ATLANTA--(BUSINESS WIRE)--MedAssets, Inc. (NASDAQ: MDAS) today announced results for its fourth quarter and full-year ended December 31, 2011. Fourth quarter results are summarized in the table below:
|
($ in millions, except per share) |
4Q-11 |
4Q-10 a |
4Q-10 a,b |
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| Net Revenue: | Recast |
Non-GAAP Acquisition- |
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| Spend and Clinical Resource Mgmt (SCM) | $ | 103.1 | $ | 53.5 | $ | 89.0 | |||||
| Revenue Cycle Management (RCM) | 53.7 | 53.4 | 53.4 | ||||||||
| Total Net Revenue | 156.8 | 106.9 | 142.4 | ||||||||
| Non-GAAP acquisition-related purchase | |||||||||||
| accounting revenue adjustment c | -- | 13.4 | -- | ||||||||
| Total non-GAAP Net Revenue | 156.8 | 120.3 | 142.4 | ||||||||
| Net income (loss) | 4.1 | (49.4 | ) | (50.9 | ) | ||||||
| Earnings (loss) per share (EPS) – diluted | 0.07 | (0.87 | ) | NA | |||||||
| Non-GAAP adjusted EBITDA | 53.7 | 41.3 | $ | 47.5 | |||||||
| Non-GAAP adjusted EPS – diluted | $ | 0.32 | $ | 0.18 | NA | ||||||
| Weighted average shares – diluted d | 58.5 | 57.0 | NA | ||||||||
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(a) The Company moved its Decision Support Services (DSS) operating unit from the RCM segment to the SCM segment on January 1, 2011. Recast results assume the DSS operating unit was part of the SCM segment on January 1, 2010. |
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(b) Non-GAAP acquisition-affected results assume The Broadlane Group (Broadlane) acquisition occurred on January 1, 2010. |
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(c) Non-GAAP acquisition-related purchase accounting revenue adjustment reflects net revenue that would have been recognized after completion of the Broadlane acquisition if not for the GAAP-related purchase accounting adjustment. A detailed explanation is provided under “Use of Non-GAAP Financial Measures” following the accompanying financial schedules. |
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(d) Given the Company’s net loss in the fourth quarter ended December 31, 2010, basic and diluted weighted average shares are the same. |
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Net Revenue
Fourth Quarter
Total net revenue for the fourth quarter of 2011 increased 46.6% to $156.8 million from $106.9 million in the fourth quarter of 2010, due primarily to the acquisition of Broadlane on November 16, 2010.
Comparing period-over-period organic growth, total net revenue of $156.8 million in the fourth quarter of 2011 increased 10.1% from total non-GAAP acquisition-affected net revenue of $142.4 million in the fourth quarter of 2010. Net revenue in the SCM segment grew 15.9% to $103.1 million from non-GAAP acquisition-affected net revenue of $89.0 million in the fourth quarter of 2010 primarily due to the recognition of approximately $15.0 million in guarantee-related revenue and growth in group purchasing-related net administrative fees. Net revenue in the RCM segment increased 0.5% to $53.7 million from $53.4 million in the fourth quarter of 2010 as technology-related revenue grew 9.5% and services-related revenue declined 19.5%.
Twelve-month Period
Total net revenue for the full-year 2011 increased 47.8% to $578.3 million from $391.3 million in full-year 2010, due primarily to the acquisition of Broadlane.
Comparing period-over-period organic growth, total net revenue of $584.5 million in full-year 2011 increased 4.9% from total non-GAAP acquisition-affected net revenue of $557.4 million in full-year 2010. Net revenue in the SCM segment grew 7.7% to $370.2 million from non-GAAP acquisition-affected net revenue of $343.7 million in full-year 2010. Net revenue in the RCM segment increased 0.3% to $214.3 million from $213.7 million in 2010.
Non-GAAP Adjusted EBITDA
Fourth Quarter
In the fourth quarter of 2011, total non-GAAP adjusted EBITDA was $53.7 million, or 34.2% of total net revenue, a 30.0% increase over total non-GAAP adjusted EBITDA of $41.3 million, or 38.6% of total net revenue, in the fourth quarter of 2010.
Comparing period-over-period organic growth, total non-GAAP adjusted EBITDA in the fourth quarter of 2011 increased 12.9% from total non-GAAP acquisition-affected adjusted EBITDA of $47.5 million, or 33.4% of total non-GAAP acquisition-affected net revenue, in the fourth quarter of 2010.
Twelve-month Period
In full-year 2011, total non-GAAP adjusted EBITDA was $184.1 million, or 31.8% of total net revenue, a 43.8% increase over total non-GAAP adjusted EBITDA of $128.0 million, or 32.7% of total net revenue, in full-year 2010.
Comparing period-over-period organic growth, total non-GAAP adjusted EBITDA in full-year 2011 was $184.1 million, or 31.5% of total non-GAAP net revenue, an increase of 9.1% from non-GAAP acquisition-affected adjusted EBITDA of $168.7 million, or 30.3% of total non-GAAP acquisition-affected net revenue, in full-year 2010.
Net Income (Loss) and Per Share
Fourth Quarter
Net income in the fourth quarter of 2011 was $4.1 million, or $0.07 per share, versus a net loss of $49.4 million, or a loss of $0.87 per share, in the fourth quarter of 2010. The net loss in the fourth quarter of 2010 was due to an impairment charge to write off goodwill associated with the Company’s DSS operating unit, as well as acquisition-related costs and restructuring charges in connection with the purchase and integration of Broadlane.
Non-GAAP adjusted EPS, defined as EPS excluding non-cash acquisition-related intangible amortization, share-based compensation, acquisition-related expenses and other non-recurring items on a tax-adjusted basis, increased 77.8% to $0.32 per share in the fourth quarter of 2011, versus non-GAAP adjusted EPS of $0.18 per share in the fourth quarter of 2010.
Twelve-month Period
Net loss in full-year 2011 was $15.5 million, or a loss of $0.27 per share, versus a net loss of $32.1 million, or a loss of $0.57 per share, in full-year 2010. The net loss in full-year 2011 was due to costs associated with the acquisition and integration of Broadlane.
Non-GAAP adjusted EPS was $0.99 per share in full-year 2011, versus non-GAAP adjusted EPS of $0.82 per share in full-year 2010.
Cash Flow and Capital Resources
Cash provided by operating activities in full-year 2011 was $124.2 million, a 17.3% increase from $105.9 million in 2010. The Company’s balance sheet at December 31, 2011 included $903.7 million in total bank and bond debt, and $62.9 million in cash and cash equivalents. On January 4, 2012, MedAssets paid $120.1 million in deferred purchase consideration to the former Broadlane owners, which was funded with cash on hand and a $55.0 million draw on its $150.0 million revolving credit facility. The Company estimates that its total bank and bond debt, net of cash and cash equivalents, as of January 31, 2012, was approximately $939.0 million, which represents leverage of approximately 5.1x full-year 2011 non-GAAP acquisition-affected adjusted EBITDA.
2012 Financial Guidance
MedAssets introduced its full-year 2012 financial guidance, as follows:
|
($ in millions, except per share) |
2012 |
Y-Y % change |
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| Net Revenue: | ||||||
| SCM segment | $ | 378 - 386 | 2.1 - 4.3 | % | ||
| RCM segment | 217 - 225 | 1.3 - 5.0 | % | |||
| Total Net Revenue | 596 - 610 | 2.0 - 4.4 | % | |||
| Non-GAAP adjusted EBITDA | 193 - 203 | 4.8 - 10.3 | % | |||
| GAAP EPS – diluted | 0.11 - 0.21 | NM | ||||
| Non-GAAP adjusted EPS - diluted | $ | 1.00 - 1.10 | 0.1 - 11.1 | % | ||
Contracted Revenue
At December 31, 2011, the Company’s rolling 12-month non-GAAP contracted revenue was an estimated $568.7 million ($350.3 million from the SCM segment and $218.4 million from the RCM segment), a year-over-year increase of 4.3% and a 1.3% sequential increase from the third quarter of 2011. Contracted revenue is the Company’s estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period.
Conference Call Information
| Time/Date: | 5:00 p.m. ET today, Thursday, February 23, 2012 | ||
| Phone: | 866-200-6965 (or 646-216-7221 for international/local callers), PIN code 94262254 | ||
| Webcast: |
http://ir.medassets.com, “Events & Presentations” page |
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| Replay: | Webcast will be archived for at least 30 days, or call 866-206-0173 (PIN code 269247) |
The Company intends to file its Form 10-K with the Securities and Exchange Commission on or before February 29, 2012. This filing will contain additional information about the Company’s results of operations.
About MedAssets
MedAssets (NASDAQ: MDAS) partners with healthcare providers to improve financial strength by implementing spend management and revenue cycle management solutions that help control cost, improve margins and cash flow, increase regulatory compliance and optimize operational efficiency. MedAssets serves more than 4,200 hospitals and 100,000 non-acute healthcare providers. The company currently manages $48 billion in supply spend and touches over $340 billion in gross patient revenue annually through its revenue cycle solutions. For more information, go to www.medassets.com.
Use of Non-GAAP Financial Information
In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the Company supplements its consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; acquisition-affected net revenue; acquisition-affected net loss; acquisition-affected EBITDA; acquisition-affected adjusted EBITDA; acquisition-affected adjusted EBITDA margin; acquisition-related purchase accounting revenue adjustment; acquisition-related SCM adjustments; adjusted net income; diluted adjusted EPS; and contracted revenue. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures, where possible, are included in the accompanying financial schedules. Also, see "Use of Non-GAAP Financial Measures" following the financial schedules for more information.
Safe Harbor Statement
This Press Release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include the intent, belief or current expectations of the Company and its management team with respect to the Company’s future business operations that include, but are not limited to: 2012 financial guidance, costs and revenue growth, margin and other financial projections; contracted revenue forecasts; and the Company’s ability to successfully integrate and capitalize on synergies associated with recent acquisitions and any other future acquisitions. Investors are cautioned that any forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to: failure to realize improvements in performance, efficiency and profitability; failure to complete anticipated sales under negotiations; failure to successfully implement revenue backlog; lack of revenue growth; client losses; and adverse developments with respect to the operation or performance of the Company’s business units or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can also be found in the Company’s Risk Factor disclosures in its Form 10-K for the year ended December 31, 2010 and Form 10-Q for the quarter ended March 31, 2011, each filed with the Securities and Exchange Commission and available at http://ir.medassets.com. The Company disclaims any responsibility to update any forward-looking statements.
mdas/F
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||
| In 000s, except per share data | Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||
| 2011 | 2010 | % Change | 2011 | 2010 | % Change | |||||||||||||||||
| Revenue: | ||||||||||||||||||||||
| Administrative fees, net | $ | 70,567 | $ | 34,633 | 103.8 | % | $ | 249,599 | $ | 119,070 | 109.6 | % | ||||||||||
| Other service fees | 86,214 | 72,313 | 19.2 | % | 328,673 | 272,261 | 20.7 | % | ||||||||||||||
| Total net revenue | 156,781 | 106,946 | 46.6 | % | 578,272 | 391,331 | 47.8 | % | ||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Cost of revenue | 31,200 | 33,561 | -7.0 | % | 121,771 | 100,737 | 20.9 | % | ||||||||||||||
| Product development expenses | 7,177 | 5,152 | 39.3 | % | 26,823 | 20,011 | 34.0 | % | ||||||||||||||
| Selling and marketing expenses | 13,543 | 11,388 | 18.9 | % | 56,997 | 46,736 | 22.0 | % | ||||||||||||||
| General and administrative expenses | 53,994 | 32,954 | 63.8 | % | 203,101 | 124,379 | 63.3 | % | ||||||||||||||
| Acquisition and integration-related expenses | 1,838 | 17,240 | -89.3 | % | 24,551 | 21,591 | 13.7 | % | ||||||||||||||
| Depreciation | 5,988 | 5,880 | 1.8 | % | 22,402 | 19,948 | 12.3 | % | ||||||||||||||
| Amortization of intangibles | 19,810 | 13,321 | 48.7 | % | 80,510 | 31,027 | 159.5 | % | ||||||||||||||
| Impairment of P&E, goodwill, and intangibles | - | 46,423 | -100.0 | % | - | 46,423 | -100.0 | % | ||||||||||||||
| Total operating expenses | 133,550 | 165,919 | -19.5 | % | 536,155 | 410,852 | 30.5 | % | ||||||||||||||
| Operating income | 23,231 | (58,973 | ) | -139.4 | % | 42,117 | (19,521 | ) | -315.8 | % | ||||||||||||
| Other income (expense): | ||||||||||||||||||||||
| Interest expense, net | (17,141 | ) | (16,522 | ) | 3.7 | % | (71,083 | ) | (27,508 | ) | 158.4 | % | ||||||||||
| Other income | 851 | 364 | 133.8 | % | 3,621 | 650 | 457.1 | % | ||||||||||||||
| Income (loss) before income taxes | 6,941 | (75,131 | ) | -109.2 | % | (25,345 | ) | (46,379 | ) | -45.4 | % | |||||||||||
| Income tax expense (benefit) | 2,794 | (25,732 | ) | -110.9 | % | (9,851 | ) | (14,255 | ) | -30.9 | % | |||||||||||
| Net income (loss) | 4,147 | (49,399 | ) | -108.4 | % | (15,494 | ) | (32,124 | ) | -51.8 | % | |||||||||||
| Basic net income (loss) per share | 0.07 | (0.87 | ) | na | (0.27 | ) | (0.57 | ) | na | |||||||||||||
| Diluted net income (loss) per share | $ | 0.07 | $ | (0.87 | ) | na | $ | (0.27 | ) | $ | (0.57 | ) | na | |||||||||
| Weighted average shares — basic | 57,189 | 57,015 | 57,298 | 56,434 | ||||||||||||||||||
| Weighted average shares — diluted | 58,451 | 57,015 | 2.5 | % | 57,298 | 56,434 | 1.5 | % | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (UNAUDITED) | ||||||||
| December 31, | December 31, | |||||||
| In 000s, except share and per share amounts | 2011 | 2010 | ||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 62,947 | $ | 46,836 | ||||
|
Accounts receivable, net of allowances of $3,891 and $5,256 as of
December 31, 2011 |
104,039 | 100,020 | ||||||
| Deferred tax asset, current | 15,434 | 18,087 | ||||||
| Prepaid expenses and other current assets | 18,488 | 19,811 | ||||||
| Total current assets | 200,908 | 184,754 | ||||||
| Property and equipment, net | 101,471 | 77,737 | ||||||
| Other long term assets | ||||||||
| Goodwill | 1,027,847 | 1,035,697 | ||||||
| Intangible assets, net | 403,371 | 484,438 | ||||||
| Other | 61,381 | 62,727 | ||||||
| Other long term assets | 1,492,599 | 1,582,862 | ||||||
| Total assets | $ | 1,794,978 | $ | 1,845,353 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 21,185 | $ | 18,107 | ||||
| Accrued revenue share obligation and rebates | 70,906 | 57,744 | ||||||
| Accrued payroll and benefits | 33,265 | 22,149 | ||||||
| Other accrued expenses | 17,811 | 22,268 | ||||||
| Deferred revenue, current portion | 48,459 | 36,533 | ||||||
| Deferred purchase consideration | 120,136 | 119,912 | ||||||
| Current portion of notes payable | 6,350 | 6,350 | ||||||
| Current portion of finance obligation | 213 | 186 | ||||||
| Total current liabilities | 318,325 | 283,249 | ||||||
| Notes payable, less current portion | 572,300 | 628,650 | ||||||
| Bonds payable | 325,000 | 325,000 | ||||||
| Finance obligation, less current portion | 9,287 | 9,505 | ||||||
| Deferred revenue, less current portion | 14,148 | 9,597 | ||||||
| Deferred tax liability | 129,635 | 150,887 | ||||||
| Other long term liabilities | 7,670 | 2,882 | ||||||
| Total liabilities | 1,376,365 | 1,409,770 | ||||||
| Stockholders’ equity | ||||||||
|
Common stock, $0.01 par value, 150,000,000 shares authorized;
57,857,000 and 58,410,000 |
579 | 584 | ||||||
| Additional paid in capital | 670,618 | 668,028 | ||||||
| Accumulated other comprehensive loss | (4,061 | ) | - | |||||
| Accumulated deficit | (248,523 | ) | (233,029 | ) | ||||
| Total stockholders’ equity | 418,613 | 435,583 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,794,978 | $ | 1,845,353 | ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (UNAUDITED) | ||||||||
| Twelve Months Ended | ||||||||
| In 000s | December 31, | December 31, | ||||||
| 2011 | 2010 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | (15,494 | ) | $ | (32,124 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities: | ||||||||
| Bad debt expense | 181 | 1,686 | ||||||
| Impairment of property, equipment, goodwill, and intangibles | - | 46,423 | ||||||
| Depreciation | 23,627 | 22,842 | ||||||
| Amortization of intangibles | 81,067 | 31,675 | ||||||
| Loss on sale of assets | 418 | 189 | ||||||
| Non-cash stock compensation expense | 5,023 | 11,493 | ||||||
| Excess tax benefit from exercise of equity awards | (956 | ) | (6,845 | ) | ||||
| Amortization of debt issuance costs | 7,445 | 6,863 | ||||||
| Noncash interest expense, net | 3,784 | 936 | ||||||
| Deferred income tax benefit | (12,734 | ) | (25,065 | ) | ||||
| Changes in assets and liabilities | 31,835 | 47,838 | ||||||
| Cash provided by operating activities | 124,196 | 105,911 | ||||||
| Investing activities: | ||||||||
| Purchases of property, equipment, and software | (16,976 | ) | (12,758 | ) | ||||
| Capitalized software development costs | (31,997 | ) | (17,968 | ) | ||||
| Acquisitions, net of cash acquired | - | (749,055 | ) | |||||
| Cash used in investing activities | (48,973 | ) | (779,781 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from notes payable | - | 655,000 | ||||||
| Proceeds from bonds payable | - | 325,000 | ||||||
| Repayment of notes payable | (56,350 | ) | (235,161 | ) | ||||
| Repayment of finance obligation | (665 | ) | (658 | ) | ||||
| Debt issuance costs | - | (46,516 | ) | |||||
| Excess tax benefit from exercise of equity awards | 956 | 6,845 | ||||||
| Issuance of common stock, net | 1,975 | 10,698 | ||||||
| Purchase of treasury shares | (5,028 | ) | - | |||||
| Cash (used in) provided by financing activities | (59,112 | ) | 715,208 | |||||
| Net increase in cash and cash equivalents | 16,111 | 41,338 | ||||||
| Cash and cash equivalents, beginning of period | 46,836 | 5,498 | ||||||
| Cash and cash equivalents, end of period | $ | 62,947 | $ | 46,836 | ||||
| SUPPLEMENTAL SEGMENT REPORTING | |||||||||||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| In 000s | Three Months Ended December 31, | ||||||||||||||||
| 2011 | 2010 | % Change | |||||||||||||||
| Net revenue | Recast | ||||||||||||||||
| Spend and Clinical Resource Management ("SCM") | $ | 103,113 | $ | 53,542 | 92.6 | % | |||||||||||
| Revenue Cycle Management ("RCM") | 53,668 | 53,404 | 0.5 | % | |||||||||||||
| Total net revenue | 156,781 | 106,946 | 46.6 | % | |||||||||||||
| Non-GAAP acquisition-related purchase accounting | |||||||||||||||||
| revenue adjustment e | - | 13,406 | |||||||||||||||
| Other non-GAAP acquisition-related SCM adjustments f | - | 22,018 | |||||||||||||||
| Total non-GAAP acquisition-affected net revenue | $ | 156,781 | $ | 142,370 | 10.1 | % | |||||||||||
| Non-GAAP Adjusted EBITDA | % margin | % margin | |||||||||||||||
| SCM | $ | 49,624 | 48.1 | % | $ | 32,789 | 61.2 | % | 51.3 | % | |||||||
| RCM | 13,986 | 26.1 | % | 14,516 | 27.2 | % | -3.7 | % | |||||||||
| Corporate | (9,933 | ) | (6,028 | ) | 64.8 | % | |||||||||||
| Total non-GAAP Adjusted EBITDA | 53,677 | 34.2 | % | 41,277 | 38.6 | % | 30.0 | % | |||||||||
| Non-GAAP acquisition-related SCM adjustments e, f | - | 6,270 | |||||||||||||||
| Total non-GAAP acquisition-affected Adjusted EBITDA | $ | 53,677 | 34.2 | % | $ | 47,547 | 33.4 | % | 12.9 | % | |||||||
| In 000s | Twelve Months Ended December 31, | ||||||||||||||||
| 2011 | 2010 | % Change | |||||||||||||||
| Net revenue | Recast | ||||||||||||||||
| SCM | $ | 363,997 | $ | 177,603 | 104.9 | % | |||||||||||
| RCM | 214,275 | 213,728 | 0.3 | % | |||||||||||||
| Total net revenue | 578,272 | 391,331 | 47.8 | % | |||||||||||||
| Non-GAAP acquisition-related purchase accounting | |||||||||||||||||
| revenue adjustment e | 6,245 | 13,406 | |||||||||||||||
| Other non-GAAP acquisition-related SCM adjustments f | - | 152,664 | |||||||||||||||
| Total non-GAAP acquisition-affected net revenue | $ | 584,517 | $ | 557,401 | 4.9 | % | |||||||||||
| Non-GAAP Adjusted EBITDA | % margin | % margin | |||||||||||||||
| SCM | $ | 165,672 | 45.5 | % | $ | 87,696 | 49.4 | % | 88.9 | % | |||||||
| RCM | 49,635 | 23.2 | % | 65,891 | 30.8 | % | -24.7 | % | |||||||||
| Corporate | (31,202 | ) | (25,547 | ) | 22.1 | % | |||||||||||
| Total non-GAAP Adjusted EBITDA | 184,105 | 31.8 | % | 128,040 | 32.7 | % | 43.8 | % | |||||||||
| Non-GAAP acquisition-related SCM adjustments e, f | - | 40,684 | |||||||||||||||
| Total non-GAAP acquisition-affected Adjusted EBITDA | $ | 184,105 | 31.5 | % | $ | 168,724 | 30.3 | % | 9.1 | % | |||||||
| (e) Acquisition-related purchase accounting revenue adjustment reflects the estimated net administrative fee revenue that would have been recognized after completion of the Broadlane acquisition if not for a GAAP-related purchase accounting adjustment. | |||||||||||||||||
| (f) Acquisition-related SCM adjustments include the historical results of Broadlane's operations from January 1, 2010 through November 15, 2010, inclusive of certain purchase accounting adjustments. | |||||||||||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | |||||||||||||||||
| SUPPLEMENTAL REPORTING OF ADJUSTED EBITDA | ||||||||||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| In 000s | Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
|
ACTUAL RESULTS |
2011 | 2010 | 2011 | 2010 | ||||||||||||
| Net income (loss) | $ | 4,147 | $ | (49,399 | ) | $ | (15,494 | ) | $ | (32,124 | ) | |||||
| Depreciation | 5,988 | 5,880 | 22,402 | 19,948 | ||||||||||||
| Depreciation (included in cost of revenue) | 410 | 727 | 1,225 | 2,894 | ||||||||||||
| Amortization of intangibles, acquisition-related | 19,810 | 13,321 | 80,510 | 31,027 | ||||||||||||
| Amortization of intangibles, acquisition-related (included in cost of revenue) | 140 | 139 | 557 | 648 | ||||||||||||
| Interest expense, net | 17,141 | 16,542 | 71,069 | 27,428 | ||||||||||||
| Income tax expense (benefit) | 2,794 | (25,732 | ) | (9,851 | ) | (14,255 | ) | |||||||||
| Non-GAAP EBITDA | $ | 50,430 | $ | (38,522 | ) | $ | 150,418 | $ | 35,566 | |||||||
| Share-based compensation | 2,078 | 2,840 | 5,023 | 11,493 | ||||||||||||
| RCM management restructuring expenses | 442 | - | 1,646 | - | ||||||||||||
| Rental income from capitalized building lease | (111 | ) | (110 | ) | (438 | ) | (439 | ) | ||||||||
| Impairment of intangibles | - | 46,423 | - | 46,423 | ||||||||||||
| Purchase accounting adjustments | - | 13,406 | 6,245 | 13,406 | ||||||||||||
| Acquisition and integration-related expenses | 1,838 | 17,240 | 24,551 | 21,591 | ||||||||||||
| Insurance settlement | (1,000 | ) | - | (3,340 | ) | - | ||||||||||
| Non-GAAP Adjusted EBITDA | $ | 53,677 | $ | 41,277 | $ | 184,105 | $ | 128,040 | ||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
|
NON-GAAP ACQUISITION-AFFECTED RESULTS |
2011 | 2010 | 2011 | 2010 | ||||||||||||
| Net income (loss) | $ | 4,147 | $ | (49,399 | ) | $ | (15,494 | ) | $ | (32,124 | ) | |||||
| Non-GAAP acquisition-related net (loss) income | - | (1,493 | ) | 6,245 | (34,832 | ) | ||||||||||
| Non-GAAP acquisition-affected net income (loss) | $ | 4,147 | $ | (50,892 | ) | $ | (9,249 | ) | $ | (66,956 | ) | |||||
| Depreciation | 5,988 | 6,558 | 22,402 | 24,458 | ||||||||||||
| Depreciation (included in cost of revenue) | 410 | 727 | 1,225 | 2,894 | ||||||||||||
| Amortization of intangibles, acquisition-related | 19,810 | 21,046 | 80,510 | 82,111 | ||||||||||||
| Amortization of intangibles, acquisition-related (included in cost of revenue) | 140 | 139 | 557 | 648 | ||||||||||||
| Interest expense, net | 17,141 | 16,963 | 71,069 | 68,493 | ||||||||||||
| Income tax expense (benefit) | 2,794 | (23,054 | ) | (9,851 | ) | (30,742 | ) | |||||||||
| Non-GAAP EBITDA | $ | 50,430 | $ | (28,513 | ) | $ | 156,663 | $ | 80,906 | |||||||
|
Share-based compensation |
2,078 | 2,881 | 5,023 | 12,071 | ||||||||||||
| RCM management restructuring expenses | 442 | - | 1,646 | - | ||||||||||||
| Rental income from capitalized building lease | (111 | ) | (110 | ) | (438 | ) | (439 | ) | ||||||||
| Impairment of intangibles | - | 46,423 | - | 46,423 | ||||||||||||
| Acquisition and integration-related expenses | 1,838 | 26,866 | 24,551 | 29,763 | ||||||||||||
| Insurance settlement |
(1,000 |
) |
- | (3,340 | ) | - | ||||||||||
| Non-GAAP Adjusted EBITDA | $ | 53,677 | $ | 47,547 | $ | 184,105 | $ | 168,724 | ||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||||||||||||||||
| SUPPLEMENTAL NET INCOME AND EARNINGS PER SHARE REPORTING | ||||||||||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
| In 000s, except per share data | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Net income (loss) | $ | 4,147 | $ | (49,399 | ) | $ | (15,494 | ) | $ | (32,124 | ) | |||||
| Pre-tax non-cash, acquisition-related intangible amortization | 19,950 | 13,461 | 81,067 | 31,676 | ||||||||||||
| Pre-tax non-cash, share-based compensation | 2,078 | 2,840 | 5,023 | 11,493 | ||||||||||||
| Pre-tax non-cash, impairment of intangibles | - | 46,423 | - | 46,423 | ||||||||||||
| Pre-tax non-cash, acquisition and integration-related expenses | 1,838 | 17,240 | 24,551 | 21,591 | ||||||||||||
| Pre-tax, RCM management restructuring expenses | 442 | - | 1,646 | - | ||||||||||||
| Pre-tax, purchase accounting revenue adjustment | - | 13,406 | 6,245 | 13,406 | ||||||||||||
| Pre-tax, swap termination, debt issuance writeoff and deferred payment interest expense accretion related to acquisitions | 679 | 6,246 | 3,082 | 6,246 | ||||||||||||
| Pre-tax, acquisition-related depreciation | 523 | - | 2,159 | - | ||||||||||||
| Pre-tax, insurance settlement | (1,000 | ) | - | (3,340 | ) | - | ||||||||||
| Tax effect on pre-tax adjustments g | (9,804 | ) | (39,846 | ) | (48,173 | ) | (52,333 | ) | ||||||||
| Non-GAAP adjusted net income | $ | 18,853 | $ | 10,371 | $ | 56,766 | $ | 46,378 | ||||||||
| Earnings (loss) Per Share (EPS) - diluted | $ | 0.07 | $ | (0.87 | ) | $ | (0.27 | ) | $ | (0.57 | ) | |||||
| Pre-tax non-cash, acquisition-related intangible amortization | 0.34 | 0.24 | 1.41 | 0.56 | ||||||||||||
| Pre-tax non-cash, share-based compensation | 0.04 | 0.05 | 0.09 | 0.20 | ||||||||||||
| Pre-tax non-cash, impairment of intangibles | - | 0.81 | - | 0.82 | ||||||||||||
| Pre-tax non-cash, acquisition and integration-related expenses | 0.03 | 0.30 | 0.43 | 0.39 | ||||||||||||
| Pre-tax, RCM management restructuring expenses | 0.01 | - | 0.03 | - | ||||||||||||
| Pre-tax, purchase accounting revenue adjustment | - | 0.24 | 0.11 | 0.24 | ||||||||||||
| Pre-tax, swap termination, debt issuance writeoff and deferred payment interest expense accretion related to acquisitions | 0.01 | 0.11 | 0.05 | 0.11 | ||||||||||||
| Pre-tax, acquisition-related depreciation | 0.01 | - | 0.04 | - | ||||||||||||
| Pre-tax, insurance settlement | (0.02 | ) | - | (0.06 | ) | - | ||||||||||
| Tax effect on pre-tax adjustments g | (0.17 | ) | (0.70 | ) | (0.84 | ) | (0.93 | ) | ||||||||
| Non-GAAP adjusted EPS - diluted | $ | 0.32 | $ | 0.18 | $ | 0.99 | $ | 0.82 | ||||||||
| Weighted average shares - diluted (in 000s) h | 58,451 | 57,015 | 57,298 | 56,434 | ||||||||||||
| (g) This amount reflects the tax impact on the adjustments used to derive Non-GAAP adjusted EPS - diluted. The Company generally utilizes its effective tax rate for each respective period to calculate the tax effect of each adjustment. Given the impact of the Broadlane acquisition on the Company's 2011 actual effective tax rate, the Company used a tax rate of 40.0% for the three and twelve months ended December 31, 2011 since it believes 40.0% will be a normalized long-term tax rate. The effective tax rate for the three months ended December 31, 2011 and 2010 was 40.3% and 34.2%, respectively. The effective tax rate for the fiscal years ended December 31, 2011 and 2010 was 38.9% and 30.7%, respectively. | ||||||||||||||||
| (h) Given the Company’s net loss for the fourth quarter ended December 31, 2010 and the fiscal years ended December 31, 2011 and 2010, basic and fully diluted weighted average shares are the same for EPS and non-GAAP adjusted EPS. | ||||||||||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||||||||||||||||
| SUPPLEMENTAL 2012 ADJUSTED EBITDA GUIDANCE | ||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||||||
| (UNAUDITED) | ||||||||
| Guidance Range for | ||||||||
| Twelve Months Ending | ||||||||
| In 000s | December 31, 2012 | |||||||
| (Low) | (High) | |||||||
| Net Income | $ | 6,500 | $ | 12,500 | ||||
| Depreciation | 29,900 | 29,900 | ||||||
| Depreciation (included in cost of revenue) | 1,600 | 1,600 | ||||||
| Amortization of intangibles, acquisition-related | 72,600 | 72,600 | ||||||
| Amortization of intangibles, acquisition-related (included in cost of revenue) | 600 | 600 | ||||||
| Interest expense, net | 65,700 | 65,700 | ||||||
| Income tax expense | 4,300 | 8,300 | ||||||
| Non-GAAP EBITDA | 181,200 | 191,200 | ||||||
| Share-based compensation | 10,200 | 10,200 | ||||||
| Acquisition and integration-related expenses | 2,000 | 2,000 | ||||||
| Rental income from capitalized building lease | (400 | ) | (400 | ) | ||||
| Non-GAAP adjusted EBITDA | $ | 193,000 | $ | 203,000 | ||||
| SUPPLEMENTAL 2012 EARNINGS PER SHARE GUIDANCE | ||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||||||
| (UNAUDITED) | ||||||||
| Guidance Range for | ||||||||
| Twelve Months Ending | ||||||||
| In 000s, except per share data | December 31, 2012 | |||||||
| (Low) | (High) | |||||||
| Net Income | $ | 6,500 | $ | 12,500 | ||||
| EPS - diluted | 0.11 | 0.21 | ||||||
| Pre-tax non-cash, acquisition-related intangible amortization | 1.24 | 1.24 | ||||||
| Pre-tax non-cash, acquisition-related intangible depreciation | 0.04 | 0.04 | ||||||
| Pre-tax non-cash, share-based compensation | 0.17 | 0.17 | ||||||
| Pre-tax acquisition and integration-related expenses | 0.03 | 0.03 | ||||||
| Tax effect on pre-tax adjustments i | (0.59 | ) | (0.59 | ) | ||||
| Non-GAAP cash EPS - diluted j | $ | 1.00 | $ | 1.10 | ||||
| Fully diluted weighted average shares outstanding | 59,000 | 59,000 | ||||||
| (i) This amount reflects the tax impact to the adjustments used to derive estimated Non-GAAP adjusted EPS - diluted. The Company uses its estimated effective tax rate for each guidance range to tax effect the adjustments. The estimated statutory tax rate for the guidance range above is 40.0%. | ||||||||
| (j) Column amounts may not add to total amount due to rounding. | ||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||||||||
| SUPPLEMENTAL REVENUE REPORTING | |||||||||||||||||
| RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| In 000s | Three Months Ended December 31, | ||||||||||||||||
| 2011 | 2010 | % Change | |||||||||||||||
| Non-GAAP gross administrative fees | $ | 104,082 | $ | 52,497 | 98.3 | % | |||||||||||
| Other service fees | 86,214 | 72,313 | 19.2 | % | |||||||||||||
| Non-GAAP gross fees | 190,296 | RSO % | 124,810 | RSO % | 52.5 | % | |||||||||||
| Non-GAAP revenue share obligation (RSO) | (33,515 | ) | 32.2 | % | (17,864 | ) | 34.0 | % | 87.6 | % | |||||||
| Net revenue | $ | 156,781 | $ | 106,946 | 46.6 | % | |||||||||||
|
NON-GAAP ACQUISITION-AFFECTED RESULTS k |
% Change | ||||||||||||||||
| Non-GAAP gross administrative fees | $ | 104,082 | $ | 95,596 | 8.9 | % | |||||||||||
| Other service fees | 86,214 | 80,037 | 7.7 | % | |||||||||||||
| Non-GAAP gross fees | 190,296 | RSO % | 175,633 | RSO % | 8.3 | % | |||||||||||
| Non-GAAP RSO | (33,515 | ) | 32.2 | % | (33,263 | ) | 34.8 | % | 0.8 | % | |||||||
| Net revenue | $ | 156,781 | $ | 142,370 | 10.1 | % | |||||||||||
| In 000s | Twelve Months Ended December 31, | ||||||||||||||||
| 2011 | 2010 | % Change | |||||||||||||||
| Non-GAAP gross administrative fees | $ | 384,560 | $ | 182,024 | 111.3 | % | |||||||||||
| Other service fees | 328,673 | 272,261 | 20.7 | % | |||||||||||||
| Non-GAAP gross fees | 713,233 | RSO % | 454,285 | RSO % | 57.0 | % | |||||||||||
| Non-GAAP RSO | (134,961 | ) | 35.1 | % | (62,954 | ) | 34.6 | % | 114.4 | % | |||||||
| Net revenue | $ | 578,272 | $ | 391,331 | 47.8 | % | |||||||||||
|
NON-GAAP ACQUISITION-AFFECTED RESULTS k |
% Change | ||||||||||||||||
| Non-GAAP gross administrative fees | $ | 394,011 | $ | 364,398 | 8.1 | % | |||||||||||
| Other service fees | 330,256 | 322,510 | 2.4 | % | |||||||||||||
| Non-GAAP gross fees | 724,267 | RSO % | 686,908 | RSO % | 5.4 | % | |||||||||||
| Non-GAAP RSO | (139,750 | ) | 35.5 | % | (129,507 | ) | 35.5 | % | 7.9 | % | |||||||
| Net revenue | $ | 584,517 | $ | 557,401 | 4.9 | % | |||||||||||
| (k) Figures include acquisition-related SCM segment adjustments for the three-month and twelve-month periods ended December 31, 2011 and 2010. | |||||||||||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | |||||||||||||||||
| SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES l | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| 12.31.10 | 3.31.11 | 6.30.11 | 9.30.11 | 12.31.11 | ||||||||||
| SCM segment | 334.2 | 342.8 | 344.1 | 348.3 | 350.3 | |||||||||
| RCM segment | 211.0 | 212.6 | 214.2 | 213.0 | 218.4 | |||||||||
| Total | 545.2 | 555.4 | 558.3 | 561.3 | 568.7 | |||||||||
| (l) Recast to reflect the move of the Decision Support Services operating unit from the RCM segment into the SCM segment, and includes contracted revenue of $155.4 million and $161.6 million added to the SCM segment from the Broadlane acquisition only for the periods ended 12.31.10 and 3.31.11, respectively. With the completion of the Broadlane acquisition and its integration into a single MedAssets reporting segment, the company is unable to provide separate contracted revenue by the two previously independent organizations. | ||||||||||||||
| SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION | ||||||||||||||
| EXPENSE INCLUDED IN OPERATING EXPENSES | ||||||||||||||
| (UNAUDITED) | ||||||||||||||
| In 000s | Three Months Ended | Twelve Months Ended | ||||||||||||
| December 31, | December 31, | |||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||
| Amount of share-based compensation included in: | ||||||||||||||
| Cost of revenue | 309 | 879 | 1,362 | 2,722 | ||||||||||
| Product development expense | 90 | 4 | 267 | 461 | ||||||||||
| Selling & marketing expense | 317 | 627 | 559 | 2,476 | ||||||||||
| General & administrative expense | 1,362 | 1,330 | 2,835 | 5,834 | ||||||||||
| Total m | $ | 2,078 | $ | 2,840 | $ | 5,023 | $ | 11,493 | ||||||
| (m) During the three months ended June 30, 2011, we recorded an adjustment that reduced our share-based compensation expense by approximately $6,500 based on our probability assessment of performance achievement relating to certain performance-based restricted stock grants and SSAR grants. | ||||||||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||||||||||||||
| Use of Non-GAAP Financial Measures | |
| In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the Company supplements its consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; acquisition-affected net revenue; acquisition-affected net loss; acquisition-affected EBITDA; acquisition-affected adjusted EBITDA; acquisition-affected adjusted EBITDA margin; acquisition-related purchase accounting revenue adjustment; acquisition-related SCM adjustments; adjusted net income; diluted adjusted EPS; and contracted revenue. | |
| These non-GAAP financial measures may have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. The Company compensates for such limitations by relying primarily on the Company’s GAAP results and using non-GAAP financial measures only supplementally. Where possible, the Company provides reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. Investors are encouraged to carefully review those reconciliations. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by the Company, may differ from and may not be comparable to similarly titled measures used by other companies. | |
| Gross fees include gross administrative fees the Company receives pursuant to its vendor contracts and all other fees the Company receives from clients. The Company's revenue share obligation represents the portion of the gross administrative fees the Company is contractually obligated to share with certain of its GPO clients. Net administrative fees (a GAAP measure) are the Company's gross administrative fees net of its revenue share obligation. Total net revenue (a GAAP measure) reflects the Company's gross fees net of its revenue share obligation. These non-GAAP measures assist management and the board of directors and may be helpful to investors in analyzing the Company's growth in its Spend and Clinical Resource Management segment given that administrative fees constitute a material portion of the Company's revenue and are paid to the Company by approximately 1,150 suppliers and other vendors contracted by its GPO, and that the Company's revenue share obligation constitutes a significant outlay to certain of its GPO clients. | |
| The Company defines: EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization; and adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and other non-recurring, non-cash or non-operating items. EBITDA and adjusted EBITDA are used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period and provides for a more complete understanding of factors and trends affecting our business. These measures assist management and the board of directors and may be useful to investors in comparing the Company's operating performance consistently over time as it removes the impact of its capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of the management team (taxes), as well as other non-cash (purchase accounting adjustments and imputed rental income) and non-recurring items, from the Company’s operational results. Adjusted EBITDA also removes the impact of non-cash share-based compensation expense and certain acquisition-related charges. EBITDA and adjusted EBITDA are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities. | |
| Acquisition-affected results include the activity of Broadlane prior to the Company’s actual ownership. The Broadlane acquisition was consummated on November 16, 2010. These results assume the acquisition of Broadlane occurred on January 1, 2010. Acquisition-affected measures (e.g. acquisition-affected net revenue; acquisition-related SCM adjustments; acquisition-affected net loss; acquisition-affected EBITDA; acquisition-affected adjusted EBITDA; acquisition-affected adjusted EBITDA margin) are used by management and the board of directors to better understand the results of operations of the Spend and Clinical Resource Management segment. Given the significant impact that this transaction had on the Company during the fiscal year ended December 31, 2010 and in future periods, the Company believes such acquisition-affected measures may be useful and meaningful to investors in their analysis of such results. Non-GAAP acquisition-affected measures are for illustrative and informational purposes only and are not intended to represent or be indicative of what the Company's results of operations would have been if this transaction had occurred at the beginning of 2010. These measures also should not be considered representative of the Company's future results of operations. | |
| Acquisition-related purchase accounting revenue adjustment reflects an estimated reduction of net administrative fee revenue. Under the Company’s revenue recognition policies, administrative fees are recorded as revenue when reported to the Company by vendors. GAAP relating to business combinations requires that the Company estimate the amount of client supply purchases (the driver of administrative fee revenue) occurring prior to the acquisition closing date and to record the fair value of the administrative fees (the asset) to be received from those purchases as an account receivable and any corresponding revenue share obligation as a liability. As vendor reports are received and cash is collected, the Company will not recognize revenue for this acquisition-related purchase accounting revenue adjustment. | |
| The Company defines adjusted net income as earnings excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense, certain acquisition and integration-related charges on a tax-adjusted basis and diluted adjusted EPS as earnings per share excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain acquisition-related charges on a tax-adjusted basis. Adjusted net income and diluted adjusted EPS are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities. Diluted adjusted EPS growth is used by the Company as the financial performance metric tied to the vesting of certain equity awards granted pursuant to the Company’s Long-Term Performance Incentive Plan. Use of this measure for this purpose allows management and the board of directors to analyze the Company’s operating performance on a consistent basis by removing the impact of certain non-cash and non-recurring items from our operations, and by rewarding organic growth and accretive business transactions. As a significant portion of senior management’s incentive based compensation is based on the achievement of certain diluted adjusted EPS growth over time, investors may find such information useful. | |
| Contracted revenue is a forward-looking operating measure used by management and the board of directors to better understand revenue growth trends within the Company's business segments as it reflects the Company’s current estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period. Such information may be useful to investors in their analysis of the Company's revenue growth trends. A reconciliation to the most directly comparable GAAP measure cannot be performed without unreasonable effort. | |