MedAssets Reports Third Quarter and Nine Month 2012 Financial Results

MedAssets Reports Third Quarter and Nine Month 2012 Financial Results

ATLANTA--(BUSINESS WIRE)-- MedAssets, Inc. (NAS: MDAS) today announced results for its third quarter and nine-month periods ended September 30, 2012. Third quarter results are summarized in the table below:

 

($ in millions, except per share)

   

3Q-12

 

3Q-11

 

% Change

Net Revenue:
Spend and Clinical Resource Mgmt (SCM) $ 99.1 $ 90.4 9.6 %
Revenue Cycle Management (RCM)   64.3   53.1   21.1  
Total Net Revenue 163.4 143.6 13.9 %
Non-GAAP acquisition-related purchase
accounting revenue adjustments a   --   0.2   nm
Total non-GAAP Net Revenue b 163.4 143.7 13.7 %
Net income (loss) 5.5 (1.0 ) nm
Earnings (loss) per share (EPS) - diluted 0.09 (0.02 ) nm
Non-GAAP adjusted EBITDA 57.0 45.2 26.0 %
Non-GAAP adjusted EPS - diluted $ 0.32 $ 0.26 23.1
Weighted average shares - diluted c 59.5 57.4 3.7 %

 

 

(a) Non-GAAP acquisition-related purchase accounting revenue adjustments reflect net revenue that would have been recognized after completion of the Broadlane acquisition if not for the GAAP-related purchase accounting revenue adjustments. A detailed explanation is provided under "Use of Non-GAAP Financial Measures" following the accompanying financial schedules.


(b) Column amounts may not add to total amount due to rounding.

(c) Given the Company's net loss for the three months ended September 30, 2011, basic and fully diluted weighted average shares are the same for EPS and non-GAAP adjusted EPS.

Net Revenue

Third Quarter

Total net revenue for the third quarter of 2012 increased 13.9% to $163.4 million from $143.6 million in the third quarter of 2011. Comparing period-over-period organic growth, total net revenue of $163.4 million in the third quarter of 2012 increased 13.7% from total non-GAAP net revenue of $143.7 million (including non-GAAP acquisition-related purchase accounting revenue adjustments) in the third quarter of 2011. Net revenue in the SCM segment grew 9.4% to $99.1 million from non-GAAP net revenue of $90.6 million in the third quarter of 2011 primarily due to continued growth in group purchasing-related net administrative fees as well as the recognition of certain guarantee-related revenue and performance fees. Net revenue in the RCM segment increased 21.1% to $64.3 million from $53.1 million in the third quarter of 2011 as technology-related revenue grew 14.5%, due to growth in subscription fees from multiple products, while services-related revenue increased 36.8% from growth in both new and existing clients.

Nine-Month Period

Total net revenue for the first nine months of 2012 increased 13.0% to $476.3 million from $421.5 million in the first nine months of 2011. Comparing period-over-period organic growth, total net revenue of $476.3 million in the first nine months of 2012 increased 11.4% from total non-GAAP net revenue of $427.7 million in the first nine months of 2011. Net revenue in the SCM segment grew 10.2% to $294.5 million from non-GAAP net revenue of $267.1 million in the first nine months of 2011. Net revenue from the RCM segment increased 13.2% to $181.8 million from $160.6 million in the first nine months of 2011 as technology-related revenue grew 13.0% and services-related revenue increased 13.8%.

Non-GAAP Adjusted EBITDA

Third Quarter

Total non-GAAP adjusted EBITDA was $57.0 million, or 34.9% of total net revenue, in the third quarter of 2012, a 26.0% increase over total non-GAAP adjusted EBITDA of $45.2 million, or 31.4% of total non-GAAP net revenue, in the third quarter of 2011.

Nine-Month Period

In the first nine months of 2012, total non-GAAP adjusted EBITDA was $152.4 million, or 32.0% of total net revenue, a 16.8% increase over total non-GAAP adjusted EBITDA of $130.4 million, or 30.5% of total non-GAAP net revenue, in the first nine months of 2011.

Net Income and Non-GAAP Adjusted Earnings Per Share (EPS)

Third Quarter

Net income in the third quarter of 2012 was $5.5 million, or $0.09 per share, versus a net loss of $1.0 million, or a loss of $0.02 per share, in the third quarter of 2011.

Non-GAAP adjusted EPS, defined as EPS excluding non-cash acquisition-related intangible amortization and depreciation, non-cash share-based compensation, certain acquisition and integration-related expenses and non-recurring items on a tax-adjusted basis, increased 23.1% to $0.32 per share in the third quarter of 2012, versus non-GAAP adjusted EPS of $0.26 per share in the third quarter of 2011.

Nine-Month Period

Net income in the first nine months of 2012 was $7.5 million, or $0.13 per share, versus a net loss of $19.6 million, or a loss of $0.34 per share, in the first nine months of 2011. The first nine months of 2011 was impacted by acquisition and integration-related expenses associated with the purchase of Broadlane in November 2010.

Non-GAAP adjusted EPS was $0.84 per share in the first nine months of 2012, a 27.3% increase over non-GAAP adjusted EPS of $0.66 per share in the first nine months of 2011.

Cash Flow and Capital Resources

Cash provided by operating activities in the first nine months of 2012 was $107.7 million, a 42.3% increase from $75.7 million in the first nine months of 2011. The Company's balance sheet at September 30, 2012 included $890.7 million in total bank and bond debt, net of cash and cash equivalents. The Company prepaid $30 million of bank debt in the third quarter along with its scheduled principal payments, in addition to $25 million in prepayments earlier in the year. Total net debt equates to leverage of approximately 4.3 times non-GAAP adjusted EBITDA for the trailing twelve-month period.

Updated 2012 Financial Guidance

MedAssets raised its full-year 2012 net revenue guidance and narrowed its adjusted EBITDA and EPS guidance, as follows:

($ in millions, except per share)

 

FY 2012

 

Y-Y % change

Net Revenue:
SCM segment $ 389.5 - 394.5 5.2 - 6.6 %
RCM segment   241.5 - 244.5 12.7-14.1  
Total Net Revenue

633.0 - 637.0

8.3 - 9.0
Non-GAAP adjusted EBITDA

200.0 - 206.0

8.6-11.9

%

GAAP EPS - diluted 0.14 - 0.21 nm
Non-GAAP adjusted EPS - diluted $ 1.07 - 1.13 8.1-14.1 %

Non-GAAP Contracted Revenue

At September 30, 2012, MedAssets rolling 12-month non-GAAP contracted revenue estimate was $603.4 million (SCM segment - $370.6 million; RCM segment - $232.8 million), a year-over-year increase of 7.5%. Non-GAAP 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, Tuesday, October 30, 2012
Phone: 866-200-6965 (or 646-216-7221 for international/local callers), PIN code 77897238
Webcast: http://ir.medassets.com, "Events & Presentations" page; Archive will be available for over 30 days
Replay: Call 866-206-0173 or 646-216-7204 (PIN code 276968)

About MedAssets

MedAssets (NAS: MDAS) partners with healthcare providers to improve their financial strength by implementing revenue cycle, spend and clinical resource management solutions that help capture revenue, 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 condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; acquisition-related purchase accounting revenue adjustments; EBITDA; adjusted EBITDA; adjusted EBITDA margin; 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, and 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, revenue growth and other financial projections and forecasts; and the Company's ability to successfully integrate and capitalize on synergies associated with acquisitions. Any forward-looking statements are not guarantees of future performance, involve risks and uncertainties, and 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, 2011 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

 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                               
In 000s, except per share data Three Months Ended Nine Months Ended
September 30, September 30,
  2012     2011   % Change     2012     2011   % Change  
Revenue:
Administrative fees, net $ 68,641 $ 62,635 9.6 % $ 200,752 $ 179,032 12.1 %
Other service fees   94,800     80,923   17.1 %   275,589     242,459   13.7 %
 
Total net revenue   163,441     143,558   13.9 %   476,341     421,491   13.0 %
 
Operating expenses:
Cost of revenue 34,570 29,528 17.1 % 100,583 90,571 11.1 %
Product development expenses 7,217 6,771 6.6 % 20,777 19,646 5.8 %
Selling and marketing expenses 12,983 12,853 1.0 % 46,709 43,454 7.5 %
General and administrative expenses 55,167 53,196 3.7 % 165,577 149,107 11.0 %
Acquisition and integration-related expenses 1,535 3,742 -59.0 % 4,812 22,713 -78.8 %
Depreciation 7,721 5,507 40.2 % 21,416 16,414 30.5 %
Amortization of intangibles   17,840     20,228   -11.8 %   55,251     60,700   -9.0 %
 
Total operating expenses   137,033     131,825   4.0 %   415,125     402,605   3.1 %
 
Operating income 26,408 11,733 125.1 % 61,216 18,886 224.1 %
Other income (expense):
Interest expense (16,672 ) (17,818 ) -6.4 % (50,722 ) (53,942 ) -6.0 %
Other income   114     2,490   nm   449     2,770   nm
 
Income (loss) before income taxes 9,850 (3,595 ) nm 10,943 (32,286 ) nm
Income tax expense (benefit)   4,386     (2,612 ) nm   3,467     (12,645 ) nm
 
Net income (loss) 5,464 (983 ) nm 7,476 (19,641 ) nm
 
Basic net income (loss) per share   0.09     (0.02 ) nm   0.13     (0.34 ) nm
 
Diluted net income (loss) per share $ 0.09   $ (0.02 ) nm $ 0.13   $ (0.34 ) nm
 
Weighted average shares — basic 57,693 57,410 57,239 57,334
Weighted average shares — diluted 59,513 57,410 3.7 % 58,896 57,334 2.7 %
 

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