EXHIBIT 99.2
PROXYMED, INC.
FIRST QUARTER 2003 FINANCIAL RESULTS CONFERENCE CALL
MODERATOR: MICHAEL HOOVER
MAY 1, 2003
10:00 A.M. ET
OPERATOR: Good morning, ladies and gentlemen, and welcome to the
ProxyMed's conference call to discuss its financial results
for the first quarter of 2003. At this time, I would like to
inform you that all participants are in a listen-only mode. At
the request of the company, we will open up the conference for
questions and answers after the presentation. We would
appreciate it if you would limit your questions to one and
then get back into queue, if you have any follow-up questions
or another question to ask. Today's conference call is being
webcast and replays of this call will be available on the
Internet at www.proxymed.com shortly after this call. Leading
today's call from ProxyMed are Mike Hoover, CEO; Nancy Ham,
President; and Judd Schmid, Chief Financial Officer.
Before the discussion begins, please be reminded that
statements made by ProxyMed during this call include answers
given in response to questions that are intended to fall
within the Safe Harbor provisions of the securities laws and
that actual results might differ materially from those in
these statements. Such statements are subject to a variety of
risks, many of which are discussed in the company's most
recent Form 10K and other SEC filings, which the company
strongly urges you to read.
At this time, I would like to turn the presentation over to
Mr. Mike Hoover. Please go ahead, sir.
MICHAEL HOOVER: Good morning and thank you, operator. Thank you, everyone, for
joining us. On our call today, we will report briefly on our
consolidated first quarter financial results, but we'll spend
most of the time discussing the integration process of
MedUnite, which we acquired on last New Years Eve.
As we discussed in our updated guidance call in January, we
expected that the acquisition of MedUnite, would cause us to
report negative numbers for both EBITDA and EPS on a
consolidated basis, and that is indeed the case. However, as
you will hear, the acquisition did not cause us to lose focus
on our existing Transaction Service operations, which reported
improved operational and financial metrics over the
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corresponding period last year and last quarter. I'd like to
highlight a few of these metrics for you. Total transactions
increased by 15 percent over fourth quarter and core
transactions were up 13 percent. Revenue in our Transaction
Services unit grew 9 percent, sequentially, and EBITDA was
slightly down due to the loss on disposal of assets and other
integration-related costs. These gains are despite increased
travel and other expenses associated with all the integration
activity.
Speaking of integration, we continue to focus our efforts
primarily on the integration of MedUnite and our HIPAA
remediation efforts. As you will hear today, we are on track
to consolidate MedUnite and ProxyMed's technology platforms by
the end of the third quarter. This will not only ensure
HIPAA-compliant connectivity solutions for our customers, but
it will allow us to continue to eliminate costs associated
with duplicative functions. This is one of the crucial steps
with MedUnite making the turn from negative from positive
EBITDA in 2003. On this important task, we did get off to a
slower start than hoped, but we are now on track on a run rate
base for EBITDA. I remain confident that we will be able to
complete the restructuring and bring MedUnite to EBITDA
profitability this year, as we committed to you in our last
call. On a relationship basis, we continue to make excellent
progress with MedUnite's seven founding payers and a partner
in NDCHealth. In summary, the results of the MedUnite
acquisition are on schedule starting the second quarter.
With that, let me turn it over to Nancy and Judd to provide
you all of the details. Judd, go ahead.
JUDD SCHMID: Thanks, Mike. Good morning, everyone. We plan to keep the
financial discussion relatively short today, as my wife is
about to give birth to our first child and I could be called
away at any time. But, seriously, as Mike pointed out, we
realized consolidated losses in the first quarter, as
expected, as we moved to integrate MedUnite. We know everyone
is very interested in our progress here, so we have worked
hard to be able to break out MedUnite's results for you for
the first quarter. So please see the "Segment and Other
Information" section of our press release for details. Going
forward, we will not be able to do this, as the progress on
the integration has already blurred the lines too much between
MedUnite and ProxyMed.
For the first quarter of 2003, we've reported consolidated
revenues of $17.4 million, EBITDA losses of $948,000, and a
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net loss of $2.5 million, or 36 cents per share, as compared
to a net loss of $563,000, or 11 cents per share last year.
From a revenue perspective, let's start with our transaction
business where sequential revenue growth over the fourth
quarter was a solid 9 percent, excluding $4.6 million in
revenues from MedUnite. From a transaction standpoint, and
excluding MedUnite's transactions, we are pleased to report
that overall transactions still grew 15 percent with core
transactions growing 13 percent, fueled by our continued
growth in both new accounts and in existing ones. I applaud
the whole team for maintaining their focus on core growth,
even with all the distractions around the MedUnite
integration.
Let me take a minute to walk you through transaction growth
rates versus revenue growth rates. Depending on the mix
between encounters and other transactions each quarter,
overall transaction volumes may increase, but revenue dollars
may increase more, less or stay the same. It's rarely a
synchronous relationship. This is because encounters are at a
lower price point than claims and other transactions that we
process. Over the last two years, we've had every conceivable
combination of revenue and transaction growth and it's
something that we have to deal with each quarter.
This strong growth in the first quarter gives us confidence
that we can achieve our internal growth rates for the year of
25 percent or more. In the first quarter, we processed a total
of 56.5 million clinical and financial healthcare
transactions, including MedUnite. This now puts us on a run
rate to process over 225 million transactions on an annual
basis.
Finally, revenues in our Lab Services business started the
year on a slow note, as we had expected and mentioned in our
updated guidance call. Most of our revenues in this business
come from the sale of fixed assets to our lab and contract
manufacturing customers. We believe that overall spending for
fixed assets is down across the economy and will continue to
be soft going into the summer. In addition, we expect to start
the year slowly, due to the effect of the 2002 M&A activity
amongst our top lab customers. Our business with labs
typically decreases for a period of time post-acquisition, and
then rebounds. We anticipate that a strengthening economy, a
resumption of normal ordering from the merged labs and an
increased penetration into the hospital outreach market will
help to improve revenue for Lab Services over the balance of
the year.
Jumping down to SG&A expenses, we expected significant costs
related to the MedUnite operations and we were somewhat
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challenged to get our hands around these costs early in the
quarter. In addition, despite our best forecasting and
planning, we did incur some unbudgeted expenses of about
$100,000 for additional deal-related accounting and legal
fees. We also incurred $123,000 in losses related to the
disposition of assets as a result of the consolidation of the
MedUnite and ProxyMed offices in Atlanta. This consolidation,
however, should save us $200,000 on an annual basis, going
forward, and has accelerated certain aspects of our
integration. Please note that these deal-related expenses and
the loss on the disposition of assets are both included in our
calculation of our EBITDA loss for the quarter. Despite these
challenges, we exited the quarter on a run rate in line with
our initial expectations.
In regard to EBITDA, on a consolidated basis, we reported an
EBITDA loss of $948,000. This includes an EBITDA loss from
MedUnite of $1.6 million for the quarter. Excluding the
MedUnite loss, our existing operations generated an EBITDA
profit of $646,000. While this is down sequentially, and even
with both EBITDA losses expected at MedUnite, we still believe
that we will generate consolidated EBITDA profits for the full
year of 2003 in excess of our 2002 consolidated EBITDA profit
of $4 million. To accomplish this, we have to continue to
reduce expenses at MedUnite. By executing on our current
plans, we should be able to achieve our stated goal of
operating the MedUnite business on an EBITDA breakeven level
sometime in the third quarter.
Amortization expense for the quarter was less than expected,
as we have not yet started amortizing the real-time network
platform acquired from MedUnite. We are completing the work to
bring it into full HIPAA compliance by the end of the second
quarter. We will then start amortization over a five-year
period.
From a cash perspective, we ended the quarter with $11.5
million in total cash, including our restricted cash. This is
the result of a solid job on collections and our success in
entering into financing arrangements for the larger
liabilities acquired with MedUnite. With these financing
arrangements, comes interest expense though, so let me give
you some updated numbers for that. In addition to financing
certain MedUnite, and even some ProxyMed, liabilities, we also
have the interest that we pay on the $13.4 million in
convertible notes issued to purchase MedUnite. As a result,
our interest expense is now running about $210,000-plus per
quarter with a modest offset of about $30,000 per quarter in
interest income.
Also on the cash front, I'm happy to report that we've
terminated the expensive lease at MedUnite's San Diego
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facility effective July 1st in exchange for a $750,000 Letter
of Credit that was being held by the landlord. This
termination saves us about $1 million in future rents. In
addition, we're working on an asset-based line of credit and
expect to have something in place within the next few weeks.
All in all, I'm comfortable with our current cash resources,
as compared to our internal needs.
We stated before that 2003 would be a restructuring year for
the company with the first two quarters sustaining substantial
EBITDA and bottom line losses. While this was true for the
first quarter, we now believe that we will achieve positive
EBITDA in the second quarter and, of course, that we will exit
the full year on a positive and, hopefully, on a normalized
EBITDA run rate. We have all been extremely busy, but we've
made good progress to date.
With that, I'll hand it over to Nancy to provide some more
color on our progress.
NANCY HAM: Good morning, everyone. It's been a pretty busy four months
since the acquisition of MedUnite and we've had a lot to do.
We had to get our arms around MedUnite, quickly reorganize the
company and all the work, execute on our platform integration
plans, keep the core business growing on track, continue HIPAA
readiness plans and, of course, attack the burn rate at
MedUnite. While it's been pretty challenging to execute at 100
percent on all these fronts, overall, I think we've made good
progress.
At this point, I'm confident that we have our arms around
MedUnite. We have a core team that has been charged with
executing every aspect of the integration, from the biggest
items of organizational restructuring, technology planning and
updated sales programs, right down to the smallest details of
new letterhead and how folks file their expense reports.
The core team has represented us from every major department
and they meet weekly, telephonically, and then, periodically,
we meet in person for in depth reviews. We've made a lot of
progress on the original to-do list for each department and
the remaining items are on track. In fact, I think we'll be a
position to disband the core team in the next month.
To spotlight some of the larger integration projects, first,
we could not be more pleased with the integration of the
associates of ProxyMed and MedUnite into one Transaction
Services team. Both sides of the house came together very well
from a cultural team and skill set perspective. I've always
believed that the critical factor in any merger acquisition
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being successful is the people and the willingness of all the
old and new associates to embrace the new company and each
other and quickly set aside who came from where, and focuses,
instead, on who needs to do what to serve the common customer.
As I recently shared with all of our associates, I give us an
A+ here.
On the facility front, as Judd mentioned, we combined our two
Atlanta offices into one, and that went great. The last
facility's task will be to move our San Diego team into their
new, smaller and much cheaper offices, and that will happen in
the next four to six weeks.
We're also wrapping up the move to one name, ProxyMed. I was
too cheap to do this out of the box, but now that we've used
up most of the MedUnite letterhead and business cards and so
forth, it's time to finish it up and move to ProxyMed. To
facilitate this, we've consolidated our e-mail in the past two
weeks, we've launched a beautiful combined internal Intranet,
we have new signage on order, and we'll be shutting down the
corporate website, www.medunite.com by mid-June.
On the technology front, as we discussed on our last call,
we're consolidating our production platforms down to one
claims processing platform and one real-time platform. On the
claims side, which actually includes claims, encounters and
electronic remittance advices, we're leveraging ProxyMed
superior and, as we recently announced, Claredi-certified and
HIPAA-compliant platforms. We now have very detailed plans in
place for this consolidation and they are going along well. As
a progress report for you, we've already moved over 50 percent
of the volume associated with the former MedUnite founding
payers to the ProxyMed platform and, by next week, we'll have
just north of 85 percent. In addition, we've moved all of the
volume associated with 31 additional payers that MedUnite was
sending to a trading partner, but where ProxyMed already had a
direct connection in place. Moving from an indirect to a
direct connection, basically, doubles the revenues associated
with those claims and it was an important deal synergy for us
to realize quickly. With payer migration going well, we now
need to focus on migrating the MedUnite physicians and
partners who submit inbound transactions. We're on track to
complete this migration by the end of the third quarter. That
is the key step to allow us to shut down MedUnite's multiple
claims platforms and to realize the associated cost savings
built into our plan.
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On the real-time side, we've been able to move even faster. We
will have the ProxyMed real-time platform and physician portal
fully integrated with MedUnites by mid-June. We will then have
one single best-of-breed real-time platform and a
fully-integrated physician portal with all of our transactions
available in one place. This is crucial to our continued
cross-selling success.
Having integrated platforms will be a significant step for us,
but even that's not enough. It's all about customers and
revenue. In parallel, we're integrating all the tools we use
across the entire company to market, sell and contract with
new customers; to then implement those customers into
production and enroll them with our payers; and to provide
ongoing support and account maintenance. In April, we hit
several key milestones on this plan. With former MedUnite
associates, based in our major Norcross, Georgia office, being
able to implement their first physicians and payers directly
onto the ProxyMed platform and then, to provide customer
support. Our Vice President of Operations, Tom Wohlford, who
came from the MedUnite side of the house, is doing a terrific
job with this initiative and, by May 31st, we'll be completed
with this project.
Finally, we've been a little busy with HIPAA as well. We've
checked off some important milestones here. We've completed
the remediation of our transaction platform and we received
HIPAA certification from Claredi on our batch and real-time
transactions. We're now in the process of working with our
payer and provider customers to either try to modify their
existing interfaces to bring them into HIPAA compliance or to
re-implement them directly on HIPAA-compliant formats. We've
developed a number of testing and certification tools, which
are integrated directly with our transaction processing
platforms to proactively assist our customer base in this
transition to HIPAA compliance. We also remediated our
provider products, including those acquired from MedUnite, to
meet the April 15th privacy deadline and to prepare for the
upcoming security regulations. As part of the privacy
regulations, our terrific privacy and legal teams survived the
onslaught of this episode of agreements and executed almost
2000 of them prior to the April 15th deadline. All of our
attention related to HIPAA has not been turned outward towards
our customers. We've all but just completed a rigorous
internally review and update of our corporate privacy and
security policies and educations and, as part of that, we
completed a series of internal education programs for every
ProxyMed associate.
While I'm pleased with the progress on the integration on the
HIPAA remediation front, I have to single out the fact that,
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even with all of that going on, we had a strong first quarter
in the core business. ProxyMed transactions grew by 15 percent
over the fourth quarter, with core transactions, excluding
encounters and MedUnite, up 13 percent. This performance was
due to a number of factors, but most importantly, due to a 40
percent increase in our implementation throughput and
continued stellar performances from our business development
and sales teams. You see some of our handy work with the
announcements of our partnership with Perot, which we
anticipate will bring us four million claims in the second
half of the year and more in 2004, and Alpha Thought Global,
which will add eight million annual transactions doing that
work. In addition to these large wins, our sales team
continues it's excellent work in signing up individual
physicians, adding almost 3,000 new direct physicians in the
first quarter.
Despite all this good news, it can't change and remove the
disappointment that we did not bring the MedUnite burn rate
down as quickly in January and February as we should have. On
a run rate basis, we're now exactly where we planned to be,
but we do have some ground to make up in this first two months
to be on track for our full year plan. The monthly EBITDA loss
is now approximately $300,000, down from $1.6 million. While
this is excellent progress, we have to continue our focus and
rapid gains to reach breakeven in the third quarter for
MedUnite and to exit the year on a normal margin run rate.
In summary, while it's been pretty busy around here, I think
we've gotten a lot done. Most importantly, we've been able to
validate our plans to bring the MedUnite business to EBITDA
profitability well within our guidance timeline of late 2003.
With that, I'll turn it back over to Mike for a wrap up.
MICHAEL HOOVER: Thanks, Nancy. As we've just discussed, we've made tremendous
progress since the beginning of the year. I want to thank all
of our associates who have worked tirelessly to make this
happen. Even as we've been working on our integration and core
operations, we haven't taken our eyes off the larger strategic
plan that drives us. While our teams have asked me to hold off
on any new acquisitions until we've completed the MedUnite
integration, we've continued to look at new opportunities to
help ProxyMed through major new products and strategic
initiatives.
As the nation's second largest processor of healthcare
transactions for the physician marketplace, serving over
140,000 physicians, processing over 225 million transactions a
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year, we constantly need to stay ahead of the competition. We
continue to do this by offering unique products and services,
all from one source, and by superior support to all of our
customers. We believe that ProxyMed is well-positioned to be
the premiere partner on both ends of the transaction process
flow. Over the last few months, we began to explore new
relationships with billing services and financial transaction
partners. We are also looking at some expanded product
offerings, such as an enhanced payment service for electronic
remittance advice and an electronic funds transfer offering,
and a claims repricing service. Some of these discussions have
led to new contracts and others are in developmental stage.
Some of these opportunities are sizable and may require cash
investments to bring to market in 2003 and 2004. We'll keep
you posted over the next few quarters as these opportunities
move along.
I hope that our call today has been informative and left you
with the same confidence that we have in achieving our goals
for the year. We made good progress in the first quarter to
reduce MedUnite's monthly EBITDA loss from $1.6 million to
$300,000, to reduce or finance many of the acquired
liabilities, to integrate the people, facilities and
technology, and to still grow the core business substantially.
As you know, we previously provided you with our guidance on a
full-year basis. While we will not be breaking that down into
quarterly guidance for 2003, at this point, we can comment on
analyst's consensus for the second quarter of $19.2 million in
revenue, positive $220,000 in EBITDA, and a loss of 25 cents
EPS. This represents growth of 10 percent in revenue and
better than $1 million improvement in EBITDA over first
quarter. While Q2 will definitely be challenging, especially
on the revenue side due to the softness in our lab business,
we are comfortable with these numbers on the EBITDA and the
EPS front. We're excited about returning to positive EBITDA so
quickly.
Just as a reminder, our annual meeting of shareholders will be
held on Thursday, May 29th at our corporate offices here in
Fort. Lauderdale. Our proxy materials are being mailed
tomorrow, so be on the lookout for them. We'd certainly like
to see you then.
That concludes our prepared comments and we'd now like to open
the lines up for any questions that you may have.
[Questions from participants and answers from management
omitted]
MICHAEL HOOVER: With that, we'll close out the call. Thank you very much for
your participation and we hope to see you at our shareholders
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meeting on May 29th here at our corporate offices in Ft.
Lauderdale, Florida. Thank you and have a good day.
OPERATOR: Ladies and gentlemen, this does conclude our conference for
today. Thank you all for participating and have a nice day.
All parties may now disconnect.
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