American CareSource (ANCI) 8-K American CareSource Reports Second Quarter Results

American CareSource Reports Second Quarter Results

Second Quarter Highlights

· Revenues were $16.0 million, a decrease of 7% compared to the prior year period and an increase of 11% compared to the first quarter of 2010

· Operating income increased to $425,000, significantly above the $233,000 reported during the same period last year

· Adjusted EBITDA increased 14% to $856,000

· Successfully completed the implementation of five new clients

· New clients contributed $1.1 million of new incremental revenue during the quarter

DALLAS, TX –August 12, 2010– American CareSource Holdings Inc. (NASDAQ: ANCI) today announced second quarter 2010 revenues of $16.0 million compared to $17.1 million in the corresponding prior year quarter.  Net income for the second quarter 2010 was $299,000, or $0.02 per diluted share, compared to $534,000, or $0.01 per diluted share, in the corresponding prior year quarter.  Net income for the second quarter 2010 included a federal income tax provision of $137,000, or $0.01 per diluted share, which was not included in net income for the second quarter 2009.  

“We are encouraged by the sequential revenue growth we have experienced.  This is a direct result of the success we have had attracting and implementing new clients,” said David Boone, Chief Executive Officer of American CareSource.  “Our focus on direct selling to TPAs is paying dividends.  To date, this has been our most successful year in terms of sales productivity as we added 6 accounts, which have generated approximately $1.4 million in revenue during the first half of 2010.  Our pipeline remains robust and we will continue to capitalize on it to build our backlog of business during the second half of the year.”

Revenues

Revenues for the second quarter of 2010 were $16.0 million compared to $17.1 million reported during the second quarter of 2009.  Compared to the second quarter of 2009, claims volumes from our two key client accounts were down 25% and continued to apply downward pressure on revenue.  Revenues from the Company’s two key accounts accounted for 80% of second quarter 2010 revenues compared with 88% during the corresponding period last year.

Revenues in the second quarter of 2010 increased 11% compared to the first quarter of 2010 due to a 12% improvement in revenue per billed claim, which was a result of a shift in mix toward higher revenue per claim specialties.

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Claims Volume

The Company billed 85,000 claims during the second quarter of 2010, a decrease from the 101,000 claims it billed during the same period last year.  The lower claims volumes reflect the impact of decreased claims flow from the Company’s two key client accounts.  Multiple factors contributed to the declines, including the loss of covered lives and payor groups for these clients due to macroeconomic factors, the presence of larger carriers in the market, the loss of the Company’s relationship with a national laboratory service provider in the third quarter of 2009 and the transition status of one of our key client accounts.  Excluding these two accounts, claims volumes from all other accounts were up 11%.

Revenues per billed claim increased to $188 during the second quarter of 2010 from $169 during the second quarter of 2009.  The increase in both revenue per processed claims and revenue per billed claims was driven by a shift in mix toward higher revenue per claim specialties, particularly dialysis services, from lower revenue per claim specialties such as laboratory and chiropractic services.

Following are claims volumes and revenue per claims for the periods presented:

(Claim amounts in 000’s)		Q2 2010		Q1 2010		Q2 2009
Claims:
Processed		100		105		121
Billed		85		86		101
Revenue per claim:
Processed	$	160	$	137	$	142
Billed	$	188	$	168	$	169

Contribution Margin

Contribution margin for the second quarter of 2010 decreased slightly to 13.5%, compared to 13.7% reported during the second quarter of 2009.  Provider margins improved compared to the prior year period due to a change in mix toward specialties that carry higher margins, specifically diagnostic imaging services, chiropractic services and dialysis services.  Provider margins were offset somewhat by higher administrative fees due to greater revenue contribution from clients that carry higher relative administrative fee rates.

Following is a comparison of the components of costs of revenue as a percentage of revenue:

	Q2 2010		Q1 2010		Q2 2009
Provider payments	73.3	%	72.6	%	75.2	%
Administrative fees	5.8	%	4.9	%	4.5	%
Claims administration and provider development	7.4	%	8.5	%	6.6	%
Total cost of revenues	86.5	%	86.0	%	86.3	%

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Selling, General and Administrative Expenses (SG&A)

SG&A for the second quarter of 2010 was $1.5 million, or 9.6% of revenue, compared to $2.0 million, or 11.6% of revenue for the second quarter of 2009 and $1.9 million, or 12.9% of revenue, for the first quarter of 2010.  Lower SG&A is a reflection of cost control measures implemented to maintain and ensure continued profitability.

Adjusted EBITDA

Adjusted EBITDA for the second quarter of 2010 was $856,000, which compares to $750,000 reported in the corresponding prior year period.

Adjusted EBITDA is defined as operating income before depreciation and amortization and excludes non-cash stock-based compensation expense, warrant amortization and severance costs. Adjusted EBITDA should be considered in addition to, but not in lieu of, income from operations reported under generally accepted accounting principles (GAAP).

A reconciliation of adjusted EBITDA to operating income is provided in the tables accompanying this release.

Operating Income

During the period, the Company reported operating income of $425,000, compared to operating income of $233,000 reported during the same period last year.  The increase reflects a decline in SG&A associated with the implementation of cost control measures.

Financial Liquidity

Cash and equivalents at June 30, 2010 totaled $11.3 million, which compares to $11.9 million reported at December 31, 2009.  The Company has no long-term debt outstanding.

Earnings Conference Call

As previously announced, American CareSource management will review its unaudited second quarter 2010 financials during a conference call scheduled for August 13, 2010 at 8:30 AM Eastern Time.  The dial-in numbers are as follows:

Domestic dial-in:                 (888) 279–0822

International dial-in:           (706) 902-0355

Conference ID Number:     90975187

This call is being webcast and can be accessed at the American CareSource Web site at http://ir.anci-care.com/events.cfm, by clicking on Webcast - Q2 2010 American CareSource Holdings Earnings Conference Call.

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About American CareSource Holdings, Inc.

American CareSource Holdings is the first national, publicly traded ancillary care network services company. The Company offers a comprehensive national network of over 4,100 ancillary service providers at more than 38,000 sites through its subsidiary, Ancillary Care Services. Ancillary Care Services provides ancillary health care services through its network that offers cost effective alternatives to physician and hospital-based services. This market is estimated at $574 billion and has grown to 30% of total national health expenditures.  These providers offer services in 31 categories including laboratories, dialysis centers, free-standing diagnostic imaging centers, non-hospital surgery centers, as well as durable medical equipment such as orthotics and prosthetics and others.  The Company's ancillary network and management provides a complete outsourced solution for a wide variety of health care payors and plan sponsors including self-insured employers, indemnity insurers, PPOs, HMOs, third party administrators and both federal and local governments. For additional information, please visit www.anci-care.com.

ANCI-F

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:

Any statements that are not historical facts contained in this release, including with respect to the Company’s plans, objectives and expectations for future operations, projections of the Company’s future operating results or financial condition, and expectations regarding the health care industry and economic conditions, are forward-looking statements.  Substantial risks and uncertainties could cause actual results to differ materially from those indicated by forward-looking statements, including, but not limited to, changes in national health care policy, regulation, general economic conditions, demand for ancillary services, pricing, competition, market acceptance/preference, the Company’s ability to integrate with its clients, changes in the business decisions by key clients or consolidation in the industry affecting them, the Company’s inability to attract or maintain providers or clients or to manage growth, implementation and performance difficulties, and other risk factors detailed from time to time in the Company’s periodic filings with the Securities and Exchange Commission.  Except as otherwise required by law, the Company undertakes no obligation to update or revise these forward-looking statements.

Investor Contact

Rich Cockrell

The Cockrell Group

Tel: 404.942.3369

rich.cockrell@thecockrellgroup.com

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AMERICAN CARESOURCE HOLDINGS, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(Unaudited)

(amounts in thousands except per share data)

	Three months ended				Six months ended
	June 30,				June 30,
	2010		2009		2010		2009
Net Revenues	$	16,018	$	17,135	$	30,449	$	33,190
Cost of revenues:
Provider payments		11,748		12,880		22,222		24,815
Administrative fees		921		778		1,628		1,594
Claims administration and provider development		1,188		1,131		2,408		2,136
Total cost of revenues		13,857		14,789		26,258		28,545
Contribution margin		2,161		2,346		4,191		4,645
Selling, general and administrative expenses		1,544		1,981		3,401		3,882
Depreciation and amortization		192		132		374		245
Total operating expenses		1,736		2,113		3,775		4,127
Operating income		425		233		416		518
Interest income, net		23		36		45		77
Unrealized gain on warrant derivative		2		278		16		254
Total other income, net		25		314		61		331
Income before income taxes		450		547		477		849
Income tax provision		151		13		177		36
Net Income	$	299	$	534	$	300	$	813
Earnings per common share:
Basic	$	0.02	$	0.03	$	0.02	$	0.05
Diluted	$	0.02	$	0.01	$	0.02	$	0.03
Basic weighted average common shares outstanding		16,393		15,425		16,299		15,422
Diluted weighted average common shares outstanding		17,120		18,055		17,082		18,171
Reconciliation of non-GAAP financial measures to reported GAAP financial measures:
	Three months ended				Six months ended
	June 30,				June 30,
		2010		2009		2010		2009
Operating income	$	425	$	233	$	416	$	518
Depreciation and amortization		192		132		374		245
EBITDA		617		365		790		763
Non-cash stock-based compensation expense		189		357		375		617
Other non-cash charges		50		28		100		56
Severance costs		-		-		143		-
EBITDA, as adjusted	$	856	$	750	$	1,408	$	1,436

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AMERICAN CARESOURCE HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

	June 30, 2010 (Unaudited)			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	11,344		$	11,868
Accounts receivable, net		6,675			7,474
Prepaid expenses and other current assets		951			1,398
Total current assets		18,970			20,740
Property and equipment, net		1,896			1,762
Other assets:
Other non-current assets		1,055			974
Intangible assets, net		1,089			1,153
Goodwill		4,361			4,361
Total assets	$	27,371		$	28,990
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Due to service providers	$	5,929		$	7,702
Accounts payable and accrued liabilities		1,494			1,980
Total current liabilities		7,423			9,682
Other Liabilities		2			18
EQUITY
Common stock		164			156
Additional paid-in capital		20,953			20,605
Accumulated deficit		(1,171	)		(1,471	)
		19,946			19,290
TOTAL LIABILITIES AND EQUITY	$	27,371		$	28,990

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AMERICAN CARESOURCE HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(amounts in thousands)

	Six months ended
	June 30,
	2010			2009
Cash flows from operating activities:
Net income	$	300		$	813
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Stock-based compensation expense		375			617
Depreciation and amortization		374			245
Unrealized gain on warrant derivative		(16	)		(254	)
Amortization of long-term client agreement		125			125
Client administration fee expense related to warrants		100			56
Deferred income taxes		164			-
Changes in operating assets and liabilities:
Accounts receivable		800			(1,087	)
Prepaid expenses and other assets		(89	)		(168	)
Accounts payable and accrued liabilities		(440	)		(1,054	)
Due to service providers		(1,773	)		786
Net cash provided by (used in) operating activities		(80	)		79
Cash flows from investing activities:
Investment in software development costs		(182	)		(329	)
Investment in property and equipment		(262	)		(437	)
Net cash used in investing activities		(444	)		(766	)
Cash flows from financing activities:
Proceeds from exercise of equity incentives		-			16
Net cash provided by financing activities		-			16
Net decrease in cash and cash equivalents		(524	)		(671	)
Cash and cash equivalents at beginning of period		11,868			10,578
Cash and cash equivalents at end of period	$	11,344		$	9,907
Supplemental cash flow information:
Cash paid for taxes	$	122		$	55
Supplemental non-cash financing activity:
Income tax withholdings on exercise of equity incentives	$	19		$	-

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