Exhibit 99.1
MedAssets Announces Third Quarter and Nine-Month 2008 Financial Results
Reports Third Quarter 2008 Net Revenue of $76.0 million,
Adjusted EBITDA of $25.2 million and Adjusted EPS of $0.15;
Reaffirms 2008 Guidance and Introduces Full-Year 2009 Guidance
ATLANTA--(BUSINESS WIRE)--November 13, 2008--MedAssets, Inc. (NASDAQ: MDAS) today announced results for its third quarter and nine-month period ended September 30, 2008.
Financial Highlights
- Total net revenue was $76.0 million in the third quarter of 2008, an increase of 54.2% from total net revenue of $49.3 million in the third quarter last year.
- Adjusted EBITDA a increased 68.1% to $25.2 million in the third quarter of 2008 when compared to adjusted EBITDA of $15.0 million in the third quarter last year.
- Adjusted diluted earnings per share a in the third quarter of 2008 was $0.15, excluding non-cash acquisition-related intangible amortization on a tax-adjusted basis.
Net Revenue
Total net revenue for the third quarter of 2008 increased 54.2% to $76.0 million from $49.3 million in the third quarter of 2007, driven by revenue growth from both organic and acquisition sources. For comparative purposes, total net revenue of $76.0 million in the third quarter of 2008 increased 15.4% over total pro forma net revenue a b of $65.9 million in the third quarter of 2007.
Total net revenue for the nine-month period ended September 30, 2008 increased 45.6% to $196.0 million from $134.6 million in the first nine months of 2007. For comparative purposes, total pro forma net revenue in the first nine months of 2008 was $224.5 million, representing a 10.4% increase over total pro forma net revenue of $203.4 million in the first nine months of 2007.
Adjusted EBITDA
In the third quarter of 2008, total adjusted EBITDA was $25.2 million, or 33.2% of total net revenue, a 68.1% increase over adjusted EBITDA of $15.0 million, or 30.4% of total net revenue, in the third quarter of 2007. For comparative purposes, third quarter 2008 total adjusted EBITDA of $25.2 million was up 35.0% over total pro forma adjusted EBITDA a b in the third quarter of 2007 of $18.7 million, or 28.4% of total pro forma net revenue.
In the nine months ended September 30, 2008, adjusted EBITDA increased 34.4% to $60.3 million, or 30.8% of total net revenue, versus adjusted EBITDA of $44.8 million, or 33.3% of total net revenue, in the first nine months of 2007. For comparative purposes, pro forma adjusted EBITDA in the first nine months of 2008 increased 10.5% to $70.4 million, or 31.3% of total pro forma net revenue, compared to pro forma adjusted EBITDA of $63.7 million, or 31.3% of total pro forma net revenue, in the nine-month period ended September 30, 2007.
(a) Reconciliation of non-GAAP measures, including pro forma net revenue, adjusted EBITDA, pro forma adjusted EBITDA and adjusted diluted EPS, to their most directly comparable GAAP measure, is provided in the attached financial schedules.
(b) Pro forma results assume the completion of the XactiMed and MD-X acquisitions, as well as certain financing, occurred on January 1, 2007, and the acquisition of Accuro occurred on January 1 of each respective year.
Profitability
The Company reported net income attributable to common stockholders in the third quarter of 2008 of $3.7 million, or $0.07 per diluted share, versus a net loss attributable to common stockholders of $4.6 million, or a loss of $0.40 per diluted share, in the third quarter of 2007. Adjusted diluted earnings per share (EPS) in the third quarter of 2008 was $0.15 per diluted share, excluding non-cash acquisition-related intangible amortization on a tax-adjusted basis.
For the first nine months of 2008, the Company reported net income attributable to common stockholders of $4.8 million, or $0.09 per diluted share, versus a net loss attributable to common stockholders of $6.0 million, or a loss of $0.55 per diluted share, in the nine-month period ended September 30, 2007. Excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, adjusted diluted EPS in the first nine months of 2008 was $0.36 per diluted share.
Share-based compensation expense, on a tax-adjusted basis, equated to $0.03 per diluted share in the third quarter and $0.08 per diluted share in the nine-month period ended September 30, 2008.
Business Segment Financial Highlights
Revenue Cycle Management (RCM) Segment
The RCM segment reported net revenue in the third quarter of 2008 of $45.8 million, up 87.8% from net revenue of $24.4 million in the third quarter of 2007. For comparative purposes, net revenue in the third quarter of 2008 of $45.8 million increased 11.8% when compared to pro forma net revenue of $41.0 million in the third quarter of 2007.
Adjusted EBITDA for the RCM segment in the third quarter of 2008 more than doubled to $14.0 million, or 30.6% of net revenue, versus adjusted EBITDA of $6.1 million, or 25.2% of net revenue, in the third quarter of 2007. For comparative purposes, adjusted EBITDA in the third quarter of 2008 of $14.0 million increased 42.5% from pro forma adjusted EBITDA in the third quarter of 2007 of $9.8 million, or 24.0% of pro forma net revenue.
For the nine-month period ended September 30, 2008, the RCM segment reported net revenue of $102.2 million, an 87.9% increase over net revenue of $54.4 million in the first nine months of 2007. Pro forma net revenue in the first nine months of 2008 was $130.8 million, compared to pro forma net revenue of $123.2 million in the first nine months of 2007.
Adjusted EBITDA in the first nine months of 2008 increased 61.4% to $26.0 million, or 25.5% of net revenue, versus adjusted EBITDA of $16.1 million, or 29.7% of net revenue, in the nine-month period ended September 30, 2007. For comparative purposes, pro forma adjusted EBITDA in the first nine months of 2008 was $36.1 million, or 27.6% of pro forma net revenue, versus pro forma adjusted EBITDA in the first nine months of 2007 of $35.0 million, or 28.4% of pro forma net revenue.
Net revenue and adjusted EBITDA growth in the RCM segment was primarily driven by increases in service and recurring subscription fee revenue, as well as the impact of acquisitions, offset slightly by a period-over-period decline in decision support revenue.
Spend Management Segment
Net revenue in the Spend Management segment increased 21.3% to $30.2 million from the $24.9 million reported in the third quarter of 2007. Adjusted EBITDA in the third quarter of 2008 was $15.2 million, or 50.4% of net revenue, versus $11.8 million, or 47.6% of net revenue, in the third quarter of 2007.
For the nine-month period ended September 30, 2008, net revenue in the Spend Management segment was $93.7 million, a 16.9% increase over the $80.2 million reported in the first nine months of 2007. Adjusted EBITDA for the Spend Management segment increased 24.1% to $46.5 million, or 49.7% of net revenue, in the first nine months of 2008, when compared to $37.5 million, or 46.7% of net revenue, in the nine-month period ended September 30, 2007.
The increase in Spend Management segment adjusted EBITDA margin in 2008 was due primarily to operating leverage and lower sales and marketing expenses as a percentage of segment net revenue.
Corporate Operations
The impact of corporate operations on total adjusted EBITDA was $4.0 million in the third quarter of 2008, versus $3.0 million in the same quarter of 2007. For the first nine months of 2008, the impact of corporate operations on total adjusted EBITDA was $12.3 million, versus $8.8 million in the first nine-month period of 2007. The increase in corporate expense was primarily attributable to higher costs associated with being a publicly-traded company and the addition of certain senior staff functions.
Cash Flow and Capital Resources
Net cash provided by operating activities increased 40.9% to $31.1 million in the first nine months of 2008, as compared to $22.1 million for the nine months ended September 30, 2007. Capital expenditures and capitalized software costs for the nine months ended September 30, 2008 were $12.3 million as compared to $12.7 million for the comparable period in 2007.
During the third quarter of 2008, the Company repaid $18.9 million of its long-term bank debt, and its balance sheet included $255.3 million in long-term bank debt at September 30, 2008. Current net leverage was approximately 2.8 times trailing adjusted pro forma EBITDA, and the Company had approximately $100 million of availability under its revolving credit facility at the end of the quarter.
Reaffirming 2008 Guidance; Initiating 2009 Guidance
MedAssets reaffirmed and narrowed its full-year 2008 financial outlook, and introduced its 2009 guidance, as follows:
(In millions, except EPS) | 2008E | 2009E | ||||
| Net Revenue: | (As Reported) | |||||
| Revenue Cycle Management | $ | 149 - 151 | $ | 207 - 213 | ||
| Spend Management | 123 - 125 | 137 - 143 | ||||
| Total Net Revenue | 272 - 276 | 346 - 354 | ||||
| Total Adjusted EBITDA | 87 - 90 | 111 - 117 | ||||
| GAAP EPS (diluted) | 0.17 - 0.21 | 0.25 - 0.33 | ||||
| Adjusted EPS (diluted) | 0.51 - 0.55 | 0.54 - 0.62 | ||||
| Cash EPS (diluted) | $ | 0.61 - 0.65 | $ | 0.74 - 0.82 | ||
At September 30, 2008, MedAssets’ rolling 12-month contracted revenue was an estimated $298.0 million, consisting of $175.0 million from the RCM segment and $123.0 million from the Spend Management segment. The Company’s rolling 12-month contracted revenue increased approximately 5.0% on a consolidated basis, as compared to the rolling 12-month total as of June 30, 2008. The Company’s contracted revenue reflects the estimated contractually committed revenue to be generated under existing customer contracts in the forward 12-month period.
Conference Call Information
The Company will host a conference call at 5:00 p.m. ET today, Thursday, November 13, 2008, to discuss its financial and business highlights and management's outlook for future performance. The live audio webcast will be accessible from the “Events & Presentations” page at http://ir.medassets.com. To access the conference call, dial 866-811-1812 or 706-902-0609 (international), and provide the conference ID number 69058140. For those unable to listen to the live broadcast, a webcast replay will be archived on MedAssets’ website for 30 days. A conference call replay will be available for one week by calling 800-642-1687 or 706-645-9291 (international), and entering conference ID number 69058140.
About MedAssets
MedAssets (NASDAQ: MDAS) partners with healthcare providers to improve their financial strength by implementing integrated spend management and revenue cycle solutions that help control cost, improve margins and cash flow, increase regulatory compliance, and optimize operational efficiency. MedAssets serves more than 125 health systems, 3,300 hospitals and 30,000 non-acute care healthcare providers. For more information, go to www.medassets.com.
Safe Harbor Statement
This Press Release contains statements that constitute 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 contained in this Press Release include the intent, belief or current expectations of the Company and members of its management team with respect to the Company’s future business operations as well as the assumptions upon which such statements are based. Forward-looking statements include specifically, but are not limited to: 2008 and 2009 projections, 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 its past and future acquisitions. Investors are cautioned that any such 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, 2007 and subsequent Forms 10-Q filed with the Securities and Exchange Commission. The Company disclaims any responsibility to update any forward-looking statements.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (UNAUDITED) | |||||||||||||||
| GAAP | GAAP | Pro Forma | |||||||||||||
| In 000s, except per share data | Three Months Ended | Three Months Ended | Three Months Ended | ||||||||||||
| September 30, | September 30, | Pro Forma | September 30, | ||||||||||||
| 2008 | 2007 | Adjustments c | 2007 | ||||||||||||
| Revenue: | |||||||||||||||
| Administrative fees, net | $ | 25,663 | $ | 22,642 | $ | - | $ | 22,642 | |||||||
| Other service fees | 50,309 | 26,631 | 16,588 | 43,219 | |||||||||||
| Total net revenue | 75,972 | 49,273 | 16,588 | 65,861 | |||||||||||
| Operating expenses: | |||||||||||||||
| Cost of revenue | 17,101 | 8,155 | 4,306 | 12,461 | |||||||||||
| Product development expenses | 4,719 | 1,916 | 1,786 | 3,702 | |||||||||||
| Selling and marketing expenses | 9,641 | 7,958 | 2,014 | 9,972 | |||||||||||
| General and administrative expenses | 22,779 | 18,148 | 5,358 | 23,506 | |||||||||||
| Depreciation | 2,581 | 1,936 | 353 | 2,289 | |||||||||||
| Amortization of intangibles | 7,324 | 5,102 | 3,945 | 9,047 | |||||||||||
| - | |||||||||||||||
| Total operating expenses | 64,145 | 43,215 | 17,762 | 60,977 | |||||||||||
| Operating income | 11,827 | 6,058 | (1,174 | ) | 4,884 | ||||||||||
| Other income (expense): | |||||||||||||||
| Interest (expense) | (5,803 | ) | (6,763 | ) | (2,580 | ) | (9,343 | ) | |||||||
| Other income (expense) | 228 | 1,189 | 16 | 1,205 | |||||||||||
| Income (loss) before income taxes | 6,252 | 484 | (3,738 | ) | (3,254 | ) | |||||||||
| Income tax expense (benefit) | 2,566 | 320 | (1,736 | ) | (1,416 | ) | |||||||||
| Net income (loss) | 3,686 | 164 | (2,002 | ) | (1,838 | ) | |||||||||
Preferred stock dividends and accretion d | - | (4,798 | ) | - | (4,798 | ) | |||||||||
| Net income (loss) attributable to common stockholders | $ | 3,686 | $ | (4,634 | ) | $ | (2,002 | ) | $ | (6,636 | ) | ||||
| Basic and diluted income (loss) per share: | |||||||||||||||
| Basic net income (loss) attributable to common stockholders | $ | 0.07 | $ | (0.40 | ) | $ | (0.32 | ) | |||||||
| Diluted net income (loss) attributable to common stockholders | $ | 0.07 | $ | (0.40 | ) | $ | (0.32 | ) | |||||||
Weighted average shares — basic e | 53,715 | 11,685 | 8,850 | 20,535 | |||||||||||
Weighted average shares — diluted e | 56,136 | 11,685 | 8,850 | 20,535 | |||||||||||
| (c) Includes all adjustments relating to the acquisition of Accuro as if this company was acquired on January 1, 2007. Refer to the Company's Form 8-K/A filed with the Securities and Exchange Commission (SEC) on August 13, 2008 for further description of similar adjustments. The unaudited pro forma results 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 event had occurred at the beginning of such period. | |||||||||||||||
| (d) The Company's participating preferred stock converted to common stock on December 18, 2007 as the result of our initial public offering. With this conversion, the Company is no longer obligated to pay the associated accrued preferred dividends, and all rights of the former preferred stockholders to accrued and unpaid preferred dividends were terminated. | |||||||||||||||
| (e) For the GAAP and pro forma three months ended September 30, 2007, common stock equivalents are not included in the weighted average shares outstanding since the effect would be antidilutive due to GAAP and pro forma net losses attributable to common stockholders in the period. | |||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||
| GAAP | Pro Forma | GAAP | Pro Forma | ||||||||||||||||||
| In 000s, except per share data | Nine Months Ended | Nine Months Ended | Nine Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | Pro Forma | September 30, | September 30, | Pro Forma | September 30, | ||||||||||||||||
| 2008 | Adjustments f | 2008 | 2007 | Adjustments g | 2007 | ||||||||||||||||
| Revenue: | |||||||||||||||||||||
| Administrative fees, net | $ | 78,355 | $ | - | $ | 78,355 | $ | 70,966 | $ | - | $ | 70,966 | |||||||||
| Other service fees | 117,610 | 28,540 | 146,150 | 63,631 | 68,774 | 132,405 | |||||||||||||||
| Total net revenue | 195,965 | 28,540 | 224,505 | 134,597 | 68,774 | 203,371 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||
| Cost of revenue | 36,252 | 6,980 | 43,232 | 17,845 | 19,300 | 37,145 | |||||||||||||||
| Product development expenses | 11,027 | 4,058 | 15,085 | 5,612 | 6,047 | 11,659 | |||||||||||||||
| Selling and marketing expenses | 32,096 | 2,557 | 34,653 | 26,675 | 7,037 | 33,712 | |||||||||||||||
| General and administrative expenses | 66,054 | 6,537 | 72,591 | 44,402 | 20,929 | 65,331 | |||||||||||||||
| Depreciation | 7,051 | 622 | 7,673 | 5,270 | 1,373 | 6,643 | |||||||||||||||
| Amortization of intangibles | 16,117 | 6,204 | 22,321 | 10,933 | 13,872 | 24,805 | |||||||||||||||
| Impairment of intangible assets | 2,079 | - | 2,079 | 1,195 | - | 1,195 | |||||||||||||||
| - | - | ||||||||||||||||||||
| Total operating expenses | 170,676 | 26,958 | 197,634 | 111,932 | 68,558 | 180,490 | |||||||||||||||
| Operating income | 25,289 | 1,582 | 26,871 | 22,665 | 216 | 22,881 | |||||||||||||||
| Other income (expense): | |||||||||||||||||||||
| Interest (expense) | (15,120 | ) | (4,363 | ) | (19,483 | ) | (14,151 | ) | (13,669 | ) | (27,820 | ) | |||||||||
| Other (expense) income | (2,101 | ) | 74 | (2,027 | ) | 2,101 | 82 | 2,183 | |||||||||||||
| Income (loss) before income taxes | 8,068 | (2,707 | ) | 5,361 | 10,615 | (13,371 | ) | (2,756 | ) | ||||||||||||
| Income tax expense (benefit) | 3,259 | (1,033 | ) | 2,226 | 4,193 | (3,867 | ) | 326 | |||||||||||||
| Net income (loss) | 4,809 | (1,674 | ) | 3,135 | 6,422 | (9,504 | ) | (3,082 | ) | ||||||||||||
Preferred stock dividends and accretion h | - | - | - | (12,445 | ) | (998 | ) | (13,443 | ) | ||||||||||||
| Net income (loss) attributable to common stockholders | $ | 4,809 | $ | (1,674 | ) | $ | 3,135 | $ | (6,023 | ) | $ | (10,502 | ) | $ | (16,525 | ) | |||||
| Basic and diluted income (loss) per share: | |||||||||||||||||||||
| Basic net income (loss) attributable to common stockholders | $ | 0.10 | $ | 0.06 | $ | (0.55 | ) | $ | (0.83 | ) | |||||||||||
| Diluted net income (loss) attributable to common stockholders | $ | 0.09 | $ | 0.06 | $ | (0.55 | ) | $ | (0.83 | ) | |||||||||||
Weighted average shares — basic i | 48,493 | 4,942 | 53,435 | 11,037 | 8,850 | 19,887 | |||||||||||||||
Weighted average shares — diluted i | 51,035 | 4,942 | 55,977 | 11,037 | 8,850 | 19,887 | |||||||||||||||
| (f) Includes all adjustments relating to the acquisition of Accuro as if this company was acquired at the beginning of each year presented. Refer to the Company's Form 8-K/A filed with the SEC on August 13, 2008 for further description of similar adjustments. The unaudited pro forma results 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 event had occurred at the beginning of such periods. | |||||||||||||||||||||
| (g) Includes all adjustments relating to the acquisitions of XactiMed, MD-X and Accuro as if the these companies were acquired on January 1, 2007. Such adjustments include the effect of financing certain acquisitions and the financing of the Company's 2007 dividend payment, as though obtained on January 1, 2007. Refer to the Company's final prospectus filed on Form 424B4 with the SEC on December 13, 2007 for further description of such adjustments. The unaudited pro forma results 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 these events had occurred at the beginning of such periods. | |||||||||||||||||||||
| (h) The Company's participating preferred stock converted to common stock on December 18, 2007 as the result of our initial public offering. With this conversion, the Company is no longer obligated to pay the associated accrued preferred dividends, and all rights of the former preferred stockholders to accrued and unpaid preferred dividends were terminated. | |||||||||||||||||||||
| (i) For the GAAP and pro forma nine months ended September 30, 2007, common stock equivalents are not included in the weighted average shares outstanding since the effect would be antidilutive due to GAAP and pro forma net losses attributable to common stockholders in the period. | |||||||||||||||||||||
| CONDENSED SEGMENT REPORTING | ||||||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||||||
| In $000s | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||||||||||||||
| ACTUAL | ||||||||||||||||||||||||||||
| Net revenue | ||||||||||||||||||||||||||||
| Revenue Cycle Management | $ | 45,791 | $ | 24,386 | $ | 102,218 | $ | 54,394 | ||||||||||||||||||||
| Spend Management | 30,181 | 24,887 | 93,747 | 80,203 | ||||||||||||||||||||||||
| Total net revenue | $ | 75,972 | $ | 49,273 | $ | 195,965 | $ | 134,597 | ||||||||||||||||||||
Adjusted EBITDA (a non-GAAP measure) j | % margin | % margin | % margin | % margin | ||||||||||||||||||||||||
| Revenue Cycle Management | $ | 14,003 | 30.6 | % | $ | 6,139 | 25.2 | % | $ | 26,043 | 25.5 | % | $ | 16,137 | 29.7 | % | ||||||||||||
| Spend Management | 15,207 | 50.4 | % | 11,837 | 47.6 | % | 46,547 | 49.7 | % | 37,494 | 46.7 | % | ||||||||||||||||
| Corporate | (4,009 | ) | (2,987 | ) | (12,323 | ) | (8,806 | ) | ||||||||||||||||||||
| Total Adjusted EBITDA | $ | 25,201 | 33.2 | % | $ | 14,989 | 30.4 | % | $ | 60,267 | 30.8 | % | $ | 44,825 | 33.3 | % | ||||||||||||
| PRO FORMA | ||||||||||||||||||||||||||||
| Net revenue | ||||||||||||||||||||||||||||
| Revenue Cycle Management | $ | 45,791 | $ | 40,974 | $ | 130,758 | $ | 123,168 | ||||||||||||||||||||
| Spend Management | 30,181 | 24,887 | 93,747 | 80,203 | ||||||||||||||||||||||||
| Total net revenue | $ | 75,972 | $ | 65,861 | $ | 224,505 | $ | 203,371 | ||||||||||||||||||||
Adjusted EBITDA (a non-GAAP measure) k | % margin | % margin | % margin | % margin | ||||||||||||||||||||||||
| Revenue Cycle Management | $ | 14,003 | 30.6 | % | $ | 9,824 | 24.0 | % | $ | 36,146 | 27.6 | % | $ | 34,972 | 28.4 | % | ||||||||||||
| Spend Management | 15,207 | 50.4 | % | 11,837 | 47.6 | % | 46,547 | 49.7 | % | 37,494 | 46.7 | % | ||||||||||||||||
| Corporate | (4,009 | ) | (2,987 | ) | (12,323 | ) | (8,806 | ) | ||||||||||||||||||||
| Total Adjusted EBITDA | $ | 25,201 | 33.2 | % | $ | 18,674 | 28.4 | % | $ | 70,370 | 31.3 | % | $ | 63,660 | 31.3 | % | ||||||||||||
(j) Adjusted EBITDA is defined by the Company 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. Adjusted EBITDA is used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period that provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. The Company believes Adjusted EBITDA assists its board of directors, management and investors in comparing its operating performance on a consistent basis because it removes the impact of the Company's capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of MedAssets' management team (taxes), as well as other non-cash (purchase accounting adjustments, share-based compensation expense and imputed rental income) and non-recurring items, from the Company's operations. See the Company's accompanying reconciliations from consolidated Adjusted EBITDA to consolidated Net Income, the closest comparable GAAP-based metric. Such reconciliations are consistent with that of the Company's segment reporting disclosures to the consolidated financial statements for the year ended December 31, 2007 included in the Company's Form 10-K as filed with the SEC on March 24, 2008. | ||||||||||||||||||||||||||||
| (k) Pro forma Adjusted EBITDA is Adjusted EBITDA after considering the effect of the acquisitions of XactiMed, MD-X and Accuro, and certain financing secured in July 2007. See the Company's accompanying reconciliations from consolidated Pro Forma Adjusted EBITDA to consolidated Pro Forma Net Income. The unaudited pro forma results 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 these events had occurred at the beginning of such periods. | ||||||||||||||||||||||||||||
| RECONCILIATION OF NET INCOME TO | ||||||||||||||||
| CONSOLIDATED ADJUSTED EBITDA (A NON-GAAP MEASURE) | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| In $000s | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| ACTUAL | ||||||||||||||||
| Net Income | $ | 3,686 | $ | 164 | $ | 4,809 | $ | 6,422 | ||||||||
| Depreciation | 2,581 | 1,936 | 7,051 | 5,270 | ||||||||||||
| Amortization of intangibles | 7,324 | 5,102 | 16,117 | 10,933 | ||||||||||||
| Amortization of intangibles (included in cost of revenue) | 233 | 87 | 995 | 767 | ||||||||||||
| Interest expense, net | 5,761 | 5,787 | 13,715 | 12,496 | ||||||||||||
| Income tax expense | 2,566 | 320 | 3,259 | 4,193 | ||||||||||||
| EBITDA | $ | 22,151 | $ | 13,396 | $ | 45,946 | $ | 40,081 | ||||||||
| Impairment of intangibles | - | - | 2,079 | 1,195 | ||||||||||||
| Share-based compensation | 2,452 | 1,299 | 6,591 | 2,891 | ||||||||||||
| Rental income from capitalized building lease | (109 | ) | (109 | ) | (329 | ) | (329 | ) | ||||||||
| Purchase accounting adjustments | 707 | 403 | 2,066 | 987 | ||||||||||||
| Interest rate swap cancellation | - | - | 3,914 | - | ||||||||||||
Adjusted EBITDA m | $ | 25,201 | $ | 14,989 | $ | 60,267 | $ | 44,825 | ||||||||
| PRO FORMA | ||||||||||||||||
| Net income (loss) | $ | 3,686 | $ | (1,838 | ) | $ | 3,135 | $ | (3,082 | ) | ||||||
| Depreciation | 2,581 | 2,289 | 7,673 | 6,643 | ||||||||||||
| Amortization of intangibles | 7,324 | 9,047 | 22,321 | 24,805 | ||||||||||||
| Amortization of intangibles (included in cost of revenue) | 233 | 87 | 995 | 1,469 | ||||||||||||
| Interest expense, net | 5,761 | 8,355 | 18,004 | 26,156 | ||||||||||||
| Income tax expense | 2,566 | (1,416 | ) | 2,226 | 326 | |||||||||||
| EBITDA | $ | 22,151 | $ | 16,524 | $ | 54,354 | $ | 56,317 | ||||||||
| Impairment of intangibles | - | - | 2,079 | 1,195 | ||||||||||||
| Share-based compensation | 2,452 | 1,500 | 7,108 | 4,184 | ||||||||||||
| Rental income from capitalized building lease | (109 | ) | (109 | ) | (329 | ) | (329 | ) | ||||||||
| Purchase accounting adjustments | 707 | 759 | 3,244 | 2,293 | ||||||||||||
| Interest rate swap cancellation | - | - | 3,914 | - | ||||||||||||
Pro Forma Adjusted EBITDA n | $ | 25,201 | $ | 18,674 | $ | 70,370 | $ | 63,660 | ||||||||
(m) Adjusted EBITDA is defined by the Company 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. Adjusted EBITDA is used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period that provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. The Company believes Adjusted EBITDA assists its board of directors, management and investors in comparing its operating performance on a consistent basis because it removes the impact of the Company's capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of MedAssets' management team (taxes), as well as other non-cash (purchase accounting adjustments, share-based compensation expense and imputed rental income) and non-recurring items, from the Company's operations. | ||||||||||||||||
| (n) Pro forma Adjusted EBITDA is Adjusted EBITDA after considering the effect of the acquisitions of XactiMed, MD-X and Accuro, and certain financing secured in July 2007. Explanations of each adjustment can be found in the Company's Form 10-Q for the quarter ended September 30, 2008 to be filed with the SEC on November 14, 2008. The unaudited pro forma results 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 these events had occurred at the beginning of such periods. | ||||||||||||||||
| RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| In $000s | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| ACTUAL | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Gross administrative fees | $ | 39,867 | $ | 34,837 | $ | 117,634 | $ | 105,880 | ||||||||
| Other service fees | 50,309 | 26,631 | 117,609 | 63,631 | ||||||||||||
| Gross fees | 90,176 | 61,468 | 235,243 | 169,511 | ||||||||||||
| Revenue share obligation | (14,204 | ) | (12,195 | ) | (39,278 | ) | (34,914 | ) | ||||||||
| Net revenue | $ | 75,972 | $ | 49,273 | $ | 195,965 | $ | 134,597 | ||||||||
| PRO FORMA | ||||||||||||||||
| Gross administrative fees | $ | 39,867 | $ | 34,837 | $ | 117,634 | $ | 105,880 | ||||||||
| Other service fees | 50,309 | 43,219 | 146,149 | 132,405 | ||||||||||||
| Gross fees | 90,176 | 78,056 | 263,783 | 238,285 | ||||||||||||
| Revenue share obligation | (14,204 | ) | (12,195 | ) | (39,278 | ) | (34,914 | ) | ||||||||
| Net revenue | $ | 75,972 | $ | 65,861 | $ | 224,505 | $ | 203,371 | ||||||||
| RECONCILIATION OF 2008 THIRD QUARTER AND NINE-MONTH ADJUSTED DILUTED | ||||||||||||||||
| EARNINGS PER SHARE (A NON-GAAP MEASURE) TO GAAP EARNINGS PER SHARE | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Per share data | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2008 | 2008 | |||||||||||||||
| Diluted net income attributable to common stockholders | $ | 0.07 | $ | 0.09 | ||||||||||||
| Impairment of intangibles | - | 0.02 | ||||||||||||||
| Interest rate swap cancellation | - | 0.05 | ||||||||||||||
| Non-cash, tax-adjusted acquisition-related intangible amortization | 0.08 | 0.20 | ||||||||||||||
| Adjusted diluted earnings per share | $ | 0.15 | $ | 0.36 | ||||||||||||
| Weighted average shares - diluted | 56,136 | 51,035 | ||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
| September 30, | December 31, | ||||||
| In $000s | 2008 | 2007 | |||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current | |||||||
| Cash and cash equivalents | $ | - | $ | 136,952 | |||
| Restricted cash | - | 20 | |||||
| Accounts receivable, net of allowances of $2,341 and $3,506 as of September 30, 2008 and December 31, 2007 | |||||||
| 45,635 | 33,679 | ||||||
| Deferred tax asset, current | 11,307 | 15,049 | |||||
| Prepaid expenses and other current assets | 6,407 | 4,508 | |||||
| Total current assets | 63,349 | 190,208 | |||||
| Property and equipment, net | 40,074 | 32,490 | |||||
| Other long term assets | |||||||
| Goodwill | 512,668 | 232,822 | |||||
| Intangible assets, net | 131,850 | 62,491 | |||||
| Other | 17,432 | 8,368 | |||||
| Other long term assets | 661,950 | 303,681 | |||||
| Total assets | $ | 765,373 | $ | 526,379 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 6,380 | $ | 4,562 | |||
| Accrued revenue share obligation and rebates | 20,671 | 29,998 | |||||
| Accrued payroll and benefits | 22,364 | 13,402 | |||||
| Other accrued expenses | 9,358 | 5,612 | |||||
| Deferred revenue, current portion | 27,600 | 19,791 | |||||
| Deferred purchase consideration | 18,987 | - | |||||
| Current portion of notes payable | 2,768 | 2,020 | |||||
| Current portion of finance obligation | 146 | 128 | |||||
| Total current liabilities | 108,274 | 75,513 | |||||
| Notes payable, less current portion | 252,531 | 196,264 | |||||
| Finance obligation, less current portion | 9,899 | 10,009 | |||||
| Deferred revenue, less current portion | 4,552 | 3,229 | |||||
| Deferred tax liability | 13,815 | 5,868 | |||||
| Other long term liabilities | 1,969 | 5,981 | |||||
| Total liabilities | 391,040 | 296,864 | |||||
| Stockholders’ equity | |||||||
| Common stock, $0.01 par value, 150,000,000 shares authorized; 53,860,000 and 44,429,000 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively | |||||||
| 539 | 444 | ||||||
| Additional paid in capital | 601,353 | 464,313 | |||||
| Notes receivable from stockholders | (217 | ) | (614 | ) | |||
| Accumulated other comprehensive loss | (458 | ) | (2,935 | ) | |||
| Accumulated deficit | (226,884 | ) | (231,693 | ) | |||
| Total stockholders’ equity | 374,333 | 229,515 | |||||
| Total liabilities and stockholders’ equity | $ | 765,373 | $ | 526,379 | |||
| CONDENSED STATEMENTS OF CASH FLOWS | |||||||
| (UNAUDITED) | |||||||
| In $000s | Nine Months Ended | ||||||
| September 30, | |||||||
| 2008 | 2007 | ||||||
| Operating activities: | |||||||
| Net income | $ | 4,809 | $ | 6,422 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Bad debt expense | 1,457 | 517 | |||||
| Depreciation | 7,359 | 5,496 | |||||
| Amortization of intangibles | 16,806 | 11,473 | |||||
(Gain) loss on sale of assets | (119 | ) | 3 | ||||
| Noncash stock compensation expense | 6,591 | 2,891 | |||||
| Excess tax benefit from exercise of stock options | (1,697 | ) | (1,659 | ) | |||
| Amortization of debt issuance costs | 895 | 307 | |||||
| Noncash interest expense, net | 906 | 361 | |||||
| Impairment of intangibles | 2,079 | 1,195 | |||||
| Deferred income tax expense | 937 | 1,859 | |||||
| Changes in assets and liabilities: | (8,918 | ) | (6,794 | ) | |||
| Cash provided by operating activities | 31,105 | 22,071 | |||||
| Investing activities: | |||||||
| Purchases of property, equipment, and software | (3,891 | ) | (7,029 | ) | |||
| Capitalized software development costs | (8,378 | ) | (5,658 | ) | |||
| Acquisitions, net of cash acquired | (209,423 | ) | (90,890 | ) | |||
| Cash used in investing activities | (221,692 | ) | (103,577 | ) | |||
| Financing activities: | |||||||
| Decrease in restricted cash | 20 | - | |||||
| Proceeds from notes payable | 142,629 | 160,188 | |||||
| Repayment of notes payable and capital lease obligations | (85,615 | ) | (11,860 | ) | |||
| Repayment of finance obligation | (483 | ) | (489 | ) | |||
| Debt issuance costs | (6,167 | ) | (1,397 | ) | |||
| Interest accrued on note receivable from stockholders | (18 | ) | - | ||||
| Payment on note receivable from stockholders | 49 | 255 | |||||
| Excess tax benefit from exercise of stock options | 1,697 | 1,659 | |||||
| Payment of dividend | - | (70,000 | ) | ||||
| Issuance of series J preferred stock, net of offering costs | - | 1,000 | |||||
| Issuance of common stock, net of offering costs | 1,523 | 2,795 | |||||
| Cash provided by financing activities | 53,635 | 82,151 | |||||
| Net (decrease) increase in cash and cash equivalents | (136,952 | ) | 645 | ||||
| Cash and cash equivalents, beginning of period | 136,952 | 23,459 | |||||
| Cash and cash equivalents, end of period | $ | - | $ | 24,104 | |||
| RECONCILIATION OF 2008 ADJUSTED EBITDA GUIDANCE | |||||
| (A NON-GAAP MEASURE) TO GAAP NET INCOME GUIDANCE | |||||
| Guidance Range for | |||||
| Year Ending | |||||
| In $000s | December 31, | ||||
| 2008 | |||||
| (Low) | (High) | ||||
| Net Income | $9,000 | $11,100 | |||
| Depreciation | 9,900 | 9,700 | |||
| Amortization of intangibles | 23,400 | 23,400 | |||
| Amortization of intangibles (included in cost of revenue) | 1,600 | 1,600 | |||
| Interest expense, net | 20,000 | 19,700 | |||
| Income tax expense | 6,100 | 7,500 | |||
| EBITDA | 70,000 | 73,000 | |||
| Impairment of intangible assets | 2,100 | 2,100 | |||
| Interest rate swap cancellation | 3,900 | 3,900 | |||
| Share-based compensation | 8,900 | 8,900 | |||
| Rental income from capitalized building lease | (400 | ) | (400 | ) | |
| Purchase accounting adjustments | 2,500 | 2,500 | |||
| Adjusted EBITDA | 87,000 | 90,000 | |||
| RECONCILIATION OF 2008 ADJUSTED DILUTED EARNINGS PER SHARE GUIDANCE | |||||
| (A NON-GAAP MEASURE) TO GAAP DILUTED EARNINGS PER SHARE GUIDANCE | |||||
| Guidance Range for | |||||
| Year Ending | |||||
| December 31, | |||||
| In 000s, except per share data | 2008 | ||||
| (Low) | (High) | ||||
| Net Income | $9,000 | $11,100 | |||
| Diluted earnings per share (EPS) | 0.17 | 0.21 | |||
| Interest rate swap cancellation | 0.05 | 0.05 | |||
| Non-cash, tax-adjusted impairment of intangible assets | 0.02 | 0.02 | |||
| Non-cash, tax-adjusted acquisition-related intangible amortization | 0.27 | 0.27 | |||
| Adjusted EPS | 0.51 | 0.55 | |||
| Non-cash, tax-adjusted share-based compensation | 0.10 | 0.10 | |||
| Cash EPS | $0.61 | $0.65 | |||
| Fully diluted weighted average shares outstanding | 52,400 | 52,400 | |||
| RECONCILIATION OF 2009 ADJUSTED EBITDA GUIDANCE | |||||
| (A NON-GAAP MEASURE) TO GAAP NET INCOME GUIDANCE | |||||
| Guidance Range for | |||||
| Year Ending | |||||
| In $000s | December 31, | ||||
| 2009 | |||||
| (Low) | (High) | ||||
| Net Income | $14,400 | $18,800 | |||
| Depreciation | 15,200 | 14,800 | |||
| Amortization of intangibles | 28,000 | 28,000 | |||
| Amortization of intangibles (included in cost of revenue) | 3,200 | 3,200 | |||
| Interest expense, net | 21,400 | 20,800 | |||
| Income tax expense | 9,600 | 12,600 | |||
| EBITDA | 91,800 | 98,200 | |||
| Share-based compensation | 19,100 | 18,700 | |||
| Rental income from capitalized building lease | (400 | ) | (400 | ) | |
| Purchase accounting adjustments | 500 | 500 | |||
| Adjusted EBITDA | 111,000 | 117,000 | |||
| RECONCILIATION OF 2009 CASH AND ADJUSTED DILUTED EARNINGS PER SHARE GUIDANCE | |||||
| (A NON-GAAP MEASURE) TO GAAP DILUTED EARNINGS PER SHARE GUIDANCE | |||||
| Guidance Range for | |||||
| Year Ending | |||||
| December 31, | |||||
| In 000s, except per share data | 2009 | ||||
| (Low) | (High) | ||||
| Net Income | $14,400 | $18,800 | |||
| Diluted earnings per share (EPS) | 0.25 | 0.33 | |||
| Non-cash, tax-adjusted acquisition-related intangible amortization | 0.29 | 0.29 | |||
| Adjusted EPS | 0.54 | 0.62 | |||
| Non-cash, tax-adjusted share-based compensation | 0.20 | 0.20 | |||
| Cash EPS | $0.74 | $0.82 | |||
| Fully diluted weighted average shares outstanding | 57,400 | 57,400 | |||
mdas/F
CONTACT:
MedAssets, Inc.
Robert P. Borchert, 678-248-8194
VP, Investor Relations
rborchert@medassets.com