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 Second Quarter Results
Second Quarter Highlights
| | • | | Revenues were $116.0 million, consistent with first half 2012 guidance |
| | • | | Adjusted EBITDA was $24.9 million, reflecting investments in go-to-market and product commercialization initiatives |
| | • | | Adjusted Net Income was $11.8 million, or $0.21 per fully diluted share |
The highlights above and the discussion below contain certain non-GAAP financial measures. We utilize these non-GAAP financial measures together with applicable GAAP financial measures 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, TN, August 7, 2012 – MModal Inc. (NASDAQ/GS: MODL), a leading provider of clinical documentation services and Speech Understanding™ technologies, announced its financial results for the three and six months ended June 30, 2012.
“Our objectives for the first half of 2012 were to grow the core transcription business while improving its operational metrics, generate new business from the commercialization of our speech and language understanding technologies and grow our ecosystem of partners,” noted Vern Davenport, Chairman and Chief Executive Officer of M*Modal. “We have executed well on each of these with significant customer wins, achievement of our first half revenue target and successful launches of both our M*Modal Fluency and M*Modal Catalyst solutions. The first half results now have us on plan for delivering the meaningful financial and operating momentum we are expecting in the second half of the year.
“Our outlook on the business continues to improve as the number of customer conversations that involve the C-suite in the buying decision has provided more enterprise-level opportunities sooner than we had originally anticipated in our transformation. Combined with the validation of our value proposition in the marketplace from our successful deployment at Duke University Health System and other notable wins, this momentum reinforces our strategy of accelerating our sales force and commercialization investments.”
Operating Results
Net revenues increased 6.9% to $116.0 million for the second quarter of 2012 compared with $108.4 million for the second quarter of 2011. Net revenues increased 6.2% to $233.4 million for the six months ended June 30, 2012, compared with $219.7 million for the same period in 2011.
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MODL Announces Second Quarter Results
Page 2
August 7, 2012
Adjusted EBITDA for the second quarter of 2012 was $24.9 million, or 21.4% of net revenues, compared with $27.6 million, or 25.4% of net revenues, for the same period in 2011. Adjusted EBITDA was $51.4 million, or 22.0% of net revenues, for the six months ended June 30, 2012, compared with $54.3 million, or 24.7% of net revenues, for the same period in 2011.
Net income attributable to MModal Inc. for the second quarter of 2012 was $3.0 million, or $0.05 per fully diluted share, compared with $5.1 million, or $0.11 per fully diluted share, for the second quarter of 2011. Net income attributable to MModal Inc. for the six months ended June 30, 2012, was $177 thousand or $0.00 per fully diluted share, compared with $14.4 million, or $0.17 per fully diluted share, for the six months ended June 30, 2011.
Adjusted net income for the second quarter of 2012 was $11.8 million, or $0.21 per fully diluted share, compared with $16.3 million, or $0.31 per fully diluted share, in the second quarter of 2011. Adjusted net income for the six months ended June 30, 2012, was $28.5 million, or $0.50 per fully diluted share, compared with $32.4 million, or $0.63 per fully diluted share, in the six months ended June 30, 2011.
Acquisition and integration (A&I) related costs and restructuring charges for the three months ended June 30, 2012, consisted primarily of amortization charges of $1.4 million related to the reassessed useful life of third-party prepaid licensing fees, $1.3 million in legal and accounting fees, $1.1 million in consulting fees, $0.5 million in severance costs and net increases in other miscellaneous charges.
Commenting on the financial results, Ron Scarboro, Chief Financial Officer of M*Modal, added, “The second quarter results were in line with our stated performance goals for the first half of this year and consistent with the priorities of investing in our go-to-market and product commercialization efforts. These investments have yielded early sales and implementation successes with our product solutions, which combined with the continued strength and profitability of our core transcription business, positions us for revenue growth and increased profitability in the second half of the year as we expected.”
Liquidity and Capital Structure
As of June 30, 2012, the Company had $9.0 million in cash and cash equivalents and $266.6 million in debt. Free cash flow was $12.1 million for the second quarter of 2012, compared with $16.3 million in the prior-year period. Capital expenditures for the second quarter of 2012 were consistent with the prior-year period at $4.4 million.
Accounts receivable were $79.7 million as of June 30, 2012, compared with $74.0 million as of June 30, 2011. Days Sales Outstanding were 62.7 days at the end of the second quarter 2012 compared with 62.3 days in the prior-year period.
| | | | | | | | | | | | | | | | | | | | |
Operating Metrics | | Q2 2012 | | | Q1 2012 | | | Q4 2011 | | | Q3 2011 | | | Q2 2011 | |
Total billed equivalent line counts: | | | 1.228B lines | | | | 1.224B lines | | | | 1.156B lines | | | | 1.020M lines | | | | 863M lines | |
Transcription volumes processed offshore: | | | 47% | | | | 48% | | | | 46% | | | | 45% | | | | 42% | |
Transcription volumes edited post speech recognition: | | | 77% | | | | 75% | | | | 75% | | | | 76% | | | | 74% | |
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MODL Announces Second Quarter Results
Page 3
August 7, 2012
Performance Goals for 2012
The Company affirms its performance goals for fiscal 2012 issued on May 8, 2012.
Investor Conference Call and Web Simulcast
M*Modal will host a conference call on August 8, 2012, at 9:00 a.m. ET (8:00 a.m. CT) whereby the Company will offer prepared comments regarding its second quarter results. The number to call for this teleconference is (212) 231-2923. A replay of the conference call will be available through Wednesday, August 15, 2012, by dialing (402) 977-9140 and entering the confirmation number, 21600849.
The live broadcast of M*Modal’s quarterly conference call will be available online at the Company’s website,www.mmodal.com, under the Investors section and Events & Presentations, on Wednesday, August 8, 2012, beginning at 9 a.m. ET. The online replay will follow shortly after the call and continue for approximately one year.
About M*Modal
M*Modal is a leading provider of clinical transcription services, clinical documentation workflow solutions, advanced cloud-based Speech UnderstandingTM technology, and advanced unstructured data analytics. Recognized as the largest clinical transcription service in the U.S. with a global network of medical editors, M*Modal also offers voice to text solutions to capture the complete patient story, codifies the doctor’s narrative to automatically populate EHRs and other key healthcare information systems, delivers computer-assisted coding to support ICD-9 and the transition to ICD-10, and provides highly advanced analytical tools for exploring the richness within the “unstructured” narrative for improvements in quality of care, greater physician satisfaction and lower operational costs.
Forward-Looking Statements
Information provided and statements contained in this press release that are not purely historical, such as statements regarding our 2012 full year performance goals and our business strategy, 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 certain non-GAAP financial measures, such as 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 forward looking 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, 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.
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MODL Announces Second Quarter Results
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August 7, 2012
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, interest expense, net, depreciation and amortization, (benefit) cost of legal proceedings, settlements, and accommodations, acquisition and restructuring charges, other income, gain on sale of investment, realized (loss) gain on settlement of foreign currency hedges, amortization of core technologies and share-based compensation and other non-cash awards. The realized (loss) gain on settlement of foreign currency hedges is a component of other income, as reported in the Consolidated Statements of Operations. The amortization of core technologies is a component of cost of revenues, 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 and restructuring charges. |
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) benefit (net of deferred tax (benefit) provision). Management believes that utilization of Free Cash Flow is an important non-GAAP financial measure of the Company’s ability to convert operating results into cash.
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MODL Announces Second Quarter Results
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August 7, 2012
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 January 1, 2011.
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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MODL Announces Second Quarter Results
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August 7, 2012
MModal Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net revenues | | $ | 115,957 | | | $ | 108,439 | | | $ | 233,357 | | | $ | 219,675 | |
Cost of revenues | | | 65,172 | | | | 65,453 | | | | 131,602 | | | | 131,474 | |
| | | | | | | | | | | | | | | | |
Gross Profit | | | 50,785 | | | | 42,986 | | | | 101,755 | | | | 88,201 | |
Operating costs and expenses: | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 23,589 | | | | 14,222 | | | | 45,784 | | | | 30,896 | |
Research and development | | | 3,624 | | | | 2,190 | | | | 6,568 | | | | 4,892 | |
Depreciation and amortization | | | 12,155 | | | | 8,879 | | | | 24,544 | | | | 17,297 | |
(Benefit) cost of legal proceedings, settlements and accommodations | | | (211 | ) | | | 581 | | | | 329 | | | | (6,932 | ) |
Acquisition and restructuring | | | 5,287 | | | | 4,391 | | | | 16,373 | | | | 11,269 | |
| | | | | | | | | | | | | | | | |
Total operating costs and expenses | | | 44,444 | | | | 30,263 | | | | 93,598 | | | | 57,422 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 6,341 | | | | 12,723 | | | | 8,157 | | | | 30,779 | |
Other income | | | 814 | | | | 530 | | | | 2,678 | | | | 1,473 | |
Gain on sale of investment | | | 4,439 | | | | — | | | | 4,439 | | | | — | |
Interest expense, net | | | (7,712 | ) | | | (6,961 | ) | | | (15,510 | ) | | | (13,998 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 3,882 | | | | 6,292 | | | | (236 | ) | | | 18,254 | |
Income tax provision (benefit) | | | 836 | | | | 886 | | | | (413 | ) | | | 2,030 | |
| | | | | | | | | | | | | | | | |
Net income | | | 3,046 | | | | 5,406 | | | | 177 | | | | 16,224 | |
Less: Net income attributable to noncontrolling interests | | | — | | | | (271 | ) | | | — | | | | (1,777 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to MModal Inc. | | $ | 3,046 | | | $ | 5,135 | | | $ | 177 | | | $ | 14,447 | |
| | | | | | | | | | | | | | | | |
Net income per common share | | | | | | | | | | | | | | | | |
Basic | | $ | 0.06 | | | $ | 0.11 | | | $ | — | | | $ | 0.17 | |
Diluted | | $ | 0.05 | | | $ | 0.11 | | | $ | — | | | $ | 0.17 | |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 55,280 | | | | 49,168 | | | | 55,134 | | | | 45,128 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 56,708 | | | | 50,559 | | | | 56,357 | | | | 46,410 | |
| | | | | | | | | | | | | | | | |
| | | | |
| Calculation of net income available to common shareholders | | | | | | | | | | | | | | | | |
| | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net income attributable to MModal Inc. | | $ | 3,046 | | | $ | 5,135 | | | $ | 177 | | | $ | 14,447 | |
Less: amount attributable to principal shareholders | | | — | | | | 400 | | | | — | | | | (6,619 | ) |
| | | | | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 3,046 | | | $ | 5,535 | | | $ | 177 | | | $ | 7,828 | |
| | | | | | | | | | | | | | | | |
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MODL Announces Second Quarter Results
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August 7, 2012
MModal Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except par value)
Unaudited
| | | | | | | | |
| | | June 30, 2012 | | | December 31, 2011 | |
Assets | | | | | | | | |
Current Assets: | | | | | | | | |
Cash and cash equivalents | | $ | 9,043 | | | $ | 29,557 | |
Accounts receivable, net of allowance of $1,849 and $1,493, respectively | | | 79,716 | | | | 74,413 | |
Other current assets | | | 31,061 | | | | 35,611 | |
| | | | | | | | |
Total Current Assets | | | 119,820 | | | | 139,581 | |
Property and equipment, net | | | 22,511 | | | | 24,367 | |
Goodwill | | | 164,410 | | | | 161,866 | |
Other intangible assets, net | | | 160,787 | | | | 173,294 | |
Deferred income taxes | | | 23,784 | | | | 20,585 | |
Other assets | | | 10,480 | | | | 12,102 | |
| | | | | | | | |
Total Assets | | $ | 501,792 | | | $ | 531,795 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current Liabilities: | | | | | | | | |
Current portion of long-term debt | | $ | 27,774 | | | $ | 22,712 | |
Accounts payable | | | 9,218 | | | | 11,808 | |
Accrued expenses | | | 30,251 | | | | 39,728 | |
Accrued compensation | | | 13,213 | | | | 10,225 | |
Deferred acquisition payments | | | 20,231 | | | | 22,323 | |
Deferred revenue | | | 11,689 | | | | 7,186 | |
| | | | | | | | |
Total Current Liabilities | | | 112,376 | | | | 113,982 | |
Long-term debt | | | 238,784 | | | | 273,822 | |
Deferred acquisition payments, non-current | | | 15,908 | | | | 15,161 | |
Other non-current liabilities | | | 4,681 | | | | 3,779 | |
| | | | | | | | |
Total Liabilities | | | 371,749 | | | | 406,744 | |
| | | | | | | | |
Stockholders’ 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; 57,139 and 56,319 shares issued, respectively | | | 5,705 | | | | 5,632 | |
Additional paid-in-capital | | | 174,331 | | | | 167,440 | |
Accumulated deficit | | | (44,205 | ) | | | (44,382 | ) |
Treasury stock, at cost (89 and - shares, respectively) | | | (1,022 | ) | | | — | |
Accumulated other comprehensive loss | | | (4,766 | ) | | | (3,639 | ) |
| | | | | | | | |
Total Stockholders’ Equity | | | 130,043 | | | | 125,051 | |
| | | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 501,792 | | | $ | 531,795 | |
| | | | | | | | |
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MODL Announces Second Quarter Results
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August 7, 2012
MModal Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Unaudited
| | | | | | | | |
| | | Six months ended June 30, | |
| | | 2012 | | | 2011 | |
Operating activities: | | | | | | | | |
Net income | | $ | 177 | | | $ | 16,224 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 24,544 | | | | 17,297 | |
Customer accommodation program reversal | | | — | | | | (9,658 | ) |
Deferred income taxes | | | (1,419 | ) | | | 705 | |
Share-based compensation | | | 5,309 | | | | 1,230 | |
Provision for doubtful accounts | | | 414 | | | | 220 | |
Non-cash interest expense | | | 2,927 | | | | 1,689 | |
Other | | | 1,192 | | | | 42 | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts receivable | | | (5,717 | ) | | | 6,206 | |
Other current assets | | | 4,550 | | | | (4,658 | ) |
Other non-current assets | | | (20 | ) | | | (5,024 | ) |
Accounts payable | | | (2,590 | ) | | | (665 | ) |
Accrued expenses | | | (10,483 | ) | | | 8,109 | |
Accrued compensation | | | 2,988 | | | | (7,141 | ) |
Deferred revenue | | | 4,503 | | | | (2,017 | ) |
Other non-current liabilities | | | 902 | | | | 396 | |
| | | | | | | | |
Net cash provided by operating activities | | | 27,277 | | | | 22,955 | |
| | | | | | | | |
Investing activities: | | | | | | | | |
Purchase of property and equipment | | | (4,945 | ) | | | (5,368 | ) |
Capitalized software | | | (3,708 | ) | | | (5,564 | ) |
Payments for acquisitions, net of cash acquired | | | (3,068 | ) | | | — | |
Other | | | 205 | | | | — | |
| | | | | | | | |
Net cash used in investing activities | | | (11,516 | ) | | | (10,932 | ) |
| | | | | | | | |
Financing activities: | | | | | | | | |
Proceeds from debt | | | 26,633 | | | | 2,113 | |
Repayment of debt | | | (56,486 | ) | | | (27,092 | ) |
Deferred acquisition payments | | | (3,957 | ) | | | — | |
Net proceeds from issuance of common stock | | | — | | | | 6,781 | |
Other | | | (1,336 | ) | | | — | |
| | | | | | | | |
Net cash used in financing activities | | | (35,146 | ) | | | (18,198 | ) |
| | | | | | | | |
Effect of exchange rate changes | | | (1,129 | ) | | | 197 | |
| | | | | | | | |
Net decrease in cash and cash equivalents | | | (20,514 | ) | | | (5,978 | ) |
| | | | | | | | |
Cash and cash equivalents — beginning of period | | | 29,557 | | | | 66,779 | |
| | | | | | | | |
Cash and cash equivalents — end of period | | $ | 9,043 | | | $ | 60,801 | |
| | | | | | | | |
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MODL Announces Second Quarter Results
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August 7, 2012
MModal Inc. and Subsidiaries
Reconciliation of Net Income to Adjusted EBITDA
(In thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net income attributable to MModal Inc. | | $ | 3,046 | | | $ | 5,135 | | | $ | 177 | | | $ | 14,447 | |
Net income attributable to noncontrolling interests | | | — | | | | 271 | | | | — | | | | 1,777 | |
Income tax provision (benefit) | | | 836 | | | | 886 | | | | (413 | ) | | | 2,030 | |
Interest expense, net | | | 7,712 | | | | 6,961 | | | | 15,510 | | | | 13,998 | |
Depreciation and amortization | | | 12,155 | | | | 8,879 | | | | 24,544 | | | | 17,297 | |
(Benefit) cost of legal proceedings, settlements and accommodations | | | (211 | ) | | | 581 | | | | 329 | | | | (6,932 | ) |
Acquisition and restructuring (1) | | | 5,287 | | | | 4,391 | | | | 16,373 | | | | 11,269 | |
Other income | | | (814 | ) | | | (530 | ) | | | (2,678 | ) | | | (1,473 | ) |
Gain on sale of investment | | | (4,439 | ) | | | — | | | | (4,439 | ) | | | — | |
Realized (loss) gain on settlement of foreign currencies | | | (1,383 | ) | | | 377 | | | | (2,260 | ) | | | 534 | |
Amortization of core technologies | | | 490 | | | | — | | | | 490 | | | | — | |
Share-based compensation and other non-cash awards | | | 2,182 | | | | 611 | | | | 3,778 | | | | 1,321 | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 24,861 | | | $ | 27,562 | | | $ | 51,411 | | | $ | 54,268 | |
| | | | | | | | | | | | | | | | |
Percent of net revenues | | | 21.4 | % | | | 25.4 | % | | | 22.0 | % | | | 24.7 | % |
| (1) | Includes $1.5 million in share-based compensation expense for the three and six months ended June 30, 2012. |
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MODL Announces Second Quarter Results
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August 7, 2012
MModal Inc. and Subsidiaries
Free Cash Flow and Adjusted Net Income
(In thousands, except per share amounts)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Free cash flow: | | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 24,861 | | | $ | 27,562 | | | $ | 51,411 | | | $ | 54,268 | |
Consolidated interest expense | | | (7,712 | ) | | | (6,961 | ) | | | (15,510 | ) | | | (13,998 | ) |
Non-cash interest | | | 1,537 | | | | 831 | | | | 2,927 | | | | 1,689 | |
Capital expenditures | | | (4,364 | ) | | | (4,360 | ) | | | (8,653 | ) | | | (10,932 | ) |
Tax (provision) benefit | | | (836 | ) | | | (886 | ) | | | 413 | | | | (2,030 | ) |
Deferred tax (benefit) provision | | | (1,374 | ) | | | 159 | | | | (1,419 | ) | | | 705 | |
| | | | | | | | | | | | | | | | |
Free cash flow | | $ | 12,112 | | | $ | 16,345 | | | $ | 29,169 | | | $ | 29,702 | |
| | | | | | | | | | | | | | | | |
Adjusted net income: | | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 24,861 | | | $ | 27,562 | | | $ | 51,411 | | | $ | 54,268 | |
Less: Depreciation and amortization (excluding acquired intangibles) | | | 4,674 | | | | 4,362 | | | | 9,366 | | | | 8,265 | |
Cash interest (total expenses less non-cash) | | | 6,175 | | | | 6,130 | | | | 12,583 | | | | 12,309 | |
Current tax provision | | | 2,210 | | | | 727 | | | | 1,006 | | | | 1,325 | |
| | | | | | | | | | | | | | | | |
Adjusted net income | | $ | 11,802 | | | $ | 16,343 | | | $ | 28,456 | | | $ | 32,369 | |
| | | | | | | | | | | | | | | | |
Adjusted net income per share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.21 | | | $ | 0.32 | | | $ | 0.52 | | | $ | 0.64 | |
Diluted | | $ | 0.21 | | | $ | 0.31 | | | $ | 0.50 | | | $ | 0.63 | |
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MODL Announces Second Quarter Results
Page 11
August 7, 2012
MModal Inc. and Subsidiaries
Share Calculation
(In thousands)
Unaudited
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | | | Six Months Ended June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
MModal Inc. shares | | | | | | | | | | | | | | | | |
Basic outstanding | | | 55,280 | | | | 49,168 | | | | 55,134 | | | | 45,128 | |
Effect of diluted shares | | | 1,428 | | | | 1,391 | | | | 1,223 | | | | 1,282 | |
| | | | | | | | | | | | | | | | |
Diluted Shares | | | 56,708 | | | | 50,559 | | | | 56,357 | | | | 46,410 | |
| | | | |
Proforma impact of fully dilutive shares(1) | | | | | | | | | | | | | | | | |
Basic | | | — | | | | 1,929 | | | | — | | | | 5,085 | |
Diluted | | | — | | | | 2,176 | | | | — | | | | 5,332 | |
| | | | |
Proforma Shares | | | | | | | | | | | | | | | | |
Proforma basic | | | 55,280 | | | | 51,097 | | | | 55,134 | | | | 50,213 | |
Proforma diluted | | | 56,708 | | | | 52,735 | | | | 56,357 | | | | 51,742 | |
| (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 Second Quarter Results
Page 12
August 7, 2012
MModal Inc. and Subsidiaries
Net Leverage Ratio
(In thousands, except ratio amounts)
Unaudited
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | June 30, 2011 | | | | | | December 31, 2011 | | | | | | June 30, 2012 | |
Current Portion of Long-Term Debt | | | | | | $ | 12,025 | | | | | | | $ | 22,712 | | | | | | | $ | 27,774 | |
Long-Term Debt | | | | | | | 257,807 | | | | | | | | 273,822 | | | | | | | | 238,784 | |
Less: Cash and Cash Equivalents | | | | | | | (60,801 | ) | | | | | | | (29,557 | ) | | | | | | | (9,043 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net Debt | | | | | | $ | 209,031 | | | | | | | $ | 266,977 | | | | | | | $ | 257,515 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | | Trailing Twelve-Month Adjusted EBITDA | |
| | | | | | June 30, 2011 | | | | | | December 31, 2011 | | | | | | June 30, 2012 | |
| | | 9/30/2010 | | | $ | 24,512 | | | | 3/31/2011 | | | $ | 26,706 | | | | 9/30/2011 | | | $ | 29,769 | |
| | | 12/31/2010 | | | | 28,021 | | | | 6/30/2011 | | | | 27,562 | | | | 12/31/2011 | | | | 34,057 | |
| | | 3/31/2011 | | | | 26,706 | | | | 9/30/2011 | | | | 29,769 | | | | 3/31/2012 | | | | 26,550 | |
| | | 6/30/2011 | | | | 27,562 | | | | 12/31/2011 | | | | 34,057 | | | | 6/30/2012 | | | | 24,861 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Total | | | $ | 106,801 | | | | | | | $ | 118,094 | | | | | | | $ | 115,237 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net Leverage Ratio | | | | | | | 2.0 | | | | | | | | 2.3 | | | | | | | | 2.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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MODL Announces Second Quarter Results
Page 13
August 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. | | $ | 15,400 | | | $ | 17,600 | |
Income tax provision | | | 6,000 | | | | 5,000 | |
Interest expense, net | | | 31,000 | | | | 29,000 | |
Other income | | | (3,500 | ) | | | (4,000 | ) |
Gain on Sale of affiliated Company | | | (4,400 | ) | | | (4,400 | ) |
Realized loss on settlement of foreign currencies | | | (3,500 | ) | | | (3,000 | ) |
(Benefit) cost of legal proceedings, settlements and accommodations | | | 2,400 | | | | 2,400 | |
Amortization of Core Technologies | | | 500 | | | | 2,000 | |
Depreciation and amortization | | | 48,300 | | | | 50,000 | |
Acquisition and restructuring charges | | | 23,000 | | | | 27,000 | |
Share-based compensation and other non-cash awards | | | 7,800 | | | | 8,400 | |
| | | | | | | | |
Adjusted EBITDA | | $ | 123,000 | | | $ | 130,000 | |
| | | | | | | | |
| | |
Adjusted net income: | | | | | | | | |
Adjusted EBITDA | | $ | 123,000 | | | $ | 130,000 | |
Less: Amortization (excluding acquired intangibles) | | | 20,000 | | | | 22,000 | |
Cash interest (total expenses less non-cash) | | | 26,100 | | | | 25,600 | |
Current tax provision | | | 6,100 | | | | 4,900 | |
| | | | | | | | |
Adjusted net income | | $ | 70,800 | | | $ | 77,500 | |
| | | | | | | | |
| | |
Adjusted net income per share | | | | | | | | |
Basic | | $ | 1.28 | | | $ | 1.41 | |
Diluted | | $ | 1.25 | | | $ | 1.36 | |
| | |
MModal Inc. shares(1) | | | | | | | | |
Basic outstanding | | | 55,100 | | | | 55,100 | |
Effect of diluted options | | | 1,400 | | | | 1,900 | |
| | | | | | | | |
Diluted shares | | | 56,500 | | | | 57,000 | |
| (1) | MModal Inc. weighted average shares outstanding |
-END-
