NASHVILLE, Tenn.--(BUSINESS WIRE)--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. |
