FOR IMMEDIATE RELEASE
| | |
Investor Contacts: | | |
Ron Scarboro | | Tripp Sullivan |
Chief Financial Officer | | Corporate Communications, Inc |
ron.scarboro@mmodal.com | | tripp.sullivan@cci-ir.com |
(615) 798-4350 | | (615) 324-7335 |
M*Modal Reports Fourth Quarter Results
Fourth Quarter Highlights
| | • | | Posts record revenues of $116.1 million |
| | • | | Adjusted EBITDA increases 21.5% to $34.1 million compared with the prior-year period |
| | • | | Net Income Available to Common Shareholders increases to $0.50 per fully diluted share from $0.04 per fully diluted share in the prior-year period |
| | • | | Adjusted Net Income per fully diluted share increases 35.7% to $0.38 compared with the prior-year period |
| | • | | Establishes performance goals for 2012 |
The highlights above, as well as the discussion below, contain certain non-GAAP financial measures that, together with applicable GAAP financial measures, we utilize to evaluate the results of our performance. Refer to the section of this release entitled “Non-GAAP Financial Measures” for further discussion, as well as the tables attached to this release that reconcile these non-GAAP financial measures to applicable GAAP financial measures.
FRANKLIN, Tenn. (March 7, 2012) MModal Inc. (NASDAQ: MODL), a leading provider of integrated clinical documentation solutions for the U.S. healthcare industry, announced its financial results for the three months and full year ended December 31, 2011.
“We have continued to improve our execution, and I am pleased with the tremendous efforts of our team. Additionally, we have made progress on our goals of unifying the Company and solutions under one brand, signing significant strategic partnerships and competing much more effectively in the market,” noted Vern Davenport, Chairman and Chief Executive Officer of M*Modal. “With an experienced healthcare management team now in place, we expect to accelerate our efforts in addressing our customers’ pressing needs of more robust clinical information capture and physician adoption of technology as well as the continuing challenges of cost and quality.”
Operating Results
Net revenues were $443.8 million for the full year ended December 31, 2011, compared with $417.3 million for the full year ended December 31, 2010. Net revenues were $116.1 million for the fourth quarter of 2011 compared with $110.5 million for the fourth quarter of 2010.
Adjusted EBITDA for the full year ended December 31, 2011, was $118.1 million, or 26.6% of net revenues, compared with $85.8 million, or 20.6% of net revenues, for the full year ended December 31, 2010. Adjusted EBITDA for the fourth quarter of 2011 was $34.1 million, or 29.3% of net revenues, compared with $28.0 million, or 25.4% of net revenues, for the fourth quarter of 2010. Adjusted EBITDA
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includes $0.4 million and $1.0 million of realized losses from foreign currency hedge transactions for the full year and three months ended December 31, 2011, respectively.
Net income available to common shareholders for the full year ended December 31, 2011, was $56.2 million, or $1.12 per fully diluted share, compared with $5.8 million, or $0.16 per fully diluted share, for the full year ended December 31, 2010. Net income available to common shareholders for the fourth quarter of 2011 was $27.8 million, or $0.50 per fully diluted share, compared with $1.4 million, or $0.04 per fully diluted share, for the fourth quarter of 2010. Net income available to common shareholders and income per diluted share for the full year and three months ended December 31, 2011 was increased by an income tax benefit of $43.4 million, or $0.87 per diluted share, and $26.2 million, or $0.47 per diluted share, respectively, primarily related to the reduction of valuation allowance on our consolidated deferred tax assets.
Adjusted net income for the full year ended December 31, 2011, was $72.2 million, or $1.34 per fully diluted share, compared with $52.6 million, or $1.01 per fully diluted share, in the full year ended December 31, 2010. Adjusted net income for the fourth quarter of 2011 was $21.2 million, or $0.38 per fully diluted share, compared with $14.7 million, or $0.28 per fully diluted share, in the fourth quarter of 2010.
During the full year ended December 31, 2011, the Company recorded restructuring charges of $9.9 million, including a reduction in workforce and a charge related to office closures. During the three months ended December 31, 2011, the Company recorded restructuring charges of $0.4 million related to the previously announced integration of MultiModal Technologies, Inc. The benefits from these restructuring efforts are expected to be fully realized beginning in 2012.
Commenting on the financial results, Ron Scarboro, Chief Financial Officer of M*Modal, stated, “Our improved gross profit margin of 403 basis points from the prior quarter and $7.8 million of gross profit from the prior-year quarter have been realized from our strong execution across our medical transcription outsource services base to move to a globalized delivery system and further penetrate post-capture speech recognition technologies among our volumes as well as leveraging our M*Modal Fluency™ and M*Modal Catalyst™ solutions. These improved margins are the catalyst for our increased planned investments in our go-to-market initiatives and technology platforms.”
Liquidity and Capital Structure
As of December 31, 2011, the Company had $29.6 million in cash and cash equivalents and $296.5 million in debt. For the full year ended December 31, 2011, free cash flow was $65.4 million compared with $54.8 million for the full year ended December 31, 2010. Free cash flow for the fourth quarter of 2011 was $19.0 million compared with $13.9 million in the prior-year period. Capital expenditures for the full year ended December 31, 2011, were $24.1 million compared with $14.3 million in the prior-year period. For the fourth quarter of 2011, capital expenditures were $7.0 million compared with $4.7 million in the prior-year period.
Accounts receivable were $74.4 million as of December 31, 2011 compared with $82.0 million as of December 31, 2010. Days Sales Outstanding were 58.5 days at year-end 2011 compared with 67.8 days at year-end 2010.
At December 31, 2011, the Company had federal net operating loss carry forward amounts of approximately $101 million, all of which are available through 2014 to help off-set future period taxable income amounts, subject to annual limitations. Additionally, the Company had approximately $183 million of capitalized tax intangibles, of which approximately 62% are expected to be amortized for tax purposes, on a declining basis, over the next five years.
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| | | | | | | | | | | | | | | | | | | | |
Fourth Quarter Operating Metrics | | Q42011 | | | Q32011 | | | Q22011 | | | Q12011 | | | Q42010 | |
Total billed equivalent line counts: | | | 1.156B lines | 1 | | | 1.020B lines | 1 | | | 863M lines | | | | 875M lines | | | | 850M lines | |
| | | | | |
Transcription volumes processed offshore: | | | 46 | %2 | | | 45 | % | | | 42 | % | | | 41 | % | | | 41 | % |
| | | | | |
Transcription volumes edited post speech recognition: | | | 75 | %3 | | | 76 | % | | | 74 | % | | | 72 | % | | | 65 | % |
| 1 | Includes approximately 270 million and 150 million total billed equivalent line counts associated with the acquisition of MultiModal Technologies, Inc., for the fourth quarter and third quarter of 2011, respectively. |
| 2 | Excluding acquisitions, transcription volumes processed offshore were 49% in December 2011. |
| 3 | Excluding acquisitions, transcription volumes edited post speech recognition were 78% in December 2011. |
| | | | | | | | |
Full Year Operating Metrics | | 2011 | | | 2010 | |
Total billed equivalent line counts: | | | 3.914B lines | | | | 3.128B lines | |
| | |
Transcription volumes processed offshore: | | | 44 | % | | | 41 | % |
| | |
Transcription volumes edited post speech recognition: | | | 74 | % | | | 65 | % |
Performance Goals for 2012
The Company has established the following performance goals and expectations for fiscal 2012.
| | | | |
Net revenues: | | | | |
For the first half ending June 30, 2012 | | $ | 230 million to $240 million | |
For the full year ending December 31, 2012 | | $ | 490 million to $505 million | |
Adjusted EBITDA: | | $ | 123 million to $130 million | |
Adjusted Net Income: | | $ | 1.24 to $1.35 per fully diluted share | |
These fiscal 2012 estimates are based on the following full year assumptions:
| | | | |
Restructuring and integration charges: | | $ | 19 million to $23 million | |
Weighted average shares outstanding: | | | 56.5 million for the full year | |
Effective cash income tax rate: | | | 6% to 8 | % |
Capital expenditures: | | $ | 26 million to $30 million | |
“Our 2012 focus builds on the continued execution of our transcription services business and to gain meaningful market traction in our technology business,” Mr. Davenport added. “Our first half investments in our technologies and go-to-market capabilities, as well as the execution capabilities we have established, position us well to continue our growth – all focused on capturing and creating more meaningful clinical documentation for our customers.”
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Investor Conference Call and Web Simulcast
M*Modal will host a conference call on March 8, 2012, at 7:30 a.m. CT (8:30 a.m. ET) to discuss its results of operations for the fourth quarter of 2011. The number to call for the interactive teleconference is (212) 231-2900. A replay of the conference call will be available through Thursday, March 15, 2012, by dialing (402) 977-9140 and entering the confirmation number, 21576972.
A live broadcast of M*Modal quarterly conference call will be available online at the Company’s website, www.mmodal.com, under the Investors section and Events & Presentations on March 8, 2012, beginning at 7:30 a.m. CT (8:30 a.m. ET). The online replay will follow shortly after the call and continue for one year.
About M*Modal
M*Modal is a leading provider of clinical narrative capture services, Speech and Language Understanding technology and clinical documentation workflow. M*Modal’s enterprise solutions – including mobile voice capture devices, speech recognition, Web-based workflow platforms and global network of medical editors – help healthcare facilities facilitate adoption of electronic health records (EHR), improve patient care, increase physician satisfaction and lower operational costs. For more information, please visitwww.mmodal.com.
Forward-Looking Statements
Information provided and statements contained in this press release that are not purely historical, such as statements regarding our 2012 performance goals, our business strategy and proposed investments, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this press release and the Company assumes no obligation to update the information included in this press release. Statements made in this press release that are forward-looking in nature may involve risks and uncertainties. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including, without limitation, specific factors discussed herein and in other releases and public filings made by the Company (including filings by the Company with the Securities and Exchange Commission). Although the Company believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this press release.
Non-GAAP Financial Measures
In addition to the United States generally accepted accounting principles, or GAAP, results provided throughout this document, M*Modal has provided certain non-GAAP financial measures to help evaluate the results of our performance. The Company believes that these non-GAAP financial measures, when presented in conjunction with comparable GAAP financial measures, are useful to both management and investors in analyzing the Company’s ongoing business and operating performance. The Company believes that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view the Company’s financial results in the way that management views financial results. The tables attached to this press release include a reconciliation of these historical non-GAAP financial measures to the most directly comparable GAAP financial measures.
We also present Adjusted EBITDA and Adjusted Net Income on a forward-looking basis as part of our performance goals for fiscal 2012 and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures. These measures are subject to change because management cannot predict, with sufficient reliability, potential changes in tax valuation allowances,
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potential restructuring impacts, contingencies related to past and future acquisitions, and changes in fair values of our derivative instruments, all of which are difficult to estimate primarily due to dependencies on future events.
Adjusted EBITDA
Adjusted EBITDA is a metric used by management to measure operating performance. Adjusted EBITDA is defined as net income attributable to MModal Inc., as applicable, plus net income attributable to noncontrolling interests, income taxes, net interest expense, depreciation and amortization, cost (benefit) of legal proceedings, settlements, and accommodations, acquisition and restructuring charges, discontinued operations, equity in income of affiliated company, share based compensation and other non-cash awards, gain on sale of investment, and realized gain on settlement of foreign currency hedges, excluding other (income) expense. The realized gain on settlement of foreign currency hedges is a component of other (income) expense, as reported in the Consolidated Statements of Operations. Share-based compensation and other non-cash awards represents only the portion of such expense that is a component of selling, general and administrative expense, as reported in the Consolidated Statements of Operations, as it excludes such expense attributable to the Company’s restructuring actions.
We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period by excluding the following:
| • | | potential differences caused by variations in capital structures (affecting interest expense, net), tax positions (such as the impact on periods or companies for changes in effective tax rates), the age and book depreciation of fixed assets (affecting depreciation expense); |
| • | | the impact of non-cash charges; and |
| • | | the impact of acquisition and integration related charges, restructuring charges, and certain unusual or nonrecurring items. |
Because Adjusted EBITDA facilitates internal comparisons of operating performance on a more consistent basis, we also use Adjusted EBITDA in measuring our performance relative to that of our competitors. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating activities as measures of our profitability or liquidity. We understand that although Adjusted EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
| • | | Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
| • | | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| • | | Although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and |
| • | | Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Free Cash Flow
Free Cash Flow, a non-GAAP financial measure, is defined by the Company as Adjusted EBITDA less consolidated interest expense (net of non-cash interest), less capital expenditures (including capitalized software development costs), and less tax provision (net of deferred tax provision). Management believes that utilization of Free Cash Flow is an important non-GAAP measure of the Company’s ability to convert operating results into cash.
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Adjusted Net Income
Adjusted Net Income, a non-GAAP financial measure, is defined by the Company as Adjusted EBITDA less amortization expense for capitalized intangible assets (excluding acquired intangibles), less interest expense (net of non-cash interest), and less current tax provision. We measure Adjusted Net Income based on Proforma Shares Outstanding (see below). Management believes that utilization of Adjusted Net Income is an important non-GAAP financial measure of our normalized operating results.
Proforma Shares Outstanding
For purposes of evaluating our results on per-share metrics, many of our computations utilize proforma share computations. Our measure of proforma shares includes our Basic and Diluted share computations utilized for GAAP purposes, plus our estimate of the impacts of common stock equivalents which consists of stock options, restrictive stock issuable to certain key employees, shares issued to former principal stockholders, shares issued to former principal stockholders and shares issued in our initial public offering, our private exchange offer, our public exchange offer and our short-form merger with MModal MQ Inc. (f/k/a MedQuist Inc.). The pro forma shares are calculated as if the shares that were issued to former principal stockholders and in our initial public offering, our private exchange offer, our public exchange offer and our short-form merger were issued and outstanding as of the beginning of each period presented.
Total Billed Equivalent Line Counts
Total billed equivalent line counts are defined as the number of lines and line equivalents billed for the period, as defined by a customer’s contract, and includes volume processed on the Company’s transcription platforms as well as technology volume (speech recognition).
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MModal Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
Net revenues | | $ | 116,091 | | | $ | 110,534 | | | $ | 443,800 | | | $ | 417,326 | |
Cost of revenues | | | 62,024 | | | | 64,308 | | | | 255,566 | | | | 259,194 | |
| | | | | | | | | | | | | | | | |
Gross Profit | | | 54,067 | | | | 46,226 | | | | 188,234 | | | | 158,132 | |
| | | | | | | | | | | | | | | | |
| | | | |
Operating costs and expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 17,823 | | | | 15,398 | | | | 64,188 | | | | 61,062 | |
Research and development | | | 2,497 | | | | 3,086 | | | | 9,570 | | | | 12,030 | |
Depreciation and amortization | | | 11,310 | | | | 8,872 | | | | 37,826 | | | | 32,617 | |
Cost (benefit) of legal proceedings, settlements and accommodations | | | 210 | | | | 820 | | | | (6,678 | ) | | | 3,605 | |
Acquisition and restructuring | | | 9,423 | | | | 2,271 | | | | 26,943 | | | | 11,079 | |
| | | | | | | | | | | | | | | | |
Total operating costs and expenses | | | 41,263 | | | | 30,447 | | | | 131,849 | | | | 120,393 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 12,804 | | | | 15,779 | | | | 56,385 | | | | 37,739 | |
| | | | |
Gain on sale of investment | | | — | | | | 8,780 | | | | — | | | | 8,780 | |
Equity in income of affiliated company | | | — | | | | 77 | | | | — | | | | 693 | |
Other income (expense) | | | (2,845 | ) | | | (100 | ) | | | (5,405 | ) | | | 460 | |
Loss on extinguishment of debt | | | — | | | | (13,525 | ) | | | — | | | | (13,525 | ) |
Interest expense, net | | | (8,222 | ) | | | (7,299 | ) | | | (29,301 | ) | | | (19,268 | ) |
| | | | | | | | | | | | | | | | |
Income from continuing operations before income taxes and noncontrolling interests | | | 1,737 | | | | 3,712 | | | | 21,679 | | | | 14,879 | |
Income tax benefit | | | (26,202 | ) | | | (2,159 | ) | | | (43,398 | ) | | | (2,312 | ) |
| | | | | | | | | | | | | | | | |
Net income from continuing operations | | $ | 27,939 | | | $ | 5,871 | | | $ | 65,077 | | | $ | 17,191 | |
| | | | | | | | | | | | | | | | |
| | | | |
Income from discontinued operations, net of tax | | | (142 | ) | | | 218 | | | | (142 | ) | | | 556 | |
| | | | | | | | | | | | | | | | |
Net income | | | 27,797 | | | | 6,089 | | | | 64,935 | | | | 17,747 | |
Less: Net income attributable to noncontrolling interests | | | — | | | | (4,006 | ) | | | (2,138 | ) | | | (9,240 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net income attributable to MModal Inc. | | $ | 27,797 | | | $ | 2,083 | | | $ | 62,797 | | | $ | 8,507 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income per common share from continuing operations | | | | | | | | | | | | | | | | |
Basic | | $ | 0.51 | | | $ | 0.03 | | | $ | 1.15 | | | $ | 0.14 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.50 | | | $ | 0.03 | | | $ | 1.12 | | | $ | 0.14 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income per common share from discontinued operations | | | | | | | | | | | | | | | | |
Basic | | $ | — | | | $ | 0.01 | | | $ | — | | | $ | 0.02 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | — | | | $ | 0.01 | | | $ | — | | | $ | 0.02 | |
| | | | | | | | | | | | | | | | |
| | | | |
Net income per common share available to common shareholders | | | | | | | | | | | | | | | | |
Basic | | $ | 0.51 | | | $ | 0.04 | | | $ | 1.15 | | | $ | 0.16 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.50 | | | $ | 0.04 | | | $ | 1.12 | | | $ | 0.16 | |
| | | | | | | | | | | | | | | | |
| | | | |
Weighted average shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 54,418 | | | | 35,158 | | | | 48,959 | | | | 35,012 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 55,452 | | | | 36,370 | | | | 50,138 | | | | 35,954 | |
| | | | | | | | | | | | | | | | |
Calculation of net income available to common shareholders
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | | |
Net income attributable to MModal Inc. | | $ | 27,797 | | | $ | 2,083 | | | $ | 62,797 | | | $ | 8,507 | |
Less: amount attributable to former principal shareholders | | | — | | | | (687 | ) | | | (6,619 | ) | | | (2,750 | ) |
| | | | | | | | | | | | | | | | |
Net income available to common shareholders | | | 27,797 | | | | 1,396 | | | | 56,178 | | | | 5,757 | |
| | | | | | | | | | | | | | | | |
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MModal Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except par value)
Unaudited
| | | | | | | | |
| | | December 31,
2011 | | | December 31,
2010 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 29,557 | | | $ | 66,779 | |
Accounts receivable, net of allowance of $1,493 and $1,466, respectively | | | 74,413 | | | | 82,038 | |
Other current assets | | | 35,611 | | | | 23,706 | |
| | | | | | | | |
Total current assets | | | 139,581 | | | | 172,523 | |
| | |
Property and equipment, net | | | 24,367 | | | | 23,018 | |
Goodwill | | | 161,866 | | | | 90,268 | |
Other intangible assets, net | | | 173,294 | | | | 107,962 | |
Deferred income taxes | | | 20,585 | | | | 6,896 | |
Other assets | | | 12,102 | | | | 14,212 | |
| | | | | | | | |
| | |
Total assets | | $ | 531,795 | | | $ | 414,879 | |
| | | | | | | | |
| | |
Liabilities and Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 22,712 | | | $ | 27,817 | |
Accounts payable | | | 11,808 | | | | 11,358 | |
Accrued expenses | | | 39,728 | | | | 36,917 | |
Accrued compensation | | | 10,225 | | | | 16,911 | |
Deferred acquisition payments | | | 22,323 | | | | — | |
Deferred revenue | | | 7,186 | | | | 10,570 | |
| | | | | | | | |
Total current liabilities | | | 113,982 | | | | 103,573 | |
Long-term debt | | | 273,822 | | | | 266,677 | |
Deferred income taxes | | | — | | | | 4,221 | |
Deferred acquisition payments, non-current | | | 15,161 | | | | — | |
Due to related parties | | | — | | | | 3,537 | |
Other non-current liabilities | | | 3,779 | | | | 2,360 | |
| | | | | | | | |
Total liabilities | | | 406,744 | | | | 380,368 | |
| | | | | | | | |
Commitments and contingencies | | | | | | | | |
| | |
Total equity: | | | | | | | | |
| | |
Preferred stock - $0.10 par value; authorized 25,000 shares; none issued or outstanding | | | — | | | | — | |
Common stock - $0.10 par value; authorized 300,000 shares; 56,319 and 35,158 shares issued and outstanding, respectively | | | 5,632 | | | | 3,516 | |
Additional paid-in-capital | | | 167,440 | | | | 148,265 | |
Accumulated deficit | | | (44,382 | ) | | | (107,179 | ) |
Accumulated other comprehensive loss | | | (3,639 | ) | | | (663 | ) |
| | | | | | | | |
Total MModal Inc. stockholders’ equity | | | 125,051 | | | | 43,939 | |
Noncontrolling interests | | | — | | | | (9,428 | ) |
| | | | | | | | |
Total equity | | | 125,051 | | | | 34,511 | |
| | | | | | | | |
| | |
Total liabilities and equity | | $ | 531,795 | | | $ | 414,879 | |
| | | | | | | | |
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MModal Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
| | | | | | | | |
| | | Years ended December 31, | |
| | | 2011 | | | 2010 | |
Operating activities: | | | | | | | | |
Net income | | $ | 64,935 | | | | 17,747 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 37,826 | | | | 33,454 | |
Customer Accommodation Program reversal | | | (9,658 | ) | | | — | |
Gain on sale of investment | | | — | | | | (8,780 | ) |
Equity in income of affiliated company | | | — | | | | (693 | ) |
Deferred income taxes | | | (46,868 | ) | | | (3,903 | ) |
Share based compensation | | | 5,026 | | | | 765 | |
Provision for doubtful accounts | | | 230 | | | | 1,538 | |
Non-cash interest expense | | | 4,118 | | | | 4,131 | |
Loss on extinguishment of debt | | | — | | | | 13,525 | |
Other | | | 847 | | | | (962 | ) |
| | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | 14,153 | | | | (9,962 | ) |
Other current assets | | | (9,398 | ) | | | (1,858 | ) |
Other non-current assets | | | (1,151 | ) | | | (495 | ) |
Accounts payable | | | (2,576 | ) | | | 981 | |
Accrued expenses | | | 9,827 | | | | (5,041 | ) |
Accrued compensation | | | (8,237 | ) | | | (4,244 | ) |
Deferred revenue | | | (3,816 | ) | | | 569 | |
Other non-current liabilities | | | 1,008 | | | | (547 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 56,266 | | | | 36,225 | |
| | | | | | | | |
| | |
Investing activities: | | | | | | | | |
Purchase of property and equipment | | | (12,732 | ) | | | (7,152 | ) |
Proceeds from the sale of property and equipment | | | 576 | | | | — | |
Proceeds from sale of investments | | | — | | | | 19,469 | |
Capitalized software | | | (11,320 | ) | | | (7,155 | ) |
Proceeds from sale of Patient Financial Services business | | | — | | | | 12,547 | |
| | |
Payments for acquisitions and interests in affiliates, net of cash acquired | | | (70,103 | ) | | | (99,793 | ) |
| | | | | | | | |
Net cash used in investing activities | | | (93,579 | ) | | | (82,084 | ) |
| | | | | | | | |
| | |
Financing activities: | | | | | | | | |
Proceeds from debt | | | 62,715 | | | | 392,352 | |
Repayment of debt | | | (60,748 | ) | | | (229,727 | ) |
Dividends paid to noncontrolling interests | | | — | | | | (53,913 | ) |
Debt issuance costs | | | — | | | | (21,607 | ) |
Net proceeds from issuance of common stock | | | 5,789 | | | | — | |
Related party payments | | | (4,000 | ) | | | — | |
Payments related to initial public offering | | | — | | | | (3,745 | ) |
Other | | | (878 | ) | | | — | |
| | | | | | | | |
Net cash provided by financing activities | | | 2,878 | | | | 83,360 | |
| | | | | | | | |
| | |
Effect of exchange rate changes | | | (2,787 | ) | | | (355 | ) |
Net increase (decrease) in cash and cash equivalents | | | (37,222 | ) | | | 37,146 | |
Cash and cash equivalents - beginning of period | | | 66,779 | | | | 29,633 | |
| | | | | | | | |
| | |
Cash and cash equivalents - end of period | | $ | 29,557 | | | $ | 66,779 | |
| | | | | | | | |
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MODL Announces Fourth Quarter Results
Page 10
March 7, 2012
MModal Inc. and Subsidiaries
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Twelve Months Ended
December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | | |
Net income attributable to MModal Inc. | | $ | 27,797 | | | $ | 2,083 | | | $ | 62,797 | | | $ | 8,507 | |
Net income attributable to noncontrolling interests | | | — | | | | 4,006 | | | | 2,138 | | | | 9,240 | |
Discontinued operations | | | 142 | | | | (218 | ) | | | 142 | | | | (556 | ) |
Income tax benefit | | | (26,202 | ) | | | (2,159 | ) | | | (43,398 | ) | | | (2,312 | ) |
Interest expense, net | | | 8,222 | | | | 7,299 | | | | 29,301 | | | | 19,268 | |
Other (income) expense | | | 2,845 | | | | 100 | | | | 5,405 | | | | (460 | ) |
Realized loss on settlement of foreign currencies | | | (991 | ) | | | — | | | | (364 | ) | | | — | |
Loss on extinguishment of debt | | | — | | | | 13,525 | | | | — | | | | 13,525 | |
Depreciation and amortization | | | 11,310 | | | | 8,872 | | | | 37,826 | | | | 32,617 | |
Acquisition and restructuring charges | | | 9,423 | | | | 2,271 | | | | 26,943 | | | | 11,079 | |
Cost (benefit) of legal proceedings, settlements and accommodations | | | 210 | | | | 820 | | | | (6,678 | ) | | | 3,605 | |
Share-based compensation and other non-cash awards | | | 1,303 | | | | 279 | | | | 3,984 | | | | 765 | |
Gain on sale of investment | | | — | | | | (8,780 | ) | | | — | | | | (8,780 | ) |
Equity in income of affiliated company | | | — | | | | (77 | ) | | | — | | | | (693 | ) |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 34,059 | | | $ | 28,021 | | | $ | 118,096 | | | $ | 85,805 | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA as a percentage of net revenues | | | 29.3 | % | | | 25.4 | % | | | 26.6 | % | | | 20.6 | % |
| | | | | | | | | | | | | | | | |
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MODL Announces Fourth Quarter Results
Page 11
March 7, 2012
MModal Inc. and Subsidiaries
Free Cash Flow and Adjusted Net Income
(In thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | | |
Free cash flow: | | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 34,059 | | | $ | 28,021 | | | $ | 118,096 | | | $ | 85,805 | |
Consolidated interest expense | | | (8,222 | ) | | | (7,299 | ) | | | (29,301 | ) | | | (19,268 | ) |
Non-cash interest | | | 1,655 | | | | 803 | | | | 4,118 | | | | 4,131 | |
Capital expenditures | | | (7,045 | ) | | | (4,687 | ) | | | (24,052 | ) | | | (14,307 | ) |
Tax benefit | | | 26,202 | | | | 2,159 | | | | 43,398 | | | | 2,312 | |
Deferred tax benefit | | | (27,639 | ) | | | (5,072 | ) | | | (46,867 | ) | | | (3,903 | ) |
| | | | | | | | | | | | | | | | |
Free cash flow | | $ | 19,010 | | | $ | 13,925 | | | $ | 65,392 | | | $ | 54,770 | |
| | | | | | | | | | | | | | | | |
| | | | |
Adjusted net income: | | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 34,059 | | | $ | 28,021 | | | $ | 118,096 | | | $ | 85,805 | |
Less: Depreciation and amortization (excluding acquired intangibles) | | | 4,879 | | | | 3,869 | | | | 17,260 | | | | 16,482 | |
Cash interest (total expenses less non-cash) | | | 6,567 | | | | 6,496 | | | | 25,183 | | | | 15,137 | |
Current tax provision | | | 1,437 | | | | 2,913 | | | | 3,469 | | | | 1,591 | |
| | | | | | | | | | | | | | | | |
Adjusted net income | | $ | 21,176 | | | $ | 14,743 | | | $ | 72,184 | | | $ | 52,595 | |
| | | | | | | | | | | | | | | | |
| | | | |
Adjusted net income per share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.39 | | | $ | 0.29 | | | $ | 1.37 | | | $ | 1.04 | |
Diluted | | | 0.38 | | | | 0.28 | | | | 1.34 | | | | 1.01 | |
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MODL Announces Fourth Quarter Results
Page 12
March 7, 2012
MModal Inc. and Subsidiaries
Share Calculation
(In thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | | |
MModal Inc. shares | | | | | | | | | | | | | | | | |
Basic outstanding | | | 54,418 | | | | 35,158 | | | | 48,959 | | | | 35,012 | |
Effect of diluted options | | | 1,034 | | | | 1,212 | | | | 1,179 | | | | 942 | |
| | | | | | | | | | | | | | | | |
Diluted shares | | | 55,452 | | | | 36,370 | | | | 50,138 | | | | 35,954 | |
| | | | |
Proforma impact of fully dilutive shares (1) | | | | | | | | | | | | | | | | |
Basic | | | 172 | | | | 15,775 | | | | 3,576 | | | | 15,775 | |
Diluted | | | 394 | | | | 16,005 | | | | 3,806 | | | | 16,005 | |
| | | | |
Proforma Shares | | | | | | | | | | | | | | | | |
Proforma basic | | | 54,590 | | | | 50,933 | | | | 52,535 | | | | 50,787 | |
Proforma diluted | | | 55,846 | | | | 52,375 | | | | 53,944 | | | | 51,959 | |
| (1) | Fully dilutive shares includes common stock equivalents which consists of stock options, restricted stock issuable to certain key employees, shares issued to former principal stockholders, shares issued in our initial public offering, our private exchange offer and our public exchange offer and our short-form merger with MModal MQ Inc. (f/k/a MedQuist Inc.) |
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MODL Announces Fourth Quarter Results
Page 13
March 7, 2012
MModal Inc. and Subsidiaries
Reconciliation of Net Income to Adjusted EBITDA and Adjusted Net Income - Performance Goals for 2012
(In thousands)
Unaudited
| | | | | | | | |
| | | Twelve Months Ended
December 31, 2012 | |
| | | Low | | | High | |
| | |
Net income attributable to MModal Inc. | | $ | 18,000 | | | $ | 20,400 | |
Income tax provision | | | 7,000 | | | | 5,800 | |
Interest expense, net | | | 29,000 | | | | 28,500 | |
Other income | | | (4,500 | ) | | | (5,000 | ) |
Realized loss on settlement of foreign currencies | | | 1,700 | | | | 1,700 | |
Depreciation and amortization | | | 47,000 | | | | 49,500 | |
Acquisition and restructuring charges | | | 19,000 | | | | 23,000 | |
Share-based compensation and other non-cash awards | | | 5,800 | | | | 6,100 | |
| | | | | | | | |
Adjusted EBITDA | | $ | 123,000 | | | $ | 130,000 | |
| | | | | | | | |
| | |
Adjusted net income: | | | | | | | | |
Adjusted EBITDA | | $ | 123,000 | | | $ | 130,000 | |
Less: Amortization (excluding acquired intangibles) | | | 21,000 | | | | 23,500 | |
Cash interest (total expenses less non-cash) | | | 25,600 | | | | 25,100 | |
Current tax provision | | | 6,100 | | | | 4,900 | |
| | | | | | | | |
Adjusted net income | | $ | 70,300 | | | $ | 76,500 | |
| | | | | | | | |
| | |
Adjusted net income per share | | | | | | | | |
Basic | | $ | 1.28 | | | $ | 1.39 | |
Diluted | | $ | 1.24 | | | $ | 1.35 | |
| | |
MModal Inc. shares(1) | | | | | | | | |
Basic outstanding | | | 55,100 | | | | 55,100 | |
Effect of diluted options | | | 1,400 | | | | 1,400 | |
| | | | | | | | |
Diluted shares | | | 56,500 | | | | 56,500 | |
| (1) | MModal Inc. weighted average shares outstanding |
-END-
