Exhibit 99.1
MedAssets Reports Fourth Quarter and Full-Year 2010 Financial Results
ATLANTA--(BUSINESS WIRE)--February 24, 2011--MedAssets, Inc. (NASDAQ: MDAS) today announced results for its fourth quarter and 12-month period ended December 31, 2010, as summarized below:
| (In millions, except per share) | | 4Q-10 a | | 4Q-09 | | FY 2010 | | FY 2009 |
| Net Revenue: | | | | | | | | |
| Revenue Cycle Management (RCM) | | $ | 58.8 | | | $ | 56.5 | | $ | 235.2 | | | $ | 205.9 |
| Spend Management (SM) | | | 48.2 | | | | 39.2 | | | 156.1 | | | | 135.4 |
| Total Net Revenue | | | 106.9 | | | | 95.7 | | | 391.3 | | | | 341.3 |
Non-GAAP acquisition-related purchase
accounting revenue adjustment | | | 13.4 | | | | -- | | | 13.4 | | | | -- |
| Total non-GAAP Net Revenue | | | 120.4 | | | | 95.7 | | | 404.7 | | | | 341.3 |
| Net (loss) income | | | (49.4 | ) | | | 10.0 | | | (32.1 | ) | | | 19.9 |
| (Loss) earnings per share (EPS) - diluted | | | (0.87 | ) | | | 0.17 | | | (0.57 | ) | | | 0.34 |
| Non-GAAP adjusted EBITDA | | | 41.3 | | | | 36.0 | | | 128.0 | | | | 111.4 |
| Non-GAAP cash EPS - diluted | | $ | 0.18 | | | $ | 0.28 | | $ | 0.82 | | | $ | 0.82 |
| Weighted average shares – diluted b | | | 57.0 | | | | 58.8 | | | 56.4 | | | | 57.9 |
| | | | | | | | |
| (a) Column amounts may not add to total amount due to rounding. |
| (b) Given the Company’s net loss in 2010, basic and diluted weighted average shares are the same. |
| |
Net Revenue
Fourth Quarter
Total net revenue for the fourth quarter of 2010 increased 11.8% to $106.9 million from $95.7 million in the fourth quarter of 2009. RCM segment growth of 4.1% was driven by an increase in technology solutions revenue, offset by a decline in services revenue and decision support license fees. Revenue growth of 22.8% in the SM segment was driven by 46 days of revenue from The Broadlane Group (Broadlane), continued strong demand for medical device and clinical consulting services, and growth in group purchasing-related net administrative fees.
Comparing period-over-period organic growth, the Company’s non-GAAP acquisition-affected total net revenue for the fourth quarter of 2010 increased 1.3% to $142.4 million from non-GAAP acquisition-affected total net revenue of $140.5 million in the same period of 2009.
12-month Period
Total net revenue for the year ended December 31, 2010 increased 14.7% to $391.3 million from $341.3 million in 2009.
Comparing period-over-period organic growth, the Company’s non-GAAP acquisition-affected total net revenue for full-year 2010 increased 9.6% to $557.4 million from non-GAAP acquisition-affected total net revenue of $508.8 million in the same period of 2009.
Non-GAAP Adjusted EBITDA
Fourth Quarter
In the fourth quarter of 2010, total non-GAAP adjusted EBITDA was $41.3 million, or 38.6% of total net revenue, a 14.5% increase over total non-GAAP adjusted EBITDA of $36.0 million, or 37.7% of total net revenue, in the fourth quarter of 2009.
Comparing period-over-period organic growth, total acquisition-affected non-GAAP adjusted EBITDA in the fourth quarter of 2010 was $47.5 million, or 33.4% of non-GAAP acquisition-affected total net revenue, a 2.1% decrease from acquisition-affected non-GAAP adjusted EBITDA of $48.6 million, or 34.6% of non-GAAP acquisition-affected total net revenue, in the same period of 2009.
12-month Period
In 2010, total non-GAAP adjusted EBITDA was $128.0 million, or 32.7% of total net revenue, a 14.9% increase over non-GAAP total adjusted EBITDA of $111.4 million, or 32.7% of total net revenue, in 2009.
Comparing period-over-period organic growth, total acquisition-affected non-GAAP adjusted EBITDA in full-year 2010 was $168.7 million, or 30.3% of non-GAAP acquisition-affected total net revenue, a 4.0% increase from acquisition-affected non-GAAP adjusted EBITDA of $162.3 million, or 31.9% of non-GAAP acquisition-affected total net revenue, in 2009.
Net (Loss) Income and Per Share
Fourth Quarter
Net loss in the fourth quarter of 2010 was $49.4 million, or a loss of $0.87 per diluted share, versus net income of $10.0 million, or earnings of $0.17 per diluted share, in the fourth quarter of 2009. The net loss in the fourth quarter of 2010 was due to an impairment charge to write off goodwill associated with the Company’s decision support services (DSS) operating unit, as well as acquisition-related costs and restructuring charges in connection with the acquisition and integration of Broadlane, both of which are described in more detail below.
Non-GAAP cash 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, was $0.18 per diluted share in the fourth quarter of 2010, versus non-GAAP cash EPS of $0.28 per diluted share in the fourth quarter of 2009.
12-month Period
Net loss for the full-year 2010 was $32.1 million, or a loss of $0.57 per diluted share, versus net income of $19.9 million, or earnings of $0.34 per diluted share, in the same period of 2009. Non-GAAP cash EPS was $0.82 per diluted share in 2010, compared to non-GAAP cash EPS of $0.82 per diluted share in 2009.
Cash Flow and Capital Resources
Net cash provided by operating activities in the full-year 2010 increased 75.6% to $105.9 million from $60.3 million in 2009. With new debt financing related to the Broadlane acquisition, MedAssets’ balance sheet at December 31, 2010 included $913.2 million in total bank and bond debt, net of cash and cash equivalents, which represented leverage of approximately 5.4 times trailing 12-month non-GAAP acquisition-affected adjusted EBITDA.
Fourth Quarter 2010 Acquisition-related Adjustments, Costs and Charges
Purchase Accounting Revenue Adjustment - The $13.4 million 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 at the end of this press release under “Use of Non-GAAP Financial Measures.”
Acquisition-related Costs, including Restructuring Charges - The Company incurred $17.2 million in expenses and charges in connection with the acquisition and integration of Broadlane, which were related to the elimination of redundant staff, transaction-related investment banking, audit and legal fees, as well as other costs to achieve targeted synergies. The Company incurred an additional $6.2 million in interest expense related to the write off of unamortized debt issuance costs related to its former credit agreement, the termination of an interest rate swap, and interest expense related to the Broadlane deferred payment.
Business Segment Realignment
Beginning January 1, 2011, the Company’s Spend Management segment was renamed Spend and Clinical Resource Management (SCM) to more accurately reflect the broader clinical resource utilization and performance management capabilities of the organization. Concurrent with the change, the DSS operating unit became part of the SCM segment as a component in the delivery of clinical and financial analytics capabilities.
Impairment Charge
The Company recognized an impairment charge of $44.5 million in the fourth quarter of 2010 to write off goodwill associated with its DSS operating unit given lower than expected expansion of its customer base due to the impact of the economic and competitive environment, as well as capital spending trends by hospitals and health systems.
2011 Financial Guidance
Management introduced the following financial guidance for full-year 2011:
| (In millions, EPS) | | FY 2011 | | FY 2010 | | % Change |
| Net Revenue: | | (Guidance) | | (Non-GAAP, Adjusted
for Broadlane, DSS) | | (From 2011
midpoint) |
| Revenue Cycle Management (RCM) | | $ | 228-236 | | | $ | 213.7 | | | 8.6 | % |
Spend and Clinical Resource Mgmt (SCM) c | | | 359-367 | | | | 343.7 | | | 5.6 | |
| Total non-GAAP acquisition-affected Net Revenue | | | 588-602 | | | | 557.4 | | | 6.7 | |
| Loss Per Share – diluted | | | (0.36-0.46 | ) | | | (1.19 | ) | | nm |
| Non-GAAP adjusted EBITDA | | | 185-193 | | | | 168.7 | | | 10.8 | |
| Non-GAAP cash EPS - diluted | | $ | 0.94-1.04 | | | $ | 0.82 | | | 20.7 | % |
| |
(c) Includes the DSS operating unit previously in the RCM segment, as well as non-GAAP acquisition-related purchase accounting revenue adjustments of $6.0 million and $13.4 million in the years ending December 31, 2011 and 2010, respectively. |
| |
Contracted Revenue Estimates
At December 31, 2010, the Company’s rolling 12-month non-GAAP contracted revenue was an estimated $545.2 million ($211.0 million from the RCM segment and $334.2 million from the SCM segment). This is a year-over-year increase of 55.7% on a consolidated basis, and an 11.3% annual increase excluding contracted revenue added through the Broadlane acquisition.
Non-GAAP contracted revenue estimates from December 31, 2009 to present have been recast to reflect the shift of the DSS operating unit from the RCM segment into the SCM segment, but have not been adjusted for Broadlane prior to December 31, 2010. Refer to the Supplemental Non-GAAP Contracted Revenue Estimates in the financial schedules section for details.
Conference Call Information
| Time/Date: | | 5:00 p.m. ET today, Thursday, February 24, 2011 |
| Phone: | | 866-811-1812 (or 702-696-4559 international/local), conference ID 38948650 |
| Webcast: | | http://ir.medassets.com, “Events & Presentations” page |
| Replay: | | Webcast will be archived for at least 30 days, or call 800-642-1687 (conf ID # 38948650) |
The Company intends to file its Form 10-K with the Securities and Exchange Commission on or before March 1, 2011. This filing will contain additional information about the Company’s results of operations.
About MedAssets
MedAssets (NASDAQ: 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 180 health systems, 4,000 hospitals and 90,000 non-acute healthcare providers. 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 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 EBITDA; acquisition-affected adjusted EBITDA; acquisition-affected adjusted EBITDA margin; acquisition-related purchase accounting revenue adjustment; acquisition-related spend management adjustments; diluted cash 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: 2011 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 the acquisition of Broadlane 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, 2009 and its Form 10-Q for the period ended September 30, 2010 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, | | |
| | 2010 | | 2009 | | % Change | | | | 2010 | | 2009 | | % Change |
| Revenue: | | | | | | | | | | | | | | |
| Administrative fees, net | | $ | 34,633 | | | $ | 29,728 | | | 16.5 | % | | | | $ | 119,070 | | | $ | 108,223 | | | 10.0 | % |
| Other service fees | | | 72,313 | | | | 65,967 | | | 9.6 | % | | | | | 272,261 | | | | 233,058 | | | 16.8 | % |
| | | | | | | | | | | | | | |
| Total net revenue | | | 106,946 | | | | 95,695 | | | 11.8 | % | | | | | 391,331 | | | | 341,281 | | | 14.7 | % |
| | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | |
| Cost of revenue | | | 33,561 | | | | 18,821 | | | 78.3 | % | | | | | 100,737 | | | | 74,651 | | | 34.9 | % |
| Product development expenses | | | 5,152 | | | | 3,570 | | | 44.3 | % | | | | | 20,011 | | | | 18,994 | | | 5.4 | % |
| Selling and marketing expenses | | | 11,388 | | | | 8,753 | | | 30.1 | % | | | | | 46,736 | | | | 45,282 | | | 3.2 | % |
| General and administrative expenses | | | 32,954 | | | | 32,690 | | | 0.8 | % | | | | | 124,379 | | | | 110,661 | | | 12.4 | % |
| Acquisition and integration- related expenses | | | 17,240 | | | | - | | | 100.0 | % | | | | | 21,591 | | | | - | | | 100.0 | % |
| Depreciation | | | 5,880 | | | | 4,191 | | | 40.3 | % | | | | | 19,948 | | | | 13,211 | | | 51.0 | % |
| Amortization of intangibles | | | 13,321 | | | | 6,983 | | | 90.8 | % | | | | | 31,027 | | | | 28,012 | | | 10.8 | % |
Impairment of PP&E, goodwill, and intangibles | | | 46,423 | | | | - | | | | | | | | 46,423 | | | | - | | | |
| | | | | | | | | | | | | | |
| Total operating expenses | | | 165,919 | | | | 75,008 | | | 121.2 | % | | | | | 410,852 | | | | 290,811 | | | 41.3 | % |
| | | | | | | | | | | | | | |
| Operating (loss) income | | | (58,973 | ) | | | 20,687 | | | -385.1 | % | | | | | (19,521 | ) | | | 50,470 | | | -138.7 | % |
| Other income (expense): | | | | | | | | | | | | | | |
| Interest (expense) | | | (16,522 | ) | | | (4,099 | ) | | 303.1 | % | | | | | (27,508 | ) | | | (18,114 | ) | | 51.9 | % |
| Other income | | | 364 | | | | 13 | | | 2700.0 | % | | | | | 650 | | | | 417 | | | 55.9 | % |
| | | | | | | | | | | | | | |
| (Loss) income before income taxes | | | (75,131 | ) | | | 16,601 | | | -552.6 | % | | | | | (46,379 | ) | | | 32,773 | | | -241.5 | % |
| Income tax (benefit) expense | | | (25,732 | ) | | | 6,630 | | | -488.1 | % | | | | | (14,255 | ) | | | 12,826 | | | -211.1 | % |
| | | | | | | | | | | | | | |
| Net (loss) income | | | (49,399 | ) | | | 9,971 | | | -595.4 | % | | | | | (32,124 | ) | | | 19,947 | | | -261.0 | % |
| | | | | | | | | | | | | | |
| Basic net (loss) income per share | | | (0.87 | ) | | | 0.18 | | | | | | | | (0.57 | ) | | | 0.36 | | | |
| | | | | | | | | | | | | | |
| Diluted net (loss) income per share | | $ | (0.87 | ) | | $ | 0.17 | | | -613.0 | % | | | | $ | (0.57 | ) | | $ | 0.34 | | | -265.4 | % |
| | | | | | | | | | | | | | |
| Weighted average shares — basic | | | 57,015 | | | | 55,588 | | | | | | | | 56,434 | | | | 54,841 | | | |
| Weighted average shares — diluted | | | 57,015 | | | | 58,799 | | | -3.0 | % | | | | | 56,434 | | | | 57,865 | | | -2.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | | | |
| (UNAUDITED) | | | | |
| | | | |
| | December 31, | | December 31, |
| In 000s, except shares | | 2010 | | 2009 |
| | | | |
| ASSETS | | | | |
| Current assets | | | | |
| Cash and cash equivalents | | $ | 46,836 | | | $ | 5,498 | |
| Accounts receivable, net of allowances of $5,256 and $4,189 as of December 31, 2010 and | | | | |
| December 31, 2009 | | | 100,020 | | | | 67,617 | |
| Deferred tax asset, current | | | 18,087 | | | | 14,423 | |
| Prepaid expenses and other current assets | | | 19,811 | | | | 8,442 | |
| | | | |
| Total current assets | | | 184,754 | | | | 95,980 | |
| | | | |
| Property and equipment, net | | | 77,737 | | | | 54,960 | |
| Other long term assets | | | | |
| Goodwill | | | 1,035,697 | | | | 511,861 | |
| Intangible assets, net | | | 484,438 | | | | 95,589 | |
| Other | | | 62,727 | | | | 20,154 | |
| Other long term assets | | | 1,582,862 | | | | 627,604 | |
| | | | |
| Total assets | | $ | 1,845,353 | | | $ | 778,544 | |
| | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| Current liabilities | | | | |
| Accounts payable | | $ | 18,107 | | | $ | 8,680 | |
| Accrued revenue share obligation and rebates | | | 57,744 | | | | 31,948 | |
| Accrued payroll and benefits | | | 22,149 | | | | 12,874 | |
| Other accrued expenses | | | 22,268 | | | | 7,410 | |
| Deferred revenue, current portion | | | 36,533 | | | | 24,498 | |
| Deferred purchase consideration | | | 119,912 | | | | - | |
| Current portion of notes payable | | | 6,350 | | | | 13,771 | |
| Current portion of finance obligation | | | 186 | | | | 163 | |
| | | | |
| Total current liabilities | | | 283,249 | | | | 99,344 | |
| | | | |
| Notes payable, less current portion | | | 628,650 | | | | 201,390 | |
| Bonds payable | | | 325,000 | | | | - | |
| Finance obligation, less current portion | | | 9,505 | | | | 9,694 | |
| Deferred revenue, less current portion | | | 9,597 | | | | 7,380 | |
| Deferred tax liability | | | 150,887 | | | | 19,239 | |
| Other long term liabilities | | | 2,882 | | | | 4,125 | |
| | | | |
| Total liabilities | | | 1,409,770 | | | | 341,172 | |
| | | | |
| Stockholders’ equity | | | | |
Common stock, $0.01 par value, 150,000,000 shares authorized; 58,410,000 and 56,715,000
shares issued and outstanding as of December 31, 2010 and December 31, 2009 | | | 584 | | | | 567 | |
| Additional paid in capital | | | 668,028 | | | | 639,315 | |
| Accumulated other comprehensive loss | | | - | | | | (1,605 | ) |
| Accumulated deficit | | | (233,029 | ) | | | (200,905 | ) |
| | | | |
| Total stockholders’ equity | | | 435,583 | | | | 437,372 | |
| | | | |
| Total liabilities and stockholders’ equity | | $ | 1,845,353 | | | $ | 778,544 | |
| | | | | | | | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (UNAUDITED) |
| | Twelve Months Ended, |
| In 000s | | December 31, | | December 31, |
| | 2010 | | 2009 |
| | | | |
| Operating activities: | | | | |
| Net (loss) income | | $ | (32,124 | ) | | $ | 19,947 | |
| | | | |
Adjustments to reconcile (loss) income from continuing operations to
net cash provided by operating activities: | | | | |
| Bad debt expense | | | 1,686 | | | | 5,753 | |
| Impairment of property, equipment, goodwill, and intangibles | | | 46,423 | | | | - | |
| Depreciation | | | 22,842 | | | | 15,639 | |
| Amortization of intangibles | | | 31,675 | | | | 28,753 | |
| Loss on sale of assets | | | 189 | | | | 191 | |
| Non-cash stock compensation expense | | | 11,493 | | | | 16,652 | |
| Excess tax benefit from exercise of equity awards | | | (6,845 | ) | | | (6,944 | ) |
| Amortization of debt issuance costs | | | 6,863 | | | | 1,841 | |
| Noncash interest expense, net | | | 936 | | | | 1,184 | |
| Deferred income tax (benefit) expense | | | (25,065 | ) | | | 4,512 | |
| | | | |
| Changes in assets and liabilities | | | 47,838 | | | | (27,225 | ) |
| | | | |
| Cash provided by operating activities | | | 105,911 | | | | 60,303 | |
| | | | |
| Investing activities: | | | | |
| Purchases of property, equipment, and software | | | (12,758 | ) | | | (11,785 | ) |
| Capitalized software development costs | | | (17,968 | ) | | | (16,402 | ) |
| Acquisitions, net of cash acquired | | | (749,055 | ) | | | (18,275 | ) |
| | | | |
| Cash used in investing activities | | | (779,781 | ) | | | (46,462 | ) |
| | | | |
| Financing activities: | | | | |
| Proceeds from notes payable | | | 655,000 | | | | 71,797 | |
| Proceeds from bonds payable | | | 325,000 | | | | - | |
| Repayment of notes payable | | | (235,161 | ) | | | (102,262 | ) |
| Repayment of finance obligation | | | (658 | ) | | | (658 | ) |
| Debt issuance costs | | | (46,516 | ) | | | - | |
| Excess tax benefit from exercise of equity awards | | | 6,845 | | | | 6,944 | |
| Issuance of common stock | | | 10,698 | | | | 10,407 | |
| | | | |
| Cash provided by (used in) financing activities | | | 715,208 | | | | (13,772 | ) |
| | | | |
| Net increase in cash and cash equivalents | | | 41,338 | | | | 69 | |
| Cash and cash equivalents, beginning of period | | | 5,498 | | | | 5,429 | |
| | | | |
| Cash and cash equivalents, end of period | | $ | 46,836 | | | $ | 5,498 | |
| | | | | | | | |
| SUPPLEMENTAL SEGMENT REPORTING d |
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES |
| (UNAUDITED) |
| | | | | | | | | | |
| In 000s | | Three Months Ended | | | | |
| | December 31, | | | | |
| | 2010 | | | | 2009 | | | | % Change |
| Net revenue | | | | | | | | | | |
| Revenue Cycle Management ("RCM") | | $ | 58,792 | | | | | $ | 56,493 | | | | | 4.1 | % |
| Spend and Clinical Resource Management ("SCM") | | | 48,154 | | | | | | 39,202 | | | | | 22.8 | % |
| Total net revenue | | | 106,946 | | | | | | 95,695 | | | | | 11.8 | % |
| Non-GAAP acquisition-related purchase accounting revenue adjustment e | | | 13,406 | | | | | | - | | | | | |
| Other non-GAAP acquisition-related SCM adjustments f | | | 22,018 | | | | | | 44,833 | | | | | |
| Total non-GAAP acquisition-affected net revenue | | $ | 142,370 | | | | | $ | 140,528 | | | | | 1.3 | % |
| | | | | | | | | | |
| Non-GAAP Adjusted EBITDA | | | | % margin | | | | % margin | | |
| RCM | | $ | 16,492 | | | 28.1 | % | | $ | 19,472 | | | 34.5 | % | | -15.3 | % |
| SCM | | | 30,813 | | | 64.0 | % | | | 22,130 | | | 56.5 | % | | 39.2 | % |
| Corporate | | | (6,028 | ) | | | | | (5,555 | ) | | | | 8.5 | % |
| Total non-GAAP Adjusted EBITDA | | | 41,277 | | | 38.6 | % | | | 36,047 | | | 37.7 | % | | 14.5 | % |
| Non-GAAP acquisition-related SCM adjustments f | | | 6,270 | | | | | | 12,543 | | | | | |
| Total non-GAAP acquisition-affected Adjusted EBITDA | | $ | 47,547 | | | 33.4 | % | | $ | 48,590 | | | 34.6 | % | | -2.1 | % |
| | | | | | | | | | |
| | Twelve Months Ended | | | | |
| | December 31, | | | | |
| | 2010 | | | | 2009 | | | | % Change |
| Net revenue | | | | | | | | | | |
| RCM | | $ | 235,212 | | | | | $ | 205,918 | | | | | 14.2 | % |
| SCM | | | 156,119 | | | | | | 135,363 | | | | | 15.3 | % |
| Total net revenue | | | 391,331 | | | | | | 341,281 | | | | | 14.7 | % |
| Non-GAAP acquisition-related purchase accounting revenue adjustment d | | | 13,406 | | | | | | - | | | | | |
| Other non-GAAP acquisition-related SCM adjustments f | | | 152,664 | | | | | | 167,524 | | | | | |
| Total non-GAAP acquisition-affected net revenue | | $ | 557,401 | | | | | $ | 508,805 | | | | | 9.6 | % |
| | | | | | | | | | |
| Non-GAAP Adjusted EBITDA | | | | % margin | | | | % margin | | |
| RCM | | $ | 70,712 | | | 30.1 | % | | $ | 64,257 | | | 31.2 | % | | 10.0 | % |
| SCM | | | 82,875 | | | 53.1 | % | | | 68,265 | | | 50.4 | % | | 21.4 | % |
| Corporate | | | (25,547 | ) | | | | | (21,084 | ) | | | | 21.2 | % |
| Total non-GAAP Adjusted EBITDA | | $ | 128,040 | | | 32.7 | % | | $ | 111,438 | | | 32.7 | % | | 14.9 | % |
| Non-GAAP acquisition-related SCM adjustments f | | | 40,684 | | | | | | 50,824 | | | | | |
| Total non-GAAP acquisition-affected Adjusted EBITDA | | $ | 168,724 | | | 30.3 | % | | $ | 162,262 | | | 31.9 | % | | 4.0 | % |
| | | | | | | | | | |
| | | | | | | | | | |
| (d) Results from the decision support services (DSS) operating unit are included in the RCM segment. |
| |
| (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 2009 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 SEGMENT REPORTING |
| RECONCILIATION OF SELECTED SEGMENT INFORMATION g |
| (UNAUDITED) |
| | | | | | | | |
| In 000s | | | | | | | | |
| | | | | | | | |
| | As Reported |
| | Year Ended December 31, 2010 |
| | RCM | | SCM | | Corporate | | Total |
| Results of Operations: | | | | | | | | |
| Revenue: | | | | | | | | |
| Administrative fees | | $ - | | $ 182,024 | | $ - | | $ 182,024 |
| Revenue share obligation | | - | | (62,954) | | - | | (62,954) |
| Other service fees | | 235,212 | | 37,049 | | - | | 272,261 |
| Total net revenue | | 235,212 | | 156,119 | | - | | 391,331 |
| Total operating expenses | | 250,227 | | 113,101 | | 47,524 | | 410,852 |
| Operating income | | (15,015) | | 43,018 | | (47,524) | | (19,521) |
| Interest (expense) income | | - | | (20) | | (27,488) | | (27,508) |
| Other income (expense) | | 179 | | (9) | | 480 | | 650 |
| Income (loss) before income taxes | | $ (14,836) | | $ 42,989 | | $ (74,532) | | $ (46,379) |
| Income tax (benefit) | | (5,031) | | 17,581 | | (26,805) | | (14,255) |
| Net income (loss) | | (9,805) | | 25,408 | | (47,727) | | (32,124) |
| Segment Adjusted EBITDA | | $ 70,712 | | $ 82,875 | | $ (25,547) | | $ 128,040 |
| | | | | | | | |
| | DSS Adjustments |
| | RCM | | SCM | | Corporate | | Total |
| Results of Operations: | | | | | | | | |
| Revenue: | | | | | | | | |
| Administrative fees | | $ - | | $ - | | $ - | | $ - |
| Revenue share obligation | | - | | - | | - | | - |
| Other service fees | | (21,484) | | 21,484 | | - | | - |
| Total net revenue | | (21,484) | | 21,484 | | - | | - |
| Total operating expenses | | (67,360) | | 67,360 | | - | | - |
| Operating income | | 45,876 | | (45,876) | | - | | - |
| Interest (expense) income | | - | | - | | - | | - |
| Other income (expense) | | (35) | | 35 | | - | | - |
| Income (loss) before income taxes | | $ 45,841 | | $ (45,841) | | $ - | | $ - |
| Income tax (benefit) | | - | | - | | - | | - |
| Net income (loss) | | 45,841 | | (45,841) | | - | | - |
| Segment Adjusted EBITDA | | $ (4,820) | | $ 4,820 | | $ - | | $ - |
| | | | | | | | |
| | Recast |
| | Year Ended December 31, 2010 |
| | RCM | | SCM | | Corporate | | Total |
| Results of Operations: | | | | | | | | |
| Revenue: | | | | | | | | |
| Administrative fees | | $ - | | $ 182,024 | | $ - | | $ 182,024 |
| Revenue share obligation | | - | | (62,954) | | - | | (62,954) |
| Other service fees | | 213,728 | | 58,533 | | - | | 272,261 |
| Total net revenue | | 213,728 | | 177,603 | | - | | 391,331 |
| Total operating expenses | | 182,867 | | 180,461 | | 47,524 | | 410,852 |
| Operating income | | 30,861 | | (2,858) | | (47,524) | | (19,521) |
| Interest (expense) income | | - | | (20) | | (27,488) | | (27,508) |
| Other income (expense) | | 144 | | 26 | | 480 | | 650 |
| Income (loss) before income taxes | | $ 31,005 | | $ (2,852) | | $ (74,532) | | $ (46,379) |
| Income tax (benefit) | | (5,031) | | 17,581 | | (26,805) | | (14,255) |
| Net income (loss) | | 36,036 | | (20,433) | | (47,727) | | (32,124) |
| Segment Adjusted EBITDA | | $ 65,892 | | $ 87,695 | | $ (25,547) | | $ 128,040 |
| | | | | | | | |
| | | | | | | | |
| (g) The DSS operating unit became part of the Company's SCM segment effective January 1, 2011. The schedules detail the adjustments and recast segment results for the year ended December 31, 2010. The Company is including these schedules in order to provide investors with summary financial information and historical data that is on a basis consistent with its new reporting structure. The change in segment reporting in no way revises or restates GAAP financial results for any historical period. |
| SUPPLEMENTAL REVENUE REPORTING |
| RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE |
| (UNAUDITED) |
| | | | | | | | | | |
| In 000s | | Three Months Ended | | | | |
| | December 31, | | | | |
| | 2010 | | | | 2009 | | | | % Change |
| Non-GAAP gross administrative fees | | $ | 52,497 | | | | | $ | 43,956 | | | | | 19.4 | % |
| Other service fees | | | 72,313 | | | | | | 65,967 | | | | | 9.6 | % |
| Non-GAAP gross fees | | | 124,810 | | | RSO % | | | 109,923 | | | RSO % | | 13.5 | % |
| Non-GAAP revenue share obligation (RSO) | | | (17,864 | ) | | 34.0 | % | | | (14,228 | ) | | 32.4 | % | | 25.6 | % |
| Net revenue | | $ | 106,946 | | | | | $ | 95,695 | | | | | 11.8 | % |
| | | | | | | | | | |
| NON-GAAP ACQUISITION-AFFECTED RESULTS h | | | | | | | | | | |
| | | | | | | | | | |
| Non-GAAP gross administrative fees | | $ | 95,596 | | | | | $ | 91,180 | | | | | 4.8 | % |
| Other service fees | | | 80,037 | | | | | | 79,871 | | | | | 0.2 | % |
| Non-GAAP gross fees | | | 175,633 | | | RSO % | | | 171,051 | | | RSO % | | 2.7 | % |
| Non-GAAP revenue share obligation | | | (33,263 | ) | | 34.8 | % | | | (30,523 | ) | | 33.5 | % | | 9.0 | % |
| Net revenue | | $ | 142,370 | | | | | $ | 140,528 | | | | | 1.3 | % |
| | | | | | | | | | |
| | Twelve Months Ended | | | | |
| | December 31, | | | | |
| | 2010 | | | | 2009 | | | | |
| Non-GAAP gross administrative fees | | $ | 182,024 | | | | | $ | 163,454 | | | | | 11.4 | % |
| Other service fees | | | 272,261 | | | | | | 233,058 | | | | | 16.8 | % |
| Non-GAAP gross fees | | | 454,285 | | | RSO % | | | 396,512 | | | RSO % | | 14.6 | % |
| Non-GAAP revenue share obligation | | | (62,954 | ) | | 34.6 | % | | | (55,231 | ) | | 33.8 | % | | 14.0 | % |
| Net revenue | | $ | 391,331 | | | | | $ | 341,281 | | | | | 14.7 | % |
| | | | | | | | | | |
| NON-GAAP ACQUISITION-AFFECTED RESULTS h | | | | | | | | | | |
| | | | | | | | | | |
| Non-GAAP gross administrative fees | | $ | 364,398 | | | | | $ | 341,639 | | | | | 6.7 | % |
| Other service fees | | | 322,510 | | | | | | 282,852 | | | | | 14.0 | % |
| Non-GAAP gross fees | | | 686,908 | | | RSO % | | | 624,491 | | | RSO % | | 10.0 | % |
| Non-GAAP revenue share obligation | | | (129,507 | ) | | 35.5 | % | | | (115,686 | ) | | 33.9 | % | | 11.9 | % |
| Net revenue | | $ | 557,401 | | | | | $ | 508,805 | | | | | 9.6 | % |
| | | | | | | | | | |
| (h) Figures include acquisition-related SCM segment adjustments for the three and twelve months ended December 31, 2010 and 2009. |
| | | | | | | | | | |
| SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES i |
| (UNAUDITED) |
| | | | | | | | | | |
| | | 12.31.09 | | | 3.31.10 | | | | 6.30.10 | | | 9.30.10 | | | 12.31.10 | |
| | | | | | | | | | |
| RCM segment | | | 205.2 | | | 214.9 | | | | 212.5 | | | 212.7 | | | 211.0 | |
| SCM segment | | | 145.0 | | | 148.4 | | | | 154.9 | | | 163.3 | | | 334.2 | |
| Total | | | 350.2 | | | 363.3 | | | | 367.4 | | | 376.0 | | | 545.2 | |
| | | | | | | | | | |
| (i) Recast to reflect the shift of the decision support services operating unit from the RCM segment into the SCM segment, and includes $155.4 million in contracted revenue added to the SCM segment from the Broadlane acquisition for the December 31, 2010 period only. |
| | | | | | | | | | |
| 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 | | | Twelve Months Ended |
| | December 31, | | | | December 31, |
| ACTUAL RESULTS | | 2010 | | 2009 | | | | 2010 | | 2009 |
| | | | | | | | | | |
| Net (loss) income | | $ | (49,399 | ) | | $ | 9,971 | | | | | $ | (32,124 | ) | | $ | 19,947 | |
| | | | | | | | | | |
| Depreciation | | | 5,880 | | | | 4,191 | | | | | | 19,948 | | | | 13,211 | |
| Depreciation (included in cost of revenue) | | | 727 | | | | 590 | | | | | | 2,894 | | | | 2,426 | |
| Amortization of intangibles, acquisition-related | | | 13,321 | | | | 6,983 | | | | | | 31,027 | | | | 28,012 | |
| Amortization of intangibles, acquisition-related (included in cost of revenue) | | | 139 | | | | 185 | | | | | | 648 | | | | 740 | |
| Interest expense, net | | | 16,542 | | | | 4,093 | | | | | | 27,428 | | | | 18,087 | |
| Income tax (benefit) expense | | | (25,732 | ) | | | 6,630 | | | | | | (14,255 | ) | | | 12,826 | |
| | | | | | | | | | |
| Non-GAAP EBITDA | | $ | (38,522 | ) | | $ | 32,643 | | | | | $ | 35,566 | | | $ | 95,249 | |
| | | | | | | | | | |
| Share-based compensation | | | 2,840 | | | | 3,741 | | | | | | 11,493 | | | | 16,652 | |
| Rental income from capitalized building lease | | | (110 | ) | | | (110 | ) | | | | | (439 | ) | | | (439 | ) |
| Impairment of intangibles | | | 46,423 | | | | - | | | | | | 46,423 | | | | - | |
| Purchase accounting adjustments | | | 13,406 | | | | (227 | ) | | | | | 13,406 | | | | (24 | ) |
| Acquisition and integration related charges | | | 17,240 | | | | - | | | | | | 21,591 | | | | - | |
| | | | | | | | | | |
| Non-GAAP Adjusted EBITDA | | $ | 41,277 | | | $ | 36,047 | | | | | $ | 128,040 | | | $ | 111,438 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | Three Months Ended | | | | Twelve Months Ended |
| | December 31, | | | | December 31, |
| NON-GAAP ACQUISITION-AFFECTED RESULTS | | 2010 | | 2009 | | | | 2010 | | 2009 |
| | | | | | | | | | |
| Net (loss) income | | $ | (49,399 | ) | | $ | 9,971 | | | | | $ | (32,124 | ) | | $ | 19,947 | |
| Non-GAAP acquisition-related net loss | | | (1,493 | ) | | | (12,716 | ) | | | | | (34,832 | ) | | | (46,731 | ) |
| | | | | | | | | | |
| Non-GAAP acquisition-affected net loss | | $ | (50,892 | ) | | $ | (2,745 | ) | | | | $ | (66,956 | ) | | $ | (26,784 | ) |
| | | | | | | | | | |
| Depreciation | | | 6,558 | | | | 5,624 | | | | | | 24,458 | | | | 18,320 | |
| Depreciation (included in cost of revenue) | | | 727 | | | | 590 | | | | | | 2,894 | | | | 2,426 | |
| Amortization of intangibles, acquisition-related | | | 21,046 | | | | 22,432 | | | | | | 82,111 | | | | 89,808 | |
| Amortization of intangibles, acquisition-related (included in cost of revenue) | | | 139 | | | | 185 | | | | | | 648 | | | | 740 | |
| Interest expense, net | | | 16,963 | | | | 17,231 | | | | | | 68,493 | | | | 72,170 | |
| Income tax (benefit) expense | | | (23,054 | ) | | | (444 | ) | | | | | (30,742 | ) | | | (14,264 | ) |
| | | | | | | | | | |
| Non-GAAP EBITDA | | $ | (28,513 | ) | | $ | 42,873 | | | | | $ | 80,906 | | | $ | 142,416 | |
| | | | | | | | | | |
| Share-based compensation | | | 2,881 | | | | 3,891 | | | | | | 12,071 | | | | 17,261 | |
| Rental income from capitalized building lease | | | (110 | ) | | | (110 | ) | | | | | (439 | ) | | | (439 | ) |
| Impairment of intangibles | | | 46,423 | | | | - | | | | | | 46,423 | | | | - | |
| Purchase accounting adjustments | | | 20 | | | | 1,936 | | | | | | 112 | | | | 3,024 | |
| Acquisition and integration related charges | | | 26,846 | | | | - | | | | | | 29,651 | | | | - | |
| | | | | | | | | | |
| Non-GAAP Adjusted EBITDA | | $ | 47,547 | | | $ | 48,590 | | | | | $ | 168,724 | | | $ | 162,262 | |
| | | | | | | | | | |
| | | | | | | | | | |
| SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION |
| EXPENSE INCLUDED IN OPERATING EXPENSES |
| (UNAUDITED) |
| In 000s | | Three Months Ended | | | Twelve Months Ended |
| | December 31, | | | | December 31, |
| | 2010 | | 2009 | | | | 2010 | | 2009 |
| Amount of share-based compensation included in: | | | | | | | | | | |
| Cost of revenue | | | 879 | | | | 656 | | | | | | 2,722 | | | | 3,063 | |
| Product development expense | | | 4 | | | | 171 | | | | | | 461 | | | | 866 | |
| Selling & marketing expense | | | 627 | | | | 678 | | | | | | 2,476 | | | | 2,920 | |
| General & administrative expense | | | 1,330 | | | | 2,236 | | | | | | 5,834 | | | | 9,803 | |
| | | | | | | | | | |
| Total | | $ | 2,840 | | | $ | 3,741 | | | | | $ | 11,493 | | | $ | 16,652 | |
| | | | | | | | | | |
| | | | | | | | | | |
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. |
| |
| SUPPLEMENTAL EARNINGS PER SHARE REPORTING |
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES |
| (UNAUDITED) |
| | Three Months Ended | | Twelve Months Ended |
| Per share data | | December 31, | | December 31, |
| | 2010 | | 2009 | | 2010 | | 2009 |
| | | | | | | | | |
| EPS - diluted | | $ | (0.87 | ) | | $ | 0.17 | | | $ | (0.57 | ) | | | $ | 0.34 | |
| Pre-tax non-cash, acquisition-related intangible amortization | | | 0.24 | | | | 0.12 | | | | 0.56 | | | | | 0.50 | |
| Pre-tax non-cash, share-based compensation | | | 0.05 | | | | 0.06 | | | | 0.20 | | | | | 0.29 | |
| Pre-tax non-cash, impairment of intangibles | | | 0.81 | | | | - | | | | 0.82 | | | | | - | |
| Pre-tax non-cash, acquisition and integration-related charges | | | 0.30 | | | | - | | | | 0.38 | | | | | - | |
| Pre-tax, swap termination, debt issuance write-off and deferred payment interest expense accretion | | | 0.11 | | | | - | | | | 0.11 | | | | | - | |
| Pre-tax, purchase accounting adjustment | | | 0.24 | | | | - | | | | 0.24 | | | | | - | |
| Tax effect on pre-tax adjustments j | | | (0.70 | ) | | | (0.07 | ) | | | (0.93 | ) | | | | (0.31 | ) |
| Non-GAAP cash EPS - diluted | | $ | 0.18 | | | $ | 0.28 | | | $ | 0.82 | | l | | $ | 0.82 | |
| Weighted average shares - diluted (in 000s) k | | | 57,015 | | | | 58,799 | | | | 56,434 | | | | | 57,865 | |
| | | | | | | | | |
(j) This amount reflects the tax impact on the adjustments used to derive Non-GAAP cash 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 2010 actual effective tax rate, the Company used a tax rate of 40.0% for both the three and twelve months ended December 31, 2010. The effective tax rate for the three and twelve months ended December 31, 2009 was 39.9% and 39.1%, respectively. |
| |
| (k) Given the Company's net loss in 2010, basic and diluted weighted average shares are the same. |
| |
| (l) Column amounts do not add to total amount due to rounding. |
| | | | | | | | | |
| SUPPLEMENTAL 2011 ADJUSTED EBITDA GUIDANCE |
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES |
| (UNAUDITED) |
| | | | Guidance Range for | | | |
| | | | Twelve Months Ending | | | |
| In 000s | | | | December 31, 2011 | | | |
| | | | (Low) | | (High) | | | |
| | | | | | | | | |
| Net Income | | | | $ | (26,600 | ) | | $ | (21,100 | ) | | | |
| | | | | | | | | |
| Depreciation | | | | | 25,100 | | | | 24,900 | | | | |
| Depreciation (included in cost of revenue) | | | | | 1,700 | | | | 1,700 | | | | |
| Amortization of intangibles, acquisition-related | | | | | 80,600 | | | | 80,600 | | | | |
| Amortization of intangibles, acquisition-related (included in cost of revenue) | | | | | 600 | | | | 600 | | | | |
| Interest expense, net | | | | | 72,700 | | | | 72,500 | | | | |
| Income tax expense | | | | | (17,700 | ) | | | (14,000 | ) | | | |
| | | | | | | | | |
| Non-GAAP EBITDA | | | | | 136,400 | | | | 145,200 | | | | |
| | | | | | | | | |
| Impairment of intangibles | | | | | - | | | | - | | | | |
| Share-based compensation | | | | | 17,500 | | | | 17,300 | | | | |
| Acquisition-related charges | | | | | 25,500 | | | | 24,900 | | | | |
| Rental income from capitalized building lease | | | | | (400 | ) | | | (400 | ) | | | |
| Acquisition-related purchase accounting revenue adjustment | | | | | 6,000 | | | | 6,000 | | | | |
| | | | | | | | | |
| Non-GAAP adjusted EBITDA | | | | $ | 185,000 | | | $ | 193,000 | | | | |
| | | | | | | | | |
| SUPPLEMENTAL 2011 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, 2011 | | | |
| | | | (Low) | | (High) | | | |
| | | | | | | | | |
| Net Loss | | | | $ | (26,600 | ) | | $ | (21,100 | ) | | | |
| | | | | | | | | |
| EPS - diluted m | | | | | (0.46 | ) | | | (0.36 | ) | | | |
| | | | | | | | | |
| Pre-tax non-cash, acquisition-related intangible amortization | | | | | 1.40 | | | | 1.40 | | | | |
| Pre-tax non-cash, acquisition-related intangible depreciation | | | | | 0.04 | | | | 0.04 | | | | |
| Pre-tax non-cash, share-based compensation | | | | | 0.30 | | | | 0.30 | | | | |
| Pre-tax impairment of intangibles | | | | | - | | | | - | | | | |
| Pre-tax acquisition-related charges | | | | | 0.43 | | | | 0.44 | | | | |
| Pre-tax deferred payment interest expense accretion | | | | | 0.05 | | | | 0.05 | | | | |
| Pre-tax purchase accounting adjustment | | | | $ | 0.10 | | | $ | 0.10 | | | | |
| | | | | | | | | |
| Tax effect on pre-tax adjustments n | | | | | (0.93 | ) | | | (0.94 | ) | | | |
| | | | | | | | | |
| Non-GAAP cash EPS - diluted m, o | | | | | 0.94 | | | | 1.04 | | | | |
| | | | | | | | | |
| Basic and fully diluted weighted average shares outstanding m | | | | | 57,900 | | | | 57,900 | | | | |
| | | | | | | | | |
| (m) Given the Company's net loss in 2010, basic and diluted weighted average shares are the same. |
| |
| (n) This amount reflects the tax impact to the adjustments used to derive estimated Non-GAAP cash EPS - diluted. The Company uses its estimated effective tax rate for each guidance range to tax effect the adjustments. The estimated effective tax rate for the guidance range above is 40.0%. |
| |
| (o) 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. |
| |
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 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 EBITDA; acquisition-affected adjusted EBITDA; acquisition-affected adjusted EBITDA margin; acquisition-related purchase accounting revenue adjustment; acquisition-related SCM adjustments; diluted cash 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 customers. 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 customers. 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 customers.
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, 2009. Acquisition-affected measures (e.g. acquisition-affected net revenue; acquisition-related SCM adjustments; 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 extent of growth 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, the Company believes such acquisition-affected measures may be useful and meaningful to investors in their analysis of such growth. 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 2009. 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 customer 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 diluted cash 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. Diluted cash EPS is not a measure of liquidity under GAAP, or otherwise, and is not an alternative to cash flow from continuing operating activities. Diluted cash 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 cash 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 customer 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.
CONTACT:
MedAssets, Inc.
Robert P. Borchert, 678-248-8194
rborchert@medassets.com
