Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Change Healthcare Inc. Reports Fourth Quarter and Full Year Fiscal 2022 Financial Results By: Change Healthcare Inc. via Business Wire May 25, 2022 at 16:15 PM EDT Strong revenue and cash flow growth driven by continued momentum in core business and investment in expanded capabilities Total revenue of $920M, including record solutions revenue of $859M; solutions revenue growth of 6.8% driven by increased volume, COVID-19 activities and new sales Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change Healthcare”), a leading healthcare technology company, today reported financial results for the fourth quarter and fiscal year ended March 31, 2022. “The fourth quarter performance demonstrates the execution of our growth strategy, delivering on our financial objectives while continuing to make investments to advance our capabilities and support our customers and employees,” said Neil de Crescenzo, president and chief executive officer. “As we enter fiscal 2023, we remain focused on developing and delivering innovative solutions for healthcare providers, payers, partners and consumers to improve clinical, financial, and care outcomes.” Fiscal 2022 Fourth Quarter Highlights: Recent Business Highlights Signed a strategic partnership with Luma Health that will utilize Luma's KLAS-recognized Healthcare Engagement Engine™ alongside Change Healthcare’s proven revenue cycle capabilities to develop new patient engagement solutions that seamlessly connect every touchpoint across the patient journey. Integrated predictive analytics into InterQual AutoReview, enabling the solution to apply artificial intelligence to real-time EHR data and provide data-driven predictions on which level of care status is right for each patient. Awarded “Best in KLAS” for Payer IT Consulting Services for the third time in four years. Impact of McKesson Exit on Comparability of Results On March 10, 2020, Change Healthcare Inc. acquired the interest in Change Healthcare LLC (“the Joint Venture”) previously held by McKesson. The transaction resulted in Change Healthcare Inc. acquiring control of the Joint Venture, which was accounted for as a business combination resulting in fair value adjustments to various assets and liabilities, including deferred revenue, goodwill, and intangible assets. Financial Results for Fourth Quarter of Fiscal 2022 Q4 2022 Q4 2021 Total Revenue1 $920.1 million $855.2 million Solutions Revenue1 $859.2 million $804.3 million Net Income (Loss) $7.1 million $(13.1) million Diluted EPS2 $0.02 $(0.04) Adjusted EBITDA $282.3 million $272.0 million Adjusted Net Income $130.3 million $134.0 million Adjusted Diluted EPS2 $0.39 $0.42 1. Total Revenue and Solutions Revenue for fourth quarter of fiscal 2021 included the impact of fair value adjustments to deferred revenue resulting from the McKesson exit, which reduced revenue recognized by $10.1 million. 2. Diluted EPS and Adjusted Diluted EPS for the current period are based on 331 million shares compared to 321 million shares in the fourth quarter of fiscal 2021. Solutions revenue in the fourth quarter grew 6.8% compared to the fourth quarter of fiscal 2021, driven by volume growth and incremental revenue from COVID-19 testing and new sales. Adjusted EBITDA grew 3.8% over the same period, reflecting the aforementioned revenue growth, partially offset by investments to support business initiatives. Cash Flow and Balance Sheet Highlights Net cash provided by operating activities was $696.9 million and free cash flow was $420.6 million, in each case, for the twelve months ended March 31, 2022. For the twelve months ended March 31, 2021, net cash provided by operating activities and free cash flow were $586.2 million and $339.8 million, respectively. Free cash flow increased 23.8% in the current year compared to fiscal 2021. Net cash provided by operating activities and free cash flow each are affected by pass-thru funds we receive from certain pharmaceutical industry participants in advance of our obligation to remit these funds to participating retail pharmacies. Such pass-thru funds on hand increased by $12.9 million in the twelve months ended March 31, 2022, increasing free cash flow for the period by that amount, and decreased by $12.8 million for the twelve months ended March 31, 2021. The Company ended the quarter with approximately $252.3 million of cash and cash equivalents, and approximately $4,590.1 million of total debt. Subsequent to the end of the quarter, the Company repaid $100.0 million of its Senior Notes. Guidance Due to the proposed transaction with OptumInsight, we will no longer be providing financial guidance. Update on Proposed Merger with OptumInsight On January 5, 2021, OptumInsight, a diversified health services company and part of UnitedHealth Group, and Change Healthcare agreed to combine (the “Merger”). Under the terms of the merger agreement, UnitedHealth Group, through a wholly-owned subsidiary, will acquire all of the outstanding shares of Change Healthcare common stock for $25.75 per share in cash. The Boards of Directors of both UnitedHealth Group and Change Healthcare have unanimously approved the terms of the Merger, and Change Healthcare stockholders voted to approve the Merger on April 13, 2021. The closing of the Merger is subject to applicable regulatory approval and other customary closing conditions. On February 24, 2022, the Department of Justice (“DOJ”) and certain other parties commenced litigation to block the Merger, and the Company continues to support UnitedHealth Group in working toward closing the Merger. On April 4, 2022, the parties to the merger agreement entered into a waiver pursuant to which, among other things, Change Healthcare and UnitedHealth Group each waived its right to terminate the merger agreement until the earlier of (i)the tenth business day following a final order issued by the U.S. District Court for the District of Columbia with respect to the complaint filed by the DOJ that prohibits the consummation of the Merger and (ii) December 31, 2022. OptumInsight will pay a $650 million fee to Change Healthcare in the event the Merger is unable to be completed because of the decision issued by the U.S. District Court for the District of Columbia upon completion of the trial that is scheduled to begin on August 1, 2022. Additionally, the Company will be permitted to declare and pay a one-time special dividend of up to $2.00 in cash per each issued and outstanding share of its common stock, with a record date and payment date to be determined in the sole discretion of the Company’s Board of Directors (or a committee thereof). The Company expects to pay the dividend at or about the time of closing the Merger. On April 22, 2022, UnitedHealth Group, as seller, entered into an equity purchase agreement and related agreements relating to the sale of the Company’s claims editing business to an affiliate of investment funds of TPG Capital for a base purchase price in cash equal to $2.2 billion (subject to customary adjustments). Consummation of the transaction is contingent on a number of conditions, including the consummation of the Merger. Webcast Information Change Healthcare will host a conference call on Thursday, May 26, 2022, at 8:00 a.m. ET. Due to the previously announced transaction with OptumInsight, the Company will not be taking questions during the conference call. Investors and other interested parties are invited to listen to the conference call via the Company's website at https://ir.changehealthcare.com/. The webcast will be available for on-demand listening at the aforementioned URL until May 26, 2023. About Change Healthcare Change Healthcare (Nasdaq: CHNG) is a leading healthcare technology company, focused on insights, innovation, and accelerating the transformation of the U.S. healthcare system through the power of the Change Healthcare platform. We provide data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system. Learn more at changehealthcare.com. CHNG-IR Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of Change Healthcare. Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “could,” “should,” “may,” “plan,” “project,” “predict” and similar expressions. Change Healthcare cautions readers of this press release that such “forward looking statements,” including without limitation, those relating to the timing of the proposed merger and Change Healthcare’s future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, wherever they occur in this press release or in other statements attributable to Change Healthcare, are necessarily estimates reflecting the judgment of Change Healthcare’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the “forward looking statements.” Factors that could cause Change Healthcare’s actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, the inability to complete the proposed merger due to the failure to satisfy the conditions to the completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; risks related to disruption of management’s attention from Change Healthcare’s ongoing business operations due to the transaction; the effect of the announcement of the proposed merger on Change Healthcare’s operations, results and business generally; the risk that the proposed merger will not be consummated in a timely manner, exceeding the expected costs of the merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets; uncertainty and risks related to the impact of the COVID-19 pandemic (including the rise of COVID-19 variant strains such as the Delta and Omicron variants) on the national and global economy, Change Healthcare’s business, suppliers, customers, and employees; Change Healthcare’s ability to retain and recruit key management personnel and other talent (including while the proposed merger is pending); Change Healthcare’s ability to retain or renew existing customers and attract new customers; Change Healthcare’s ability to connect a large number of payers and providers; Change Healthcare’s ability to provide competitive services and prices while maintaining its margins; further consolidation in Change Healthcare’s end-customer markets; Change Healthcare’s ability to effectively manage its costs; Change Healthcare’s ability to effectively develop and maintain relationships with its channel partners; Change Healthcare’s ability to timely develop new services and improve existing solutions; Change Healthcare’s ability to deliver services timely without interruption; a decline in transaction volume in the U.S. healthcare industry; Change Healthcare’s ability to maintain access to its data sources; Change Healthcare’s ability to maintain the security and integrity of its data; Change Healthcare’s reliance on key management personnel; Change Healthcare’s ability to manage and expand its operations and keep up with rapidly changing technologies; the ability of outside service providers and key vendors to fulfill their obligations to Change Healthcare; risks related to international operations; Change Healthcare’s ability to protect and enforce its intellectual property, trade secrets and other forms of unpatented intellectual property; Change Healthcare’s ability to defend its intellectual property from infringement claims by third parties; government regulation and changes in the regulatory environment; changes in local, state, federal and international laws and regulations, including related to taxation; economic and political instability in the U.S. and international markets where Change Healthcare operates; the economic impact of escalating global tensions, including the conflict between Russia and Ukraine, and the adoption or expansion of economic sanctions or trade restrictions; litigation or regulatory proceedings; losses against which Change Healthcare does not insure; Change Healthcare’s ability to make acquisitions and integrate the operations of acquired businesses; Change Healthcare’s ability to make timely payments of principal and interest on its indebtedness; Change Healthcare’s ability to satisfy covenants in the agreements governing its indebtedness; Change Healthcare’s ability to maintain liquidity; the potential dilutive effect of future issuance of shares of Change Healthcare’s common stock; the impact of anti-takeover provisions in Change Healthcare’s organizational documents and under Delaware law, which may discourage or delay acquisition attempts; Change Healthcare’s adoption of new, or amendments to existing, accounting standards, and other risks. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Change Healthcare’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 27, 2021 as such factors may be updated from time to time in our periodic filings with the SEC. Change Healthcare’s forward-looking statements speak only as of the date of this press release or as of the date they are made. Change Healthcare disclaims any intent or obligation to update any “forward looking statement” made in this press release to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. Non-GAAP Financial Measures In the Company’s earnings releases, prepared remarks, conference calls, slide presentations and webcasts, there may be use or discussion of non-GAAP financial measures. We believe such measures provide supplemental information to investors with regards to our operating performance and assist investors’ ability to compare our financial results to those of other companies in the same industry. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between the comparable GAAP financial measure and each non-GAAP financial measure are included in this press release after the consolidated financial statements. These non-GAAP financial measures are calculated and presented on the basis of methodologies other than in accordance with GAAP. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP and may be defined and calculated differently by others in the same industry. Consolidated Statements of Operations (unaudited and amounts in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Revenue: Solutions revenue $ 859,194 $ 804,299 Postage revenue 60,937 50,861 Total revenue 920,131 855,160 Operating expenses: Cost of operations (exclusive of depreciation and amortization below) 362,459 357,506 Research and development 72,306 58,926 Sales, marketing, general and administrative 186,288 187,606 Customer postage 60,937 50,861 Depreciation and amortization 179,345 154,495 Accretion and changes in estimate with related parties, net 5,967 2,744 Gain on sale of businesses — 1,344 Total operating expenses 867,302 813,482 Operating income (loss) 52,829 41,678 Non-operating (income) and expense Interest expense, net 56,959 59,508 Loss on extinguishment of debt — 1,289 Other, net 2,078 (2,253) Total non-operating (income) and expense 59,037 58,544 Income (loss) before income tax provision (benefit) (6,208) (16,866) Income tax provision (benefit) (13,298) (3,776) Net income (loss) $ 7,090 $ (13,090) Net income (loss) per common share: Basic $ 0.02 $ (0.04) Diluted $ 0.02 $ (0.04) Weighted average common shares outstanding: Basic 325,002,702 321,393,600 Diluted 330,822,467 321,393,600 Consolidated Statements of Operations (unaudited and amounts in thousands, except share and per share amounts) Year Ended March 31, 2022 2021 Revenue: Solutions revenue $ 3,261,203 $ 2,893,889 Postage revenue 219,612 196,532 Total revenue 3,480,815 3,090,421 Operating expenses: Cost of operations (exclusive of depreciation and amortization below) 1,415,267 1,335,075 Research and development 277,930 227,036 Sales, marketing, general and administrative 734,554 686,645 Customer postage 219,612 196,532 Depreciation and amortization 681,808 591,048 Accretion and changes in estimate with related parties, net 14,833 13,158 Gain on sale of businesses — (59,143) Total operating expenses 3,344,004 2,990,351 Operating income (loss) 136,811 100,070 Non-operating (income) and expense Interest expense, net 234,244 245,241 Loss on extinguishment of debt 3,885 8,924 Other, net 4,683 (6,698) Total non-operating (income) and expense 242,812 247,467 Income (loss) before income tax provision (benefit) (106,001) (147,397) Income tax provision (benefit) (48,611) (35,187) Net income (loss) $ (57,390) $ (112,210) Net income (loss) per common share: Basic and diluted $ (0.18) $ (0.35) Weighted average common shares outstanding: Basic and diluted 323,996,600 320,771,789 Consolidated Balance Sheets (unaudited and amounts in thousands, except share and per share amounts) March 31, 2022 March 31, 2021 Assets Current assets: Cash and cash equivalents $ 252,298 $ 113,101 Accounts receivable, net 720,122 732,614 Contract assets, net 162,828 132,856 Prepaid expenses and other current assets 177,659 140,258 Total current assets 1,312,907 1,118,829 Property and equipment, net 141,340 174,370 Operating lease right-of-use assets, net 65,680 93,412 Goodwill 4,112,904 4,108,792 Intangible assets, net 3,699,603 4,187,072 Other noncurrent assets, net 600,061 430,141 Total assets $ 9,932,495 $ 10,112,616 Liabilities Current liabilities: Accounts payable $ 104,273 $ 57,449 Accrued expenses 461,506 484,293 Deferred revenue 469,098 436,666 Due to related parties, net 13,057 10,766 Current portion of long-term debt 10,006 27,339 Current portion of operating lease liabilities 21,726 30,608 Total current liabilities 1,079,666 1,047,121 Long-term debt, excluding current portion 4,580,087 4,734,775 Long-term operating lease liabilities 52,286 75,396 Deferred income tax liabilities 563,606 605,291 Tax receivable agreement obligations to related parties 104,863 103,151 Tax receivable agreement obligations 202,762 229,082 Other long-term liabilities 73,118 65,572 Total liabilities 6,656,388 6,860,388 Commitments and contingencies Stockholders' Equity Common Stock (par value, $0.001), 9,000,000,000 and 9,000,000,000 shares authorized and 313,131,714 and 306,796,076 shares issued and outstanding at March 31, 2022 and March 31, 2021, respectively 313 307 Preferred stock (par value, $0.001), 900,000,000 shares authorized and no shares issued and outstanding at both March 31, 2022 and March 31, 2021 — — Additional paid-in capital 4,340,759 4,283,391 Accumulated other comprehensive income (loss) 35,116 11,221 Accumulated deficit (1,100,081) (1,042,691) Total stockholders' equity 3,276,107 3,252,228 Total liabilities and stockholders' equity $ 9,932,495 $ 10,112,616 Consolidated Statements of Cash Flows (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Cash flows from operating activities: Net income (loss) $ (57,390) $ (112,210) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 681,808 591,048 Amortization of capitalized software developed for sale 3,509 1,326 Accretion and changes in estimate, net 25,276 11,644 Equity compensation 95,730 59,016 Deferred income tax expense (benefit) (49,060) (50,114) Amortization of debt discount and issuance costs 31,284 32,532 Loss on extinguishment of debt 3,885 8,924 Non-cash lease expense 26,648 29,114 Gain on sale of businesses — (59,143) Other, net 17,658 8,257 Changes in operating assets and liabilities: Accounts receivable, net 12,295 (6,064) Contract assets, net (26,114) 158 Prepaid expenses and other assets (82,507) (87,540) Accounts payable 34,825 (21,407) Accrued expenses and other liabilities (61,032) 14,178 Deferred revenue 40,063 166,477 Net cash provided by (used in) operating activities 696,878 586,196 Cash flows from investing activities: Capitalized expenditures (276,276) (246,381) Acquisitions, net of cash acquired — (439,483) Proceeds from sale of businesses — 115,733 Other, net (663) 2,099 Net cash provided by (used in) investing activities (276,939) (568,032) Cash flows from financing activities: Payments on Term Loan Facility (180,000) (315,000) Payments under tax receivable agreements (21,537) (20,691) Receipts (payments) on derivative instruments (22,709) (29,538) Employee tax withholding on vesting of equity compensation awards (37,751) (4,108) Payments on deferred financing obligations (10,991) (19,519) Payment of senior amortizing notes (16,384) (15,636) Proceeds from exercise of equity awards 8,933 17,514 Payments on Revolving Facility — (250,000) Proceeds from issuance of Senior Notes — 325,000 Other, net (468) (6,800) Net cash provided by (used in) financing activities (280,907) (318,778) Effect of exchange rate changes on cash and cash equivalents 165 3,310 Net increase (decrease) in cash and cash equivalents 139,197 (297,304) Cash and cash equivalents at beginning of period 113,101 410,405 Cash and cash equivalents at end of period $ 252,298 $ 113,101 Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited and amounts in thousands) Three Months Ended March 31, 2022 2021 Net income (loss) $ 7,090 $ (13,090) Income tax provision (benefit) (13,298) (3,776) Income (loss) before income tax provision (benefit) (6,208) (16,866) Amortization of capitalized software developed for sale 999 776 Depreciation and amortization 179,345 154,495 Interest expense, net 56,959 59,508 Equity compensation 21,012 24,158 Acquisition accounting adjustments (4,762) 5,917 Acquisition and divestiture-related costs 12,254 9,590 Integration and related costs 3,608 13,094 Strategic initiatives, duplicative and transition costs 7,977 8,671 Severance costs (4,484) 2,717 Accretion and changes in estimate, net 11,706 3,215 Impairment of long-lived assets and other 728 3,772 Loss on extinguishment of debt — 1,289 Gain on sale of business — 1,344 Other non-routine, net 3,189 365 Adjusted EBITDA $ 282,323 $ 272,045 Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Net income (loss) $ (57,390) $ (112,210) Income tax provision (benefit) (48,611) (35,187) Income (loss) before income tax provision (benefit) (106,001) (147,397) Amortization of capitalized software developed for sale 3,509 1,326 Depreciation and amortization 681,808 591,048 Interest expense, net 234,244 245,241 Equity compensation 95,730 59,016 Acquisition accounting adjustments (11,839) 109,743 Acquisition and divestiture-related costs 41,120 19,709 Integration and related costs 26,803 40,675 Strategic initiatives, duplicative and transition costs 46,041 21,841 Severance costs 10,178 13,184 Accretion and changes in estimate, net 25,276 11,644 Impairment of long-lived assets and other 4,958 18,190 Loss on extinguishment of debt 3,885 8,924 Gain on sale of business — (59,143) Contingent consideration — (3,000) Other non-routine, net 15,339 3,164 Adjusted EBITDA $ 1,071,051 $ 934,165 Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (unaudited and amounts in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Net income (loss) $ 7,090 $ (13,090) Amortization expense resulting from acquisition method adjustments 125,231 117,362 EBITDA adjustments 51,228 74,132 Tax effect of EBITDA adjustments and amortization expense (53,254) (44,413) Adjusted net income (loss) $ 130,295 $ 133,991 Adjusted net income (loss) per diluted share $ 0.39 $ 0.42 Year Ended March 31, 2022 2021 Net income (loss) $ (57,390) $ (112,210) Amortization expense resulting from acquisition method adjustments 498,843 463,334 EBITDA adjustments 257,491 243,947 Tax effect of EBITDA adjustments and amortization expense (204,745) (166,324) Adjusted net income (loss) $ 494,199 $ 428,747 Adjusted net income (loss) per diluted share $ 1.53 $ 1.34 Segment Results (unaudited and amounts in thousands) Three Months Ended March 31, $ % 2022 2021 Change Change Segment revenue Software and Analytics $ 443,171 $ 416,265 $ 26,906 6.5 % Network Solutions 216,402 198,334 18,068 9.1 % Technology-Enabled Services 234,262 227,311 6,951 3.1 % Postage and Eliminations (1) 26,296 23,391 2,905 12.4 % Purchase Accounting Adjustment (2) — (10,141) 10,141 (100.0 )% Net revenue $ 920,131 $ 855,160 $ 64,971 7.6 % Segment adjusted EBITDA Software and Analytics $ 164,180 $ 144,025 $ 20,155 14.0 % Network Solutions 103,170 108,147 (4,977) (4.6 )% Technology-Enabled Services 14,973 19,873 (4,900) (24.7 )% Postage and Eliminations — — — — % Total adjusted EBITDA $ 282,323 $ 272,045 $ 10,278 3.8 % Year Ended March 31, $ % 2022 2021 Change Change Segment revenue Software and Analytics $ 1,612,931 $ 1,534,926 $ 78,005 5.1 % Network Solutions 868,425 717,843 150,582 21.0 % Technology-Enabled Services 924,472 869,349 55,123 6.3 % Postage and Eliminations (1) 82,727 96,533 (13,806) (14.3 )% Purchase Accounting Adjustment (2) (7,740) (128,230) 120,490 (94.0 )% Net revenue $ 3,480,815 $ 3,090,421 $ 390,394 12.6 % Segment adjusted EBITDA Software and Analytics $ 561,994 $ 526,129 $ 35,865 6.8 % Network Solutions 446,378 377,005 69,373 18.4 % Technology-Enabled Services 62,679 31,031 31,648 102.0 % Postage and Eliminations — — — — % Total adjusted EBITDA $ 1,071,051 $ 934,165 $ 136,886 14.7 % (1) Revenue for Postage and Eliminations includes postage revenue of $60.9 million and $50.9 million for the three months ended March 31, 2022 and 2021, respectively. Revenue for Postage and Eliminations includes postage revenue of $219.6 million and $196.5 million for the years ended March 31, 2022 and 2021, respectively. (2) Amount reflects the impact to deferred revenue resulting from the McKesson exit which reduced revenue recognized during the three months ended March 31, 2021 as well as the years ended March 31, 2022 and 2021. Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Cash provided by (used in) operating activities (1) $ 696,878 $ 586,196 Capital expenditures (276,276) (246,381) Free cash flow 420,602 339,815 Adjustments to free cash flow (2): Integration and related costs 26,803 40,675 Strategic initiatives, duplicative and transition costs 46,041 21,841 Severance costs 10,178 13,184 Integration and strategic capital expenditures 26,166 14,379 Adjusted free cash flow $ 529,790 $ 429,894 (1) Includes cash provided by pass-thru funds of $12.9 million for the year ended March 31, 2022 and cash used by pass-thru funds of $12.8 million for Change Healthcare Inc. for the year ended March 31, 2021. (2) All operating costs and integration and strategic capital expenditures are presented on an as-incurred basis. View source version on businesswire.com: https://www.businesswire.com/news/home/20220525005117/en/Contacts David Elliott Enterprise Strategy & Investor Relations 205-907-5540 daelliott@changehealthcare.com Katherine Wojtecki External Communications 630-624-9142 Katherine.Wojtecki@changehealthcare.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Change Healthcare Inc. Reports Fourth Quarter and Full Year Fiscal 2022 Financial Results By: Change Healthcare Inc. via Business Wire May 25, 2022 at 16:15 PM EDT Strong revenue and cash flow growth driven by continued momentum in core business and investment in expanded capabilities Total revenue of $920M, including record solutions revenue of $859M; solutions revenue growth of 6.8% driven by increased volume, COVID-19 activities and new sales Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change Healthcare”), a leading healthcare technology company, today reported financial results for the fourth quarter and fiscal year ended March 31, 2022. “The fourth quarter performance demonstrates the execution of our growth strategy, delivering on our financial objectives while continuing to make investments to advance our capabilities and support our customers and employees,” said Neil de Crescenzo, president and chief executive officer. “As we enter fiscal 2023, we remain focused on developing and delivering innovative solutions for healthcare providers, payers, partners and consumers to improve clinical, financial, and care outcomes.” Fiscal 2022 Fourth Quarter Highlights: Recent Business Highlights Signed a strategic partnership with Luma Health that will utilize Luma's KLAS-recognized Healthcare Engagement Engine™ alongside Change Healthcare’s proven revenue cycle capabilities to develop new patient engagement solutions that seamlessly connect every touchpoint across the patient journey. Integrated predictive analytics into InterQual AutoReview, enabling the solution to apply artificial intelligence to real-time EHR data and provide data-driven predictions on which level of care status is right for each patient. Awarded “Best in KLAS” for Payer IT Consulting Services for the third time in four years. Impact of McKesson Exit on Comparability of Results On March 10, 2020, Change Healthcare Inc. acquired the interest in Change Healthcare LLC (“the Joint Venture”) previously held by McKesson. The transaction resulted in Change Healthcare Inc. acquiring control of the Joint Venture, which was accounted for as a business combination resulting in fair value adjustments to various assets and liabilities, including deferred revenue, goodwill, and intangible assets. Financial Results for Fourth Quarter of Fiscal 2022 Q4 2022 Q4 2021 Total Revenue1 $920.1 million $855.2 million Solutions Revenue1 $859.2 million $804.3 million Net Income (Loss) $7.1 million $(13.1) million Diluted EPS2 $0.02 $(0.04) Adjusted EBITDA $282.3 million $272.0 million Adjusted Net Income $130.3 million $134.0 million Adjusted Diluted EPS2 $0.39 $0.42 1. Total Revenue and Solutions Revenue for fourth quarter of fiscal 2021 included the impact of fair value adjustments to deferred revenue resulting from the McKesson exit, which reduced revenue recognized by $10.1 million. 2. Diluted EPS and Adjusted Diluted EPS for the current period are based on 331 million shares compared to 321 million shares in the fourth quarter of fiscal 2021. Solutions revenue in the fourth quarter grew 6.8% compared to the fourth quarter of fiscal 2021, driven by volume growth and incremental revenue from COVID-19 testing and new sales. Adjusted EBITDA grew 3.8% over the same period, reflecting the aforementioned revenue growth, partially offset by investments to support business initiatives. Cash Flow and Balance Sheet Highlights Net cash provided by operating activities was $696.9 million and free cash flow was $420.6 million, in each case, for the twelve months ended March 31, 2022. For the twelve months ended March 31, 2021, net cash provided by operating activities and free cash flow were $586.2 million and $339.8 million, respectively. Free cash flow increased 23.8% in the current year compared to fiscal 2021. Net cash provided by operating activities and free cash flow each are affected by pass-thru funds we receive from certain pharmaceutical industry participants in advance of our obligation to remit these funds to participating retail pharmacies. Such pass-thru funds on hand increased by $12.9 million in the twelve months ended March 31, 2022, increasing free cash flow for the period by that amount, and decreased by $12.8 million for the twelve months ended March 31, 2021. The Company ended the quarter with approximately $252.3 million of cash and cash equivalents, and approximately $4,590.1 million of total debt. Subsequent to the end of the quarter, the Company repaid $100.0 million of its Senior Notes. Guidance Due to the proposed transaction with OptumInsight, we will no longer be providing financial guidance. Update on Proposed Merger with OptumInsight On January 5, 2021, OptumInsight, a diversified health services company and part of UnitedHealth Group, and Change Healthcare agreed to combine (the “Merger”). Under the terms of the merger agreement, UnitedHealth Group, through a wholly-owned subsidiary, will acquire all of the outstanding shares of Change Healthcare common stock for $25.75 per share in cash. The Boards of Directors of both UnitedHealth Group and Change Healthcare have unanimously approved the terms of the Merger, and Change Healthcare stockholders voted to approve the Merger on April 13, 2021. The closing of the Merger is subject to applicable regulatory approval and other customary closing conditions. On February 24, 2022, the Department of Justice (“DOJ”) and certain other parties commenced litigation to block the Merger, and the Company continues to support UnitedHealth Group in working toward closing the Merger. On April 4, 2022, the parties to the merger agreement entered into a waiver pursuant to which, among other things, Change Healthcare and UnitedHealth Group each waived its right to terminate the merger agreement until the earlier of (i)the tenth business day following a final order issued by the U.S. District Court for the District of Columbia with respect to the complaint filed by the DOJ that prohibits the consummation of the Merger and (ii) December 31, 2022. OptumInsight will pay a $650 million fee to Change Healthcare in the event the Merger is unable to be completed because of the decision issued by the U.S. District Court for the District of Columbia upon completion of the trial that is scheduled to begin on August 1, 2022. Additionally, the Company will be permitted to declare and pay a one-time special dividend of up to $2.00 in cash per each issued and outstanding share of its common stock, with a record date and payment date to be determined in the sole discretion of the Company’s Board of Directors (or a committee thereof). The Company expects to pay the dividend at or about the time of closing the Merger. On April 22, 2022, UnitedHealth Group, as seller, entered into an equity purchase agreement and related agreements relating to the sale of the Company’s claims editing business to an affiliate of investment funds of TPG Capital for a base purchase price in cash equal to $2.2 billion (subject to customary adjustments). Consummation of the transaction is contingent on a number of conditions, including the consummation of the Merger. Webcast Information Change Healthcare will host a conference call on Thursday, May 26, 2022, at 8:00 a.m. ET. Due to the previously announced transaction with OptumInsight, the Company will not be taking questions during the conference call. Investors and other interested parties are invited to listen to the conference call via the Company's website at https://ir.changehealthcare.com/. The webcast will be available for on-demand listening at the aforementioned URL until May 26, 2023. About Change Healthcare Change Healthcare (Nasdaq: CHNG) is a leading healthcare technology company, focused on insights, innovation, and accelerating the transformation of the U.S. healthcare system through the power of the Change Healthcare platform. We provide data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system. Learn more at changehealthcare.com. CHNG-IR Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of Change Healthcare. Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “could,” “should,” “may,” “plan,” “project,” “predict” and similar expressions. Change Healthcare cautions readers of this press release that such “forward looking statements,” including without limitation, those relating to the timing of the proposed merger and Change Healthcare’s future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, wherever they occur in this press release or in other statements attributable to Change Healthcare, are necessarily estimates reflecting the judgment of Change Healthcare’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the “forward looking statements.” Factors that could cause Change Healthcare’s actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, the inability to complete the proposed merger due to the failure to satisfy the conditions to the completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; risks related to disruption of management’s attention from Change Healthcare’s ongoing business operations due to the transaction; the effect of the announcement of the proposed merger on Change Healthcare’s operations, results and business generally; the risk that the proposed merger will not be consummated in a timely manner, exceeding the expected costs of the merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets; uncertainty and risks related to the impact of the COVID-19 pandemic (including the rise of COVID-19 variant strains such as the Delta and Omicron variants) on the national and global economy, Change Healthcare’s business, suppliers, customers, and employees; Change Healthcare’s ability to retain and recruit key management personnel and other talent (including while the proposed merger is pending); Change Healthcare’s ability to retain or renew existing customers and attract new customers; Change Healthcare’s ability to connect a large number of payers and providers; Change Healthcare’s ability to provide competitive services and prices while maintaining its margins; further consolidation in Change Healthcare’s end-customer markets; Change Healthcare’s ability to effectively manage its costs; Change Healthcare’s ability to effectively develop and maintain relationships with its channel partners; Change Healthcare’s ability to timely develop new services and improve existing solutions; Change Healthcare’s ability to deliver services timely without interruption; a decline in transaction volume in the U.S. healthcare industry; Change Healthcare’s ability to maintain access to its data sources; Change Healthcare’s ability to maintain the security and integrity of its data; Change Healthcare’s reliance on key management personnel; Change Healthcare’s ability to manage and expand its operations and keep up with rapidly changing technologies; the ability of outside service providers and key vendors to fulfill their obligations to Change Healthcare; risks related to international operations; Change Healthcare’s ability to protect and enforce its intellectual property, trade secrets and other forms of unpatented intellectual property; Change Healthcare’s ability to defend its intellectual property from infringement claims by third parties; government regulation and changes in the regulatory environment; changes in local, state, federal and international laws and regulations, including related to taxation; economic and political instability in the U.S. and international markets where Change Healthcare operates; the economic impact of escalating global tensions, including the conflict between Russia and Ukraine, and the adoption or expansion of economic sanctions or trade restrictions; litigation or regulatory proceedings; losses against which Change Healthcare does not insure; Change Healthcare’s ability to make acquisitions and integrate the operations of acquired businesses; Change Healthcare’s ability to make timely payments of principal and interest on its indebtedness; Change Healthcare’s ability to satisfy covenants in the agreements governing its indebtedness; Change Healthcare’s ability to maintain liquidity; the potential dilutive effect of future issuance of shares of Change Healthcare’s common stock; the impact of anti-takeover provisions in Change Healthcare’s organizational documents and under Delaware law, which may discourage or delay acquisition attempts; Change Healthcare’s adoption of new, or amendments to existing, accounting standards, and other risks. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Change Healthcare’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 27, 2021 as such factors may be updated from time to time in our periodic filings with the SEC. Change Healthcare’s forward-looking statements speak only as of the date of this press release or as of the date they are made. Change Healthcare disclaims any intent or obligation to update any “forward looking statement” made in this press release to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. Non-GAAP Financial Measures In the Company’s earnings releases, prepared remarks, conference calls, slide presentations and webcasts, there may be use or discussion of non-GAAP financial measures. We believe such measures provide supplemental information to investors with regards to our operating performance and assist investors’ ability to compare our financial results to those of other companies in the same industry. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between the comparable GAAP financial measure and each non-GAAP financial measure are included in this press release after the consolidated financial statements. These non-GAAP financial measures are calculated and presented on the basis of methodologies other than in accordance with GAAP. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP and may be defined and calculated differently by others in the same industry. Consolidated Statements of Operations (unaudited and amounts in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Revenue: Solutions revenue $ 859,194 $ 804,299 Postage revenue 60,937 50,861 Total revenue 920,131 855,160 Operating expenses: Cost of operations (exclusive of depreciation and amortization below) 362,459 357,506 Research and development 72,306 58,926 Sales, marketing, general and administrative 186,288 187,606 Customer postage 60,937 50,861 Depreciation and amortization 179,345 154,495 Accretion and changes in estimate with related parties, net 5,967 2,744 Gain on sale of businesses — 1,344 Total operating expenses 867,302 813,482 Operating income (loss) 52,829 41,678 Non-operating (income) and expense Interest expense, net 56,959 59,508 Loss on extinguishment of debt — 1,289 Other, net 2,078 (2,253) Total non-operating (income) and expense 59,037 58,544 Income (loss) before income tax provision (benefit) (6,208) (16,866) Income tax provision (benefit) (13,298) (3,776) Net income (loss) $ 7,090 $ (13,090) Net income (loss) per common share: Basic $ 0.02 $ (0.04) Diluted $ 0.02 $ (0.04) Weighted average common shares outstanding: Basic 325,002,702 321,393,600 Diluted 330,822,467 321,393,600 Consolidated Statements of Operations (unaudited and amounts in thousands, except share and per share amounts) Year Ended March 31, 2022 2021 Revenue: Solutions revenue $ 3,261,203 $ 2,893,889 Postage revenue 219,612 196,532 Total revenue 3,480,815 3,090,421 Operating expenses: Cost of operations (exclusive of depreciation and amortization below) 1,415,267 1,335,075 Research and development 277,930 227,036 Sales, marketing, general and administrative 734,554 686,645 Customer postage 219,612 196,532 Depreciation and amortization 681,808 591,048 Accretion and changes in estimate with related parties, net 14,833 13,158 Gain on sale of businesses — (59,143) Total operating expenses 3,344,004 2,990,351 Operating income (loss) 136,811 100,070 Non-operating (income) and expense Interest expense, net 234,244 245,241 Loss on extinguishment of debt 3,885 8,924 Other, net 4,683 (6,698) Total non-operating (income) and expense 242,812 247,467 Income (loss) before income tax provision (benefit) (106,001) (147,397) Income tax provision (benefit) (48,611) (35,187) Net income (loss) $ (57,390) $ (112,210) Net income (loss) per common share: Basic and diluted $ (0.18) $ (0.35) Weighted average common shares outstanding: Basic and diluted 323,996,600 320,771,789 Consolidated Balance Sheets (unaudited and amounts in thousands, except share and per share amounts) March 31, 2022 March 31, 2021 Assets Current assets: Cash and cash equivalents $ 252,298 $ 113,101 Accounts receivable, net 720,122 732,614 Contract assets, net 162,828 132,856 Prepaid expenses and other current assets 177,659 140,258 Total current assets 1,312,907 1,118,829 Property and equipment, net 141,340 174,370 Operating lease right-of-use assets, net 65,680 93,412 Goodwill 4,112,904 4,108,792 Intangible assets, net 3,699,603 4,187,072 Other noncurrent assets, net 600,061 430,141 Total assets $ 9,932,495 $ 10,112,616 Liabilities Current liabilities: Accounts payable $ 104,273 $ 57,449 Accrued expenses 461,506 484,293 Deferred revenue 469,098 436,666 Due to related parties, net 13,057 10,766 Current portion of long-term debt 10,006 27,339 Current portion of operating lease liabilities 21,726 30,608 Total current liabilities 1,079,666 1,047,121 Long-term debt, excluding current portion 4,580,087 4,734,775 Long-term operating lease liabilities 52,286 75,396 Deferred income tax liabilities 563,606 605,291 Tax receivable agreement obligations to related parties 104,863 103,151 Tax receivable agreement obligations 202,762 229,082 Other long-term liabilities 73,118 65,572 Total liabilities 6,656,388 6,860,388 Commitments and contingencies Stockholders' Equity Common Stock (par value, $0.001), 9,000,000,000 and 9,000,000,000 shares authorized and 313,131,714 and 306,796,076 shares issued and outstanding at March 31, 2022 and March 31, 2021, respectively 313 307 Preferred stock (par value, $0.001), 900,000,000 shares authorized and no shares issued and outstanding at both March 31, 2022 and March 31, 2021 — — Additional paid-in capital 4,340,759 4,283,391 Accumulated other comprehensive income (loss) 35,116 11,221 Accumulated deficit (1,100,081) (1,042,691) Total stockholders' equity 3,276,107 3,252,228 Total liabilities and stockholders' equity $ 9,932,495 $ 10,112,616 Consolidated Statements of Cash Flows (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Cash flows from operating activities: Net income (loss) $ (57,390) $ (112,210) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 681,808 591,048 Amortization of capitalized software developed for sale 3,509 1,326 Accretion and changes in estimate, net 25,276 11,644 Equity compensation 95,730 59,016 Deferred income tax expense (benefit) (49,060) (50,114) Amortization of debt discount and issuance costs 31,284 32,532 Loss on extinguishment of debt 3,885 8,924 Non-cash lease expense 26,648 29,114 Gain on sale of businesses — (59,143) Other, net 17,658 8,257 Changes in operating assets and liabilities: Accounts receivable, net 12,295 (6,064) Contract assets, net (26,114) 158 Prepaid expenses and other assets (82,507) (87,540) Accounts payable 34,825 (21,407) Accrued expenses and other liabilities (61,032) 14,178 Deferred revenue 40,063 166,477 Net cash provided by (used in) operating activities 696,878 586,196 Cash flows from investing activities: Capitalized expenditures (276,276) (246,381) Acquisitions, net of cash acquired — (439,483) Proceeds from sale of businesses — 115,733 Other, net (663) 2,099 Net cash provided by (used in) investing activities (276,939) (568,032) Cash flows from financing activities: Payments on Term Loan Facility (180,000) (315,000) Payments under tax receivable agreements (21,537) (20,691) Receipts (payments) on derivative instruments (22,709) (29,538) Employee tax withholding on vesting of equity compensation awards (37,751) (4,108) Payments on deferred financing obligations (10,991) (19,519) Payment of senior amortizing notes (16,384) (15,636) Proceeds from exercise of equity awards 8,933 17,514 Payments on Revolving Facility — (250,000) Proceeds from issuance of Senior Notes — 325,000 Other, net (468) (6,800) Net cash provided by (used in) financing activities (280,907) (318,778) Effect of exchange rate changes on cash and cash equivalents 165 3,310 Net increase (decrease) in cash and cash equivalents 139,197 (297,304) Cash and cash equivalents at beginning of period 113,101 410,405 Cash and cash equivalents at end of period $ 252,298 $ 113,101 Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited and amounts in thousands) Three Months Ended March 31, 2022 2021 Net income (loss) $ 7,090 $ (13,090) Income tax provision (benefit) (13,298) (3,776) Income (loss) before income tax provision (benefit) (6,208) (16,866) Amortization of capitalized software developed for sale 999 776 Depreciation and amortization 179,345 154,495 Interest expense, net 56,959 59,508 Equity compensation 21,012 24,158 Acquisition accounting adjustments (4,762) 5,917 Acquisition and divestiture-related costs 12,254 9,590 Integration and related costs 3,608 13,094 Strategic initiatives, duplicative and transition costs 7,977 8,671 Severance costs (4,484) 2,717 Accretion and changes in estimate, net 11,706 3,215 Impairment of long-lived assets and other 728 3,772 Loss on extinguishment of debt — 1,289 Gain on sale of business — 1,344 Other non-routine, net 3,189 365 Adjusted EBITDA $ 282,323 $ 272,045 Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Net income (loss) $ (57,390) $ (112,210) Income tax provision (benefit) (48,611) (35,187) Income (loss) before income tax provision (benefit) (106,001) (147,397) Amortization of capitalized software developed for sale 3,509 1,326 Depreciation and amortization 681,808 591,048 Interest expense, net 234,244 245,241 Equity compensation 95,730 59,016 Acquisition accounting adjustments (11,839) 109,743 Acquisition and divestiture-related costs 41,120 19,709 Integration and related costs 26,803 40,675 Strategic initiatives, duplicative and transition costs 46,041 21,841 Severance costs 10,178 13,184 Accretion and changes in estimate, net 25,276 11,644 Impairment of long-lived assets and other 4,958 18,190 Loss on extinguishment of debt 3,885 8,924 Gain on sale of business — (59,143) Contingent consideration — (3,000) Other non-routine, net 15,339 3,164 Adjusted EBITDA $ 1,071,051 $ 934,165 Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (unaudited and amounts in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Net income (loss) $ 7,090 $ (13,090) Amortization expense resulting from acquisition method adjustments 125,231 117,362 EBITDA adjustments 51,228 74,132 Tax effect of EBITDA adjustments and amortization expense (53,254) (44,413) Adjusted net income (loss) $ 130,295 $ 133,991 Adjusted net income (loss) per diluted share $ 0.39 $ 0.42 Year Ended March 31, 2022 2021 Net income (loss) $ (57,390) $ (112,210) Amortization expense resulting from acquisition method adjustments 498,843 463,334 EBITDA adjustments 257,491 243,947 Tax effect of EBITDA adjustments and amortization expense (204,745) (166,324) Adjusted net income (loss) $ 494,199 $ 428,747 Adjusted net income (loss) per diluted share $ 1.53 $ 1.34 Segment Results (unaudited and amounts in thousands) Three Months Ended March 31, $ % 2022 2021 Change Change Segment revenue Software and Analytics $ 443,171 $ 416,265 $ 26,906 6.5 % Network Solutions 216,402 198,334 18,068 9.1 % Technology-Enabled Services 234,262 227,311 6,951 3.1 % Postage and Eliminations (1) 26,296 23,391 2,905 12.4 % Purchase Accounting Adjustment (2) — (10,141) 10,141 (100.0 )% Net revenue $ 920,131 $ 855,160 $ 64,971 7.6 % Segment adjusted EBITDA Software and Analytics $ 164,180 $ 144,025 $ 20,155 14.0 % Network Solutions 103,170 108,147 (4,977) (4.6 )% Technology-Enabled Services 14,973 19,873 (4,900) (24.7 )% Postage and Eliminations — — — — % Total adjusted EBITDA $ 282,323 $ 272,045 $ 10,278 3.8 % Year Ended March 31, $ % 2022 2021 Change Change Segment revenue Software and Analytics $ 1,612,931 $ 1,534,926 $ 78,005 5.1 % Network Solutions 868,425 717,843 150,582 21.0 % Technology-Enabled Services 924,472 869,349 55,123 6.3 % Postage and Eliminations (1) 82,727 96,533 (13,806) (14.3 )% Purchase Accounting Adjustment (2) (7,740) (128,230) 120,490 (94.0 )% Net revenue $ 3,480,815 $ 3,090,421 $ 390,394 12.6 % Segment adjusted EBITDA Software and Analytics $ 561,994 $ 526,129 $ 35,865 6.8 % Network Solutions 446,378 377,005 69,373 18.4 % Technology-Enabled Services 62,679 31,031 31,648 102.0 % Postage and Eliminations — — — — % Total adjusted EBITDA $ 1,071,051 $ 934,165 $ 136,886 14.7 % (1) Revenue for Postage and Eliminations includes postage revenue of $60.9 million and $50.9 million for the three months ended March 31, 2022 and 2021, respectively. Revenue for Postage and Eliminations includes postage revenue of $219.6 million and $196.5 million for the years ended March 31, 2022 and 2021, respectively. (2) Amount reflects the impact to deferred revenue resulting from the McKesson exit which reduced revenue recognized during the three months ended March 31, 2021 as well as the years ended March 31, 2022 and 2021. Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Cash provided by (used in) operating activities (1) $ 696,878 $ 586,196 Capital expenditures (276,276) (246,381) Free cash flow 420,602 339,815 Adjustments to free cash flow (2): Integration and related costs 26,803 40,675 Strategic initiatives, duplicative and transition costs 46,041 21,841 Severance costs 10,178 13,184 Integration and strategic capital expenditures 26,166 14,379 Adjusted free cash flow $ 529,790 $ 429,894 (1) Includes cash provided by pass-thru funds of $12.9 million for the year ended March 31, 2022 and cash used by pass-thru funds of $12.8 million for Change Healthcare Inc. for the year ended March 31, 2021. (2) All operating costs and integration and strategic capital expenditures are presented on an as-incurred basis. View source version on businesswire.com: https://www.businesswire.com/news/home/20220525005117/en/Contacts David Elliott Enterprise Strategy & Investor Relations 205-907-5540 daelliott@changehealthcare.com Katherine Wojtecki External Communications 630-624-9142 Katherine.Wojtecki@changehealthcare.com
Strong revenue and cash flow growth driven by continued momentum in core business and investment in expanded capabilities Total revenue of $920M, including record solutions revenue of $859M; solutions revenue growth of 6.8% driven by increased volume, COVID-19 activities and new sales
Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change Healthcare”), a leading healthcare technology company, today reported financial results for the fourth quarter and fiscal year ended March 31, 2022. “The fourth quarter performance demonstrates the execution of our growth strategy, delivering on our financial objectives while continuing to make investments to advance our capabilities and support our customers and employees,” said Neil de Crescenzo, president and chief executive officer. “As we enter fiscal 2023, we remain focused on developing and delivering innovative solutions for healthcare providers, payers, partners and consumers to improve clinical, financial, and care outcomes.” Fiscal 2022 Fourth Quarter Highlights: Recent Business Highlights Signed a strategic partnership with Luma Health that will utilize Luma's KLAS-recognized Healthcare Engagement Engine™ alongside Change Healthcare’s proven revenue cycle capabilities to develop new patient engagement solutions that seamlessly connect every touchpoint across the patient journey. Integrated predictive analytics into InterQual AutoReview, enabling the solution to apply artificial intelligence to real-time EHR data and provide data-driven predictions on which level of care status is right for each patient. Awarded “Best in KLAS” for Payer IT Consulting Services for the third time in four years. Impact of McKesson Exit on Comparability of Results On March 10, 2020, Change Healthcare Inc. acquired the interest in Change Healthcare LLC (“the Joint Venture”) previously held by McKesson. The transaction resulted in Change Healthcare Inc. acquiring control of the Joint Venture, which was accounted for as a business combination resulting in fair value adjustments to various assets and liabilities, including deferred revenue, goodwill, and intangible assets. Financial Results for Fourth Quarter of Fiscal 2022 Q4 2022 Q4 2021 Total Revenue1 $920.1 million $855.2 million Solutions Revenue1 $859.2 million $804.3 million Net Income (Loss) $7.1 million $(13.1) million Diluted EPS2 $0.02 $(0.04) Adjusted EBITDA $282.3 million $272.0 million Adjusted Net Income $130.3 million $134.0 million Adjusted Diluted EPS2 $0.39 $0.42 1. Total Revenue and Solutions Revenue for fourth quarter of fiscal 2021 included the impact of fair value adjustments to deferred revenue resulting from the McKesson exit, which reduced revenue recognized by $10.1 million. 2. Diluted EPS and Adjusted Diluted EPS for the current period are based on 331 million shares compared to 321 million shares in the fourth quarter of fiscal 2021. Solutions revenue in the fourth quarter grew 6.8% compared to the fourth quarter of fiscal 2021, driven by volume growth and incremental revenue from COVID-19 testing and new sales. Adjusted EBITDA grew 3.8% over the same period, reflecting the aforementioned revenue growth, partially offset by investments to support business initiatives. Cash Flow and Balance Sheet Highlights Net cash provided by operating activities was $696.9 million and free cash flow was $420.6 million, in each case, for the twelve months ended March 31, 2022. For the twelve months ended March 31, 2021, net cash provided by operating activities and free cash flow were $586.2 million and $339.8 million, respectively. Free cash flow increased 23.8% in the current year compared to fiscal 2021. Net cash provided by operating activities and free cash flow each are affected by pass-thru funds we receive from certain pharmaceutical industry participants in advance of our obligation to remit these funds to participating retail pharmacies. Such pass-thru funds on hand increased by $12.9 million in the twelve months ended March 31, 2022, increasing free cash flow for the period by that amount, and decreased by $12.8 million for the twelve months ended March 31, 2021. The Company ended the quarter with approximately $252.3 million of cash and cash equivalents, and approximately $4,590.1 million of total debt. Subsequent to the end of the quarter, the Company repaid $100.0 million of its Senior Notes. Guidance Due to the proposed transaction with OptumInsight, we will no longer be providing financial guidance. Update on Proposed Merger with OptumInsight On January 5, 2021, OptumInsight, a diversified health services company and part of UnitedHealth Group, and Change Healthcare agreed to combine (the “Merger”). Under the terms of the merger agreement, UnitedHealth Group, through a wholly-owned subsidiary, will acquire all of the outstanding shares of Change Healthcare common stock for $25.75 per share in cash. The Boards of Directors of both UnitedHealth Group and Change Healthcare have unanimously approved the terms of the Merger, and Change Healthcare stockholders voted to approve the Merger on April 13, 2021. The closing of the Merger is subject to applicable regulatory approval and other customary closing conditions. On February 24, 2022, the Department of Justice (“DOJ”) and certain other parties commenced litigation to block the Merger, and the Company continues to support UnitedHealth Group in working toward closing the Merger. On April 4, 2022, the parties to the merger agreement entered into a waiver pursuant to which, among other things, Change Healthcare and UnitedHealth Group each waived its right to terminate the merger agreement until the earlier of (i)the tenth business day following a final order issued by the U.S. District Court for the District of Columbia with respect to the complaint filed by the DOJ that prohibits the consummation of the Merger and (ii) December 31, 2022. OptumInsight will pay a $650 million fee to Change Healthcare in the event the Merger is unable to be completed because of the decision issued by the U.S. District Court for the District of Columbia upon completion of the trial that is scheduled to begin on August 1, 2022. Additionally, the Company will be permitted to declare and pay a one-time special dividend of up to $2.00 in cash per each issued and outstanding share of its common stock, with a record date and payment date to be determined in the sole discretion of the Company’s Board of Directors (or a committee thereof). The Company expects to pay the dividend at or about the time of closing the Merger. On April 22, 2022, UnitedHealth Group, as seller, entered into an equity purchase agreement and related agreements relating to the sale of the Company’s claims editing business to an affiliate of investment funds of TPG Capital for a base purchase price in cash equal to $2.2 billion (subject to customary adjustments). Consummation of the transaction is contingent on a number of conditions, including the consummation of the Merger. Webcast Information Change Healthcare will host a conference call on Thursday, May 26, 2022, at 8:00 a.m. ET. Due to the previously announced transaction with OptumInsight, the Company will not be taking questions during the conference call. Investors and other interested parties are invited to listen to the conference call via the Company's website at https://ir.changehealthcare.com/. The webcast will be available for on-demand listening at the aforementioned URL until May 26, 2023. About Change Healthcare Change Healthcare (Nasdaq: CHNG) is a leading healthcare technology company, focused on insights, innovation, and accelerating the transformation of the U.S. healthcare system through the power of the Change Healthcare platform. We provide data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system. Learn more at changehealthcare.com. CHNG-IR Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of Change Healthcare. Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “could,” “should,” “may,” “plan,” “project,” “predict” and similar expressions. Change Healthcare cautions readers of this press release that such “forward looking statements,” including without limitation, those relating to the timing of the proposed merger and Change Healthcare’s future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, wherever they occur in this press release or in other statements attributable to Change Healthcare, are necessarily estimates reflecting the judgment of Change Healthcare’s senior management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the “forward looking statements.” Factors that could cause Change Healthcare’s actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, the inability to complete the proposed merger due to the failure to satisfy the conditions to the completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; risks related to disruption of management’s attention from Change Healthcare’s ongoing business operations due to the transaction; the effect of the announcement of the proposed merger on Change Healthcare’s operations, results and business generally; the risk that the proposed merger will not be consummated in a timely manner, exceeding the expected costs of the merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets; uncertainty and risks related to the impact of the COVID-19 pandemic (including the rise of COVID-19 variant strains such as the Delta and Omicron variants) on the national and global economy, Change Healthcare’s business, suppliers, customers, and employees; Change Healthcare’s ability to retain and recruit key management personnel and other talent (including while the proposed merger is pending); Change Healthcare’s ability to retain or renew existing customers and attract new customers; Change Healthcare’s ability to connect a large number of payers and providers; Change Healthcare’s ability to provide competitive services and prices while maintaining its margins; further consolidation in Change Healthcare’s end-customer markets; Change Healthcare’s ability to effectively manage its costs; Change Healthcare’s ability to effectively develop and maintain relationships with its channel partners; Change Healthcare’s ability to timely develop new services and improve existing solutions; Change Healthcare’s ability to deliver services timely without interruption; a decline in transaction volume in the U.S. healthcare industry; Change Healthcare’s ability to maintain access to its data sources; Change Healthcare’s ability to maintain the security and integrity of its data; Change Healthcare’s reliance on key management personnel; Change Healthcare’s ability to manage and expand its operations and keep up with rapidly changing technologies; the ability of outside service providers and key vendors to fulfill their obligations to Change Healthcare; risks related to international operations; Change Healthcare’s ability to protect and enforce its intellectual property, trade secrets and other forms of unpatented intellectual property; Change Healthcare’s ability to defend its intellectual property from infringement claims by third parties; government regulation and changes in the regulatory environment; changes in local, state, federal and international laws and regulations, including related to taxation; economic and political instability in the U.S. and international markets where Change Healthcare operates; the economic impact of escalating global tensions, including the conflict between Russia and Ukraine, and the adoption or expansion of economic sanctions or trade restrictions; litigation or regulatory proceedings; losses against which Change Healthcare does not insure; Change Healthcare’s ability to make acquisitions and integrate the operations of acquired businesses; Change Healthcare’s ability to make timely payments of principal and interest on its indebtedness; Change Healthcare’s ability to satisfy covenants in the agreements governing its indebtedness; Change Healthcare’s ability to maintain liquidity; the potential dilutive effect of future issuance of shares of Change Healthcare’s common stock; the impact of anti-takeover provisions in Change Healthcare’s organizational documents and under Delaware law, which may discourage or delay acquisition attempts; Change Healthcare’s adoption of new, or amendments to existing, accounting standards, and other risks. For a more detailed discussion of these factors, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Change Healthcare’s most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 27, 2021 as such factors may be updated from time to time in our periodic filings with the SEC. Change Healthcare’s forward-looking statements speak only as of the date of this press release or as of the date they are made. Change Healthcare disclaims any intent or obligation to update any “forward looking statement” made in this press release to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. Non-GAAP Financial Measures In the Company’s earnings releases, prepared remarks, conference calls, slide presentations and webcasts, there may be use or discussion of non-GAAP financial measures. We believe such measures provide supplemental information to investors with regards to our operating performance and assist investors’ ability to compare our financial results to those of other companies in the same industry. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between the comparable GAAP financial measure and each non-GAAP financial measure are included in this press release after the consolidated financial statements. These non-GAAP financial measures are calculated and presented on the basis of methodologies other than in accordance with GAAP. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP and may be defined and calculated differently by others in the same industry. Consolidated Statements of Operations (unaudited and amounts in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Revenue: Solutions revenue $ 859,194 $ 804,299 Postage revenue 60,937 50,861 Total revenue 920,131 855,160 Operating expenses: Cost of operations (exclusive of depreciation and amortization below) 362,459 357,506 Research and development 72,306 58,926 Sales, marketing, general and administrative 186,288 187,606 Customer postage 60,937 50,861 Depreciation and amortization 179,345 154,495 Accretion and changes in estimate with related parties, net 5,967 2,744 Gain on sale of businesses — 1,344 Total operating expenses 867,302 813,482 Operating income (loss) 52,829 41,678 Non-operating (income) and expense Interest expense, net 56,959 59,508 Loss on extinguishment of debt — 1,289 Other, net 2,078 (2,253) Total non-operating (income) and expense 59,037 58,544 Income (loss) before income tax provision (benefit) (6,208) (16,866) Income tax provision (benefit) (13,298) (3,776) Net income (loss) $ 7,090 $ (13,090) Net income (loss) per common share: Basic $ 0.02 $ (0.04) Diluted $ 0.02 $ (0.04) Weighted average common shares outstanding: Basic 325,002,702 321,393,600 Diluted 330,822,467 321,393,600 Consolidated Statements of Operations (unaudited and amounts in thousands, except share and per share amounts) Year Ended March 31, 2022 2021 Revenue: Solutions revenue $ 3,261,203 $ 2,893,889 Postage revenue 219,612 196,532 Total revenue 3,480,815 3,090,421 Operating expenses: Cost of operations (exclusive of depreciation and amortization below) 1,415,267 1,335,075 Research and development 277,930 227,036 Sales, marketing, general and administrative 734,554 686,645 Customer postage 219,612 196,532 Depreciation and amortization 681,808 591,048 Accretion and changes in estimate with related parties, net 14,833 13,158 Gain on sale of businesses — (59,143) Total operating expenses 3,344,004 2,990,351 Operating income (loss) 136,811 100,070 Non-operating (income) and expense Interest expense, net 234,244 245,241 Loss on extinguishment of debt 3,885 8,924 Other, net 4,683 (6,698) Total non-operating (income) and expense 242,812 247,467 Income (loss) before income tax provision (benefit) (106,001) (147,397) Income tax provision (benefit) (48,611) (35,187) Net income (loss) $ (57,390) $ (112,210) Net income (loss) per common share: Basic and diluted $ (0.18) $ (0.35) Weighted average common shares outstanding: Basic and diluted 323,996,600 320,771,789 Consolidated Balance Sheets (unaudited and amounts in thousands, except share and per share amounts) March 31, 2022 March 31, 2021 Assets Current assets: Cash and cash equivalents $ 252,298 $ 113,101 Accounts receivable, net 720,122 732,614 Contract assets, net 162,828 132,856 Prepaid expenses and other current assets 177,659 140,258 Total current assets 1,312,907 1,118,829 Property and equipment, net 141,340 174,370 Operating lease right-of-use assets, net 65,680 93,412 Goodwill 4,112,904 4,108,792 Intangible assets, net 3,699,603 4,187,072 Other noncurrent assets, net 600,061 430,141 Total assets $ 9,932,495 $ 10,112,616 Liabilities Current liabilities: Accounts payable $ 104,273 $ 57,449 Accrued expenses 461,506 484,293 Deferred revenue 469,098 436,666 Due to related parties, net 13,057 10,766 Current portion of long-term debt 10,006 27,339 Current portion of operating lease liabilities 21,726 30,608 Total current liabilities 1,079,666 1,047,121 Long-term debt, excluding current portion 4,580,087 4,734,775 Long-term operating lease liabilities 52,286 75,396 Deferred income tax liabilities 563,606 605,291 Tax receivable agreement obligations to related parties 104,863 103,151 Tax receivable agreement obligations 202,762 229,082 Other long-term liabilities 73,118 65,572 Total liabilities 6,656,388 6,860,388 Commitments and contingencies Stockholders' Equity Common Stock (par value, $0.001), 9,000,000,000 and 9,000,000,000 shares authorized and 313,131,714 and 306,796,076 shares issued and outstanding at March 31, 2022 and March 31, 2021, respectively 313 307 Preferred stock (par value, $0.001), 900,000,000 shares authorized and no shares issued and outstanding at both March 31, 2022 and March 31, 2021 — — Additional paid-in capital 4,340,759 4,283,391 Accumulated other comprehensive income (loss) 35,116 11,221 Accumulated deficit (1,100,081) (1,042,691) Total stockholders' equity 3,276,107 3,252,228 Total liabilities and stockholders' equity $ 9,932,495 $ 10,112,616 Consolidated Statements of Cash Flows (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Cash flows from operating activities: Net income (loss) $ (57,390) $ (112,210) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 681,808 591,048 Amortization of capitalized software developed for sale 3,509 1,326 Accretion and changes in estimate, net 25,276 11,644 Equity compensation 95,730 59,016 Deferred income tax expense (benefit) (49,060) (50,114) Amortization of debt discount and issuance costs 31,284 32,532 Loss on extinguishment of debt 3,885 8,924 Non-cash lease expense 26,648 29,114 Gain on sale of businesses — (59,143) Other, net 17,658 8,257 Changes in operating assets and liabilities: Accounts receivable, net 12,295 (6,064) Contract assets, net (26,114) 158 Prepaid expenses and other assets (82,507) (87,540) Accounts payable 34,825 (21,407) Accrued expenses and other liabilities (61,032) 14,178 Deferred revenue 40,063 166,477 Net cash provided by (used in) operating activities 696,878 586,196 Cash flows from investing activities: Capitalized expenditures (276,276) (246,381) Acquisitions, net of cash acquired — (439,483) Proceeds from sale of businesses — 115,733 Other, net (663) 2,099 Net cash provided by (used in) investing activities (276,939) (568,032) Cash flows from financing activities: Payments on Term Loan Facility (180,000) (315,000) Payments under tax receivable agreements (21,537) (20,691) Receipts (payments) on derivative instruments (22,709) (29,538) Employee tax withholding on vesting of equity compensation awards (37,751) (4,108) Payments on deferred financing obligations (10,991) (19,519) Payment of senior amortizing notes (16,384) (15,636) Proceeds from exercise of equity awards 8,933 17,514 Payments on Revolving Facility — (250,000) Proceeds from issuance of Senior Notes — 325,000 Other, net (468) (6,800) Net cash provided by (used in) financing activities (280,907) (318,778) Effect of exchange rate changes on cash and cash equivalents 165 3,310 Net increase (decrease) in cash and cash equivalents 139,197 (297,304) Cash and cash equivalents at beginning of period 113,101 410,405 Cash and cash equivalents at end of period $ 252,298 $ 113,101 Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited and amounts in thousands) Three Months Ended March 31, 2022 2021 Net income (loss) $ 7,090 $ (13,090) Income tax provision (benefit) (13,298) (3,776) Income (loss) before income tax provision (benefit) (6,208) (16,866) Amortization of capitalized software developed for sale 999 776 Depreciation and amortization 179,345 154,495 Interest expense, net 56,959 59,508 Equity compensation 21,012 24,158 Acquisition accounting adjustments (4,762) 5,917 Acquisition and divestiture-related costs 12,254 9,590 Integration and related costs 3,608 13,094 Strategic initiatives, duplicative and transition costs 7,977 8,671 Severance costs (4,484) 2,717 Accretion and changes in estimate, net 11,706 3,215 Impairment of long-lived assets and other 728 3,772 Loss on extinguishment of debt — 1,289 Gain on sale of business — 1,344 Other non-routine, net 3,189 365 Adjusted EBITDA $ 282,323 $ 272,045 Reconciliation of Net Income (Loss) to Adjusted EBITDA (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Net income (loss) $ (57,390) $ (112,210) Income tax provision (benefit) (48,611) (35,187) Income (loss) before income tax provision (benefit) (106,001) (147,397) Amortization of capitalized software developed for sale 3,509 1,326 Depreciation and amortization 681,808 591,048 Interest expense, net 234,244 245,241 Equity compensation 95,730 59,016 Acquisition accounting adjustments (11,839) 109,743 Acquisition and divestiture-related costs 41,120 19,709 Integration and related costs 26,803 40,675 Strategic initiatives, duplicative and transition costs 46,041 21,841 Severance costs 10,178 13,184 Accretion and changes in estimate, net 25,276 11,644 Impairment of long-lived assets and other 4,958 18,190 Loss on extinguishment of debt 3,885 8,924 Gain on sale of business — (59,143) Contingent consideration — (3,000) Other non-routine, net 15,339 3,164 Adjusted EBITDA $ 1,071,051 $ 934,165 Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (unaudited and amounts in thousands, except share and per share amounts) Three Months Ended March 31, 2022 2021 Net income (loss) $ 7,090 $ (13,090) Amortization expense resulting from acquisition method adjustments 125,231 117,362 EBITDA adjustments 51,228 74,132 Tax effect of EBITDA adjustments and amortization expense (53,254) (44,413) Adjusted net income (loss) $ 130,295 $ 133,991 Adjusted net income (loss) per diluted share $ 0.39 $ 0.42 Year Ended March 31, 2022 2021 Net income (loss) $ (57,390) $ (112,210) Amortization expense resulting from acquisition method adjustments 498,843 463,334 EBITDA adjustments 257,491 243,947 Tax effect of EBITDA adjustments and amortization expense (204,745) (166,324) Adjusted net income (loss) $ 494,199 $ 428,747 Adjusted net income (loss) per diluted share $ 1.53 $ 1.34 Segment Results (unaudited and amounts in thousands) Three Months Ended March 31, $ % 2022 2021 Change Change Segment revenue Software and Analytics $ 443,171 $ 416,265 $ 26,906 6.5 % Network Solutions 216,402 198,334 18,068 9.1 % Technology-Enabled Services 234,262 227,311 6,951 3.1 % Postage and Eliminations (1) 26,296 23,391 2,905 12.4 % Purchase Accounting Adjustment (2) — (10,141) 10,141 (100.0 )% Net revenue $ 920,131 $ 855,160 $ 64,971 7.6 % Segment adjusted EBITDA Software and Analytics $ 164,180 $ 144,025 $ 20,155 14.0 % Network Solutions 103,170 108,147 (4,977) (4.6 )% Technology-Enabled Services 14,973 19,873 (4,900) (24.7 )% Postage and Eliminations — — — — % Total adjusted EBITDA $ 282,323 $ 272,045 $ 10,278 3.8 % Year Ended March 31, $ % 2022 2021 Change Change Segment revenue Software and Analytics $ 1,612,931 $ 1,534,926 $ 78,005 5.1 % Network Solutions 868,425 717,843 150,582 21.0 % Technology-Enabled Services 924,472 869,349 55,123 6.3 % Postage and Eliminations (1) 82,727 96,533 (13,806) (14.3 )% Purchase Accounting Adjustment (2) (7,740) (128,230) 120,490 (94.0 )% Net revenue $ 3,480,815 $ 3,090,421 $ 390,394 12.6 % Segment adjusted EBITDA Software and Analytics $ 561,994 $ 526,129 $ 35,865 6.8 % Network Solutions 446,378 377,005 69,373 18.4 % Technology-Enabled Services 62,679 31,031 31,648 102.0 % Postage and Eliminations — — — — % Total adjusted EBITDA $ 1,071,051 $ 934,165 $ 136,886 14.7 % (1) Revenue for Postage and Eliminations includes postage revenue of $60.9 million and $50.9 million for the three months ended March 31, 2022 and 2021, respectively. Revenue for Postage and Eliminations includes postage revenue of $219.6 million and $196.5 million for the years ended March 31, 2022 and 2021, respectively. (2) Amount reflects the impact to deferred revenue resulting from the McKesson exit which reduced revenue recognized during the three months ended March 31, 2021 as well as the years ended March 31, 2022 and 2021. Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow (unaudited and amounts in thousands) Year Ended March 31, 2022 2021 Cash provided by (used in) operating activities (1) $ 696,878 $ 586,196 Capital expenditures (276,276) (246,381) Free cash flow 420,602 339,815 Adjustments to free cash flow (2): Integration and related costs 26,803 40,675 Strategic initiatives, duplicative and transition costs 46,041 21,841 Severance costs 10,178 13,184 Integration and strategic capital expenditures 26,166 14,379 Adjusted free cash flow $ 529,790 $ 429,894 (1) Includes cash provided by pass-thru funds of $12.9 million for the year ended March 31, 2022 and cash used by pass-thru funds of $12.8 million for Change Healthcare Inc. for the year ended March 31, 2021. (2) All operating costs and integration and strategic capital expenditures are presented on an as-incurred basis. View source version on businesswire.com: https://www.businesswire.com/news/home/20220525005117/en/
David Elliott Enterprise Strategy & Investor Relations 205-907-5540 daelliott@changehealthcare.com Katherine Wojtecki External Communications 630-624-9142 Katherine.Wojtecki@changehealthcare.com
