EXHIBIT 99.1
PROXYMED, INC.
FOURTH QUARTER AND YEAR END 2001 FINANCIAL RESULTS CONFERENCE CALL
MODERATOR: MICHAEL HOOVER
FEBRUARY 14, 2002
10:00 A.M. ET
Operator: Ladies and gentlemen, thank you for standing by. Welcome to
the ProxyMed fourth quarter and year end 2001 conference
call. During the presentation, all participants will be in a
listen-only mode. Afterwards, we will conduct a question and
answer session. At that time if you have a question, please
press the one, followed by the four on your telephone. As a
reminder, this conference is being recorded Thursday,
February 14th, 2002.
I would now like to turn the conference over to Judd Schmid,
Chief Financial Officer. Please go ahead, sir.
Judson Schmid: Thank you, Stephanie. Good morning, everyone. Thank you for
joining us for ProxyMed's conference call to discuss the
company's results for the fourth quarter and year end of
2001. I'm Judson Schmid, ProxyMed's Chief Financial Officer.
Before we begin our discussion, let me take a minute to
reference the Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995. "This conference
call may contain forward-looking statements that are subject
to risks and uncertainties, including but not limited to,
assumptions, beliefs and opinions related to ProxyMed's
growth strategy based upon ProxyMed's interpretation and
analysis of health care industry trends and management's
ability to successfully develop, market, sell, cross-sell,
and implement its clinical and financial transaction services
and software applications to physicians, pharmacies,
laboratories and payers as well as the successful integration
of its acquisitions. Other risk factors are detailed in the
company's filings with the Securities and Exchange
Commission. ProxyMed expressly disclaims any intent or
obligation to update any forward looking statements."
Leading today's conference call is Mike Hoover, ProxyMed's
Chairman and Chief Executive Officer, and providing an
operational summary will by Nancy Ham , our President and
Chief Operating Officer.
I'd like to now turn the call over to Mike. Go ahead, please,
Mike.
Michael Hoover: Thank you, Judd. Good morning, everyone, and welcome to
ProxyMed's year end 2001, results conference call. Today we
will discuss and review our fourth quarter and year end
results for 2001, and then we'll review our strategies for
2002. In our discussion today, we will be focusing on the
successful completion of our turn around of the company and
how ProxyMed's focus on the small physician practice
differentiates us and drives our 2002 strategy. As is
customary, at the end of our remarks, we will open up the
lines for any questions that you may have.
Let me begin by saying I will never get tired of repeating
that once again we have good news to report. That ProxyMed
has reported record revenue and EBITDA profits for the
quarter and for the year. 2001 was certainly a busy year here
for ProxyMed. In 12 short months we were able to get our
growth on track, increasing revenue by almost 30 percent over
2000, and transaction volume by over 70 percent. We enter
2002 with a transaction run rate over 106 million
transactions annually. On the margin side, we reduced SG&A
expenses by 10 percent on a monthly run rate, while driving
our EBITDA margins from years of losses to three consecutive
quarters of record profits. As a result, we are pleased to
report that we exceeded our original revenue guidance of
$42.5 million and we have met comfortably our updated
guidance for EBITDA, as adjusted.
As if that weren't enough, we also completed our capital
structure cleanup, raised $8 million in new capital, grew our
institutional ownership significantly and restructured our
board to a more efficient seven members. Beginning the year
on track to deliver our first full quarter of EPS, which will
be the second quarter of 2002. I wanted to thank the
management team and all of our terrific associates for a job
well done.
Now to get to the details, let's turn it back over to Judd
who will take us through the financial results for the
quarter and for the year. Judd.
Judson Schmid: Thank you, Mike, and good morning, everyone. As Mike said,
we'll never get tired of saying that we have good news to
report once again here at ProxyMed. 2001 was certainly a
terrific year for us with record revenues and profits. To
begin our discussion, we are reporting quarterly revenues of
$12.8 million, up 8 percent over the third quarter and up 47
percent over the fourth quarter of 2000. In addition, we are
reporting a record EBITDA profit of $930,000, an improvement
of 23 percent over last quarter and our eighth consecutive
quarter of EBITDA improvement.
For the 2001 year, revenues were $43.2 million, a 29 percent
increase over the 2000 year, and in excess of our guidance of
$42.5 million. More importantly, we delivered EBITDA as
adjusted of $2.46 million for the year, comfortably within
our guidance range of $2.4 to $2.55 million. This record
EBITDA is comprised of reported EBITDA of $1.6 million and
approximately $900,000 in added back items, consisting of
certain separation pay, software licensing contingency
charges, and non-cash compensatory option expense incurred
primarily in the early part of the year.
Let's focus now on the quarter in more detail. The fourth
quarter has traditionally been a slightly weaker revenue
quarter for ProxyMed compared to our third quarter, but for
this year we bucked that trend. As just noted, ProxyMed
recorded revenues of $12.8 million for the fourth quarter, an
increase of 47 percent over last year's fourth quarter
revenues of $8.7 million, and in increase of 8 percent over
our normally stronger third quarter.
This performance was fueled by an 80 percent revenue increase
in Healthcare Transaction Services, which rose from $3
million last year, to $5.4 million this year. In addition, we
saw a 30 percent revenue increase in our Laboratory
Communication Solutions segment, from $5.7 million last year
to $7.4 million this year.
In terms of transaction growth during the quarter, we
processed 26.5 million clinical and financial transactions
through ProxyNet, our secure national health care information
network, representing a 72 percent increase over the fourth
quarter of 2000. For the full year, we processed 88 million
transactions, an increase of 48 percent over last year. And
as Mike said, we end the year with an annualized run rate of
106 million transactions.
Consistently improving our EBITDA margins is the main focus
of ProxyMed, especially as we move forward. To accomplish
this goal, we are pursuing three main tactics. First, we are
seeking to improve our revenue mix by eliminating certain
non-core and low margin activities. This may have a modestly
negative effect on the first quarter of 2002 revenue, but
over the course of 2002, it will allow us to drive higher
quality core growth. Secondly, as we deliver this higher
quality core growth, our incremental margins on new
transactions are quite high. We are able to efficiently
leverage investments that we have made in our technology and
infrastructure to support our rapidly increasing transaction
growth. And in all areas of the company we continuously
strive for operational efficiencies as a way to improve our
EBITDA margins. For example, with our recent payoff of our
obligation to the former owner of MDP, we can now execute on
additional integration efficiencies, thereby improving the
margin on that book of business.
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On the SG&A side, although we are very vigilant about keeping
our expenses in check, we continue to make selective
investments, such as growing our very successful Payer
Services sales team to drive our revenue growth. Consolidated
SG&A expenses were $5.3 million for the quarter, down from
$6.2 million in the fourth quarter of last year. On an annual
basis, SG&A expenses as a percentage of revenues, dropped
from 81 percent to 49 percent as our business both matured
and achieved economies of scale and operational synergies.
As a result of these initiatives, reported EBITDA profits for
the fourth quarter increased to $930,000, compared to a
reported EBITDA loss of $624,000 for the fourth quarter of
2000. The improvement in EBITDA also represents an increase
of 23 percent over last quarter's EBITDA performance which
was a record of $754,000.
Looking below the EBITDA line, as we have noted before,
starting January 1st, 2002, we adopted the new FASB 142 rules
regarding goodwill amortization. As a result, our
depreciation and amortization will be reduced by roughly
$800,000 per quarter to around $600,000. In addition to
non-cash D&A charges, we had non-cash dividend charges of $4
million for the quarter. This resulted primarily from the
charge associated with our Series C Conversion Offer, which
officially ended on Monday.
As you know in December, we commenced an offer to convert the
outstanding 1.4 million shares of our Series C preferred
stock into common stock as the final phase of cleaning up our
capital structure. I'm very happy to report that we had
almost 99 percent of those outstanding shares converted under
the terms of the deal. The few remaining unconverted shares
are basically reduced to the same rights as common
shareholders: anti-dilution provisions have been waived and
the Board will not declare any more dividends. And in 2001,
the dividends totaled $1.6 million.
While the conversion was a great success, the timing of all
the conversions did have one negative result. Because we had
only 83 percent converted through December 31st, we will have
to take a $600,000 non-cash deemed dividend charge in the
first quarter of 2002 for those shareholders that converted
after year end. Given that we had very nominal interest
charges and we'll not be a tax payer for many years due to
our accumulated net operating losses of over $60 million, we
expect to obtain positive EPS on a monthly basis in early
2002. While it is probable that the non-cash deemed dividend
charge will prevent us from achieving positive EPS for the
first full quarter of 2002, we are comfortable that we will
deliver positive EPS for the second quarter.
With the conversion behind us, the year long cleanup of our
capital structure is complete and we start 2002 with the
following capital structure as of today:
- 5.1 million common shares outstanding;
- 20,000 common shares underlying the
remaining Series C preferred stock;
- 842,400 stock options; and
- 189,000 warrants.
All totaling 6.2 million fully diluted shares. Remember that
during the year, we had undertaken two successful warrant
exchanges, a 1-for-15 reverse stock split, and a private
placement of common stock in which we raised almost $8
million from nine U.S. and Canadian institutional investors.
The bottom line is that we have an attractive capital
structure starting out this new year.
As of today, our S-3 that we filed for the registration of
the shares sold in the December private placement, the
premium shares paid in the Series C Conversion Offer and the
shares issued as a result of our Series C warrant exchange
completed last summer is now effective. On this point, we
received several inquiries about the potential for increased
selling pressure on the stock due
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to the increased number of shares now fully registered and
free from lockup tomorrow, February 15th. While we do not
control the individual decisions of our shareholders, we do
believe that most of our investors are in the stock with a
long-term horizon as they realize ProxyMed's potential for
future success.
Additionally, one important item to note, is that since June
2001, any preferred holder was free to convert to common and
sell without any restrictions or lockup, yet we haven't seen
any significant selling of these shares. Again, leading us to
believe that these investors are comfortable with the future
of the company. Additionally, based upon the latest
information available, insider and affiliate ownership is
approximately 23 percent, and there are approximately 4
million shares of public float, although we continue to be
thinly traded. Institutional ownership has grown nicely to
over 19 percent from almost 5 percent a year ago, and we
believe that this number is actually higher.
Finally, to wrap up the financial discussion, at December
31st our cash position was over $12.6 million. Subsequent to
year end, we did payoff our $7 million obligation to the
former owner of MDP. Overall for 2001, we generated
approximately $850,000 in operating cash flows. In 2001, we
also spent $1.4 million on capital expenditures, primarily
related to network and security upgrades and software to
support new products and services.
From a financial standpoint, we accomplished all of our goals
that we established at the beginning of the year: achieved
positive cash flow, achieved positive EBITDA, accelerate core
growth, cleanup the capital structure, and deliver within our
guidance. We end the year in the strongest financial position
the company has ever been in. Having been with ProxyMed for
almost six years now, I can clearly say that this was the
most exciting year thus far.
Thank you very much, and I'll now turn it over to Nancy for
her operational review.
Nancy Ham: Thank you, Judd. As we've just been discussing, we continue
to make great progress in the fourth quarter with our
operational plan. Let me start by discussing our Healthcare
Transactions Segment, which includes our Payer Services and
Prescription Services divisions.
In this segment, we concentrated in the past quarter
primarily on core growth, especially with our program for
smaller physicians called FOCUS, and through our cross
selling initiatives. As a result, we increased the breadth
and depth of our network once again in the quarter. On the
front-end, or physician side of the network, we've formalized
our proven methodologies for targeting, acquiring, retaining
and maximizing small physician practices into a program we
call FOCUS. We believe that we're unique in our industry for
both our targeting of small physician practices which are
those with one-to-nine doctors, and our ability to convert
these small practices to successful electronic transaction
submitters.
A few key statistics: We have today over 60,000 direct
physician clients. With over 90 percent of our submitting
sites fitting that small physician profile of one-to-nine
doctors. And once we sign a small physician practice, we have
85 percent of them in active production within 30 days. With
their satisfaction rating of the sales and implementation
process being a very positive 94 out of 100. And, finally,
and perhaps most importantly, once we have these small
practices, we keep them, with our annual attrition rate being
less than 5 percent.
Using this proven FOCUS methodology, our sales team had
another great quarter, being over quota on both the number of
new physicians and the number of services sold. The sales
team added almost 1,500 new physicians to our network in the
quarter. In addition, we added 17 new strategic partners, who
we call Electronic Commerce Partners, representing another
3,000 indirect physicians in multiple markets. This brings
out total of active Electronic Commerce Partners to 131. And
on the back-end of the network, we signed six new payers,
bringing our total of direct payer connections to 343.
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In addition to this internal growth, we also effectively grew
the breadth of our network through strategic opportunities.
In late Q3 and early Q4, we had a very successful
implementation of our EDS partnership, which enabled us to
offer our financial transaction services to clients at the
EDS operated Maryland Health Information Network. In just 60
pretty hectic days we added almost 500 offices with over
1,500 physicians. Truly a great job by the whole team. As a
result of these activities, we ended the year with direct
relationships with almost 60,000 physicians and indirect
relationships with another 40,000.
While adding additional physicians certainly remains a core
part of our growth strategy, we are perhaps even more focused
on accelerating our cross-selling initiatives. Today we have
ten separate financial administrative and clinical value
added services for a physician office. But the majority of
our customers today are using only one or two of these
services. Obviously, this represents tremendous untapped
potential with our existing physician base. We could more
than triple our revenue, driving very nice incremental
margins along the way, if we could just move our customer
base from doing on average a little over one service with us
to doing even just three. As a sign that we are getting more
effective at improving these services, in the fourth quarter
we had our best quarter ever here with new physicians signing
up on average for 2.4 services.
Shifting now to Prescription Services. Although 2001 was a
challenging year, we remain enthusiastic about the longer
term prospects of electronic prescribing. And in fact, the
fourth quarter was our best quarter in well over a year in
terms of increasing the depth of our network. With our new
relationship with eRx Network, we can reach an additional
9,000 pharmacies, which now for the first time ever can
participate in electronic prescribing. The first eRx
customer, Publix, went into production in the fourth quarter
and looking ahead in 2002 we expect to see a steady stream of
eRx pharmacies turning on their new electronic prescribing
capabilities. With this new partnership, our network can now
reach pharmacies to fill one in three prescriptions in the
United States. And we ended 2001 with active physician
customers in 27 states, up from 15 at the end of the second
quarter.
Turning now to our Lab Communication Solutions business, we
had a very good quarter. Revenues grew by 3 percent over the
third quarter. While this sounds like modest growth, as Judd
mentioned earlier, we normally experience actually a small
fall off in revenue from Q3 to Q4 as labs begin their
traditional year-end freeze on many expenditures. We were
quite pleased with these results. And when compared to the
same period a year ago, revenue was up a strong 30 percent
demonstrating the progress that we've made with new products
and stronger customer relationships.
We do continue to see strength and opportunity in our core
products and contract manufacturing business. We're getting
better cross-selling here too, selling new recurring revenue
services such as our Fleetwatch monitoring service to our
device customers. In addition, the HIPAA privacy rules will
create a significant opportunity to sell one-time upgrades to
the over 150,000 intelligent devices manufactured by ProxyMed
and in service at our lab customers today. We also believe
that HIPAA will help to drive more rapid adoption of Internet
technologies. And to take advantage of this opportunity, in
the fourth quarter we brought to market a new product,
ProxyLab which offers a flexible thick or thin implementation
for both order entry and results reporting. We've already
announced our first major distribution partnership for
ProxyLab with ARUP Laboratories, a leading specialty testing
company, with over 1,000 hospital lab clients.
All in all, we had a terrific quarter here at ProxyMed, both
financially and operationally. And with that, I'll turn it
back over to Mike.
Michael Hoover: Thank you, Nancy. Once again, I must reiterate that in 2001,
we truly turned the corner. As a result of the dedication and
focus of our management team and associates, we have made
this company a leading force in the healthcare connectivity
marketplace. We met our revenue and EBITDA goals and we are
poised to continue that success in the years to come. By
focusing on
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the small physician practice, a niche that virtually no one
else is going after, our business plan for 2002 and beyond
can be realized. As Nancy discussed, over 250,000 physicians
are in this small group practice setting that fall within our
target demographic of one-to-nine physicians. This is an
under-served market, and yet is precisely the market our
payer and clinical partners are most interested in reaching.
We believe that by focusing on the following growth drivers,
we will continue to gain penetration into this most important
segment. We will continue to grow our direct provider base
through our proven physician FOCUS program. We plan to
cross-sell our financial and clinical services to our
existing physicians and partners and we believe that if we
could modestly increase the number of services used by our
60,000 direct physicians, we could double or even triple our
current transaction revenues. We will leverage our unique
clinical and financial transaction sets to deepen our
partnership with payers and to execute one to two significant
strategic partnerships each year. Payers represent an
excellent partner for gaining penetration to the physicians.
By offering private-label solutions that offer multiple
services, ProxyMed can sell a one-stop solution to the
physician. And we will continue to pursue strategic and
accretive acquisitions. We have identified several potential
candidates that will complement our current product and
service offerings.
I am confident that with the approach just described,
ProxyMed can meet our published goals of 25 to 35 percent
revenue growth and 80 to 100 percent EBITDA growth, which for
2002 translates into revenue of $50 to $55 million and EBITDA
of $6 to $7 million. We are clearly positioned to deliver the
company's first ever positive EPS year. Beginning in February
and with Q2 being the first full quarter of positive EPS.
Let me conclude by quoting our new mission statement here at
ProxyMed. "ProxyMed solves the business problems of physician
offices everyday by automating their financial,
administrative and clinical transactions with their
healthcare institution partners. We exceed customer
expectations through our expertise, our proven methodologies
and our dedication to service excellence." Today we here at
ProxyMed firmly believe that we are the premier physician
connectivity in our industry. We deliver a full suite of
transactions to physicians' offices that no one else offers.
And we provide our customers with unsurpassed customer
service. With these attributes behind us, we are committed to
becoming one of the only truly profitable companies in the
industry.
That concludes our formal presentation and we would now like
to open it up for any questions that you may have.
[Questions from participants and answers from management
omitted]
Michael Hoover: I want to thank you for everyone's time today. I do have one
final point of interest, that we are setting our annual
shareholders' meeting for May 22nd, 2002, here in Fort
Lauderdale and we'd like to invite everyone.
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