EXHIBIT 99.1
CLAI MAY 2001 CONFERENCE CALL AGENDA, 6
CLAIMSNET.COM INC. ANALYST AND INVESTOR CONFERENCE CALL
May 15, 2001
Chaired by Bo W. Lycke with Paul Miller
[BO LYCKE] Good morning and thank you for joining us for Claimsnet's first
quarter 2001 conference call. I hope that each of you has been able to access
the associated press release, which was distributed earlier today.
This morning we will be reviewing our first quarter financial results
and discussing certain key events since our last conference call. In addition,
we will be giving you a progress report on several of our core partnerships.
I am pleased to have Paul Miller, our chief operating and financial
officer, with me in addressing you this morning. In as much as we will be making
forward-looking statements in the course of this call, we have been advised to
make the following Safe Harbor Statement. Paul...
[PAUL MILLER] Thank you Bo.
Since we will be making forward-looking statements in the course of this
conference call, we need to make the following Safe Harbor Statement Under the
Private Securities Litigation Act 1995 - With the exception of historical
information, the matters discussed in this conference call are forward looking
statements that involve a number of risks and uncertainties. The actual future
results of the Company could differ significantly from those statements. Factors
that could cause or contribute to such differences include, but are not limited
to future economic, political, competitive, and market conditions, and future
business decisions, all of which are difficult to predict accurately and many of
which are beyond our control. Further information on the Company's risk factors
is contained in the Company's quarterly, annual, and other periodic reports as
filed with the Securities and Exchange Commission. And finally, we remind you
that we are subject to Regulation FD and, accordingly, are limited in our
ability to disclose material non-public information.
[BO LYCKE] Thanks Paul.
Please continue with an overview of our first quarter results.
[PAUL MILLER] Good morning to everyone and thank you for joining our call today.
We are pleased to report that our revenues rose 90% to a record $532,000 in the
first quarter 2001, over the $280,000 in first quarter 2000. Revenues from
transactions increased almost 40% to $146,000, while revenues from subscriptions
and services increased over 120% to $385,000. The increase in revenues was
driven by several dynamics in the quarter. Please note that the following
comparisons are between Q1 2001 and Q1 2000.
The revenue drivers in the quarter included:
o A 14% increase in online transactions, which exceeded 1.4 million in
the quarter;
o A 150% increase in patient statements processed, which represented a
record 7% of total transactions. The importance of this increase to
revenues is both the quantity of transactions and the revenue per
transaction, which is 42 cents, as compared with only 8 cents per
patient claim;
o Relatedly, the average revenue per transaction increased 25%, from 8
cents to 10 cents;
o The fourth factor in revenue expansion for the quarter is a 120%
increase in subscription and service revenues, primarily related to
subscription fees from McKessonHBOC and implementation fees from
several of our strategic partners.
While we have been reporting better leverage in our cost of revenues for several
quarters now, we were pleased to report our first quarterly gross profit this
morning. This was a gross profit of $28,000, which compares with a gross loss of
$309,000 in first quarter 2000. Our gross profit was the result of our 90%
increase in revenues, which were produced with a 14% decrease in cost of
revenues. This efficiency partly reflects our focus on larger, more profitable
accounts. That shift in focus was quite apparent in the first quarter 2001, in
which our number of accounts rose a modest 4%, while our number of providers on
service rose 14% to 3,612.
As for the bottom line on the quarter, we were pleased to report that our net
loss declined by 32% to $1.3 million, or 15 cents per share, as compared with a
net loss of $1.9 million, or 29 cents per share in the first quarter 2000.
Please note that there was over a 30% increase in average number of shares
outstanding between the periods, which was related to several transactions and
financings over the past 12 months.
Also, I would like to mention that our net loss in the first quarter was
negatively impacted by a $356,000 one-time non cash expense related to the
warrants issued to McKessonHBOC in October 1999 and our recently announced
contract restructuring. Without giving effect to this non-cash expense, our net
loss for the quarter was under a million dollars and in line with our guidance
during the last call.
Let me assure you that we remain very focused on cashflow. Bo will be addressing
new capital shortly. We are taking very clear steps to control spending and
direct our resources to the most promising business opportunities. Revenues have
been rising slowly, which of course helps, and we have been able to capture
efficiencies along the way. All of this helps to control our burn rate.
I will now turn the call back to you, Bo.
[BO LYCKE] Thank you very much Paul. I will move on to several key events of the
first quarter. But first, let me address our industry, in general.
It may be stating the obvious to say that there have been only limited
strides in the emergence of a market for online, or ehealth services, but it is
important to mention. I think it is fair to say that most of us believed with
the savings, ease of use and regulatory requirements associated with online
transaction processing, that we would have drawn a larger crowd sooner. That
being said, the healthcare industry is notoriously cautious in the face of
change, and frankly heavily burdened with matters of patient care and managed
care. The facts are that it is this very resistance to change that has created
such a huge potential opportunity. In the face of the deliberate migration from
legacy-based transaction processing to online transaction processing, most of
the remaining players are facing the challenge of having online services
available while controlling the associated costs. Clearly one solution is more
and closer partnerships and combinations to reduce the cost of redundant
resources.
It is with this objective in mind, that we drew up a new agreement and
understanding with McKessonHBOC. As part of the new agreement, McKesson acquired
1.5 million shares of Claimsnet.com common stock at the market price of $1.75
per share. This provided Claimsnet with a capital infusion of over $2.6 million
, and gave McKessonHBOC a 14.5% stake in Claimsnet. In addition to the
stock purchase, McKesson made a one-time cash contribution of $200,000 to
Claimsnet, for a total of $2,850,000. The new agreement calls for the
elimination of certain license fees and fixed subscription payments in the
original agreement.
Under the new agreement, McKesson will retain its license to use the
Claimsnet system in a private label capacity and Claimsnet will continue to
receive transaction fees for all processing performed under the license. The
other important distinction of the new agreement, is the understanding that we
will explore new opportunities together. These might include services for the
payer market. This is important to us, as it expands the potential breadth of
our relationship.
In describing the changes in our relationship with McKesson, I began to
address capital, or cash raised during the first quarter. In addition to the
$2.8 million from McKesson, we raised $700,000, actually netted $630,000,
through the issuance of 400,000 new common shares to a group of European
institutional investors. This stock was sold at the market price $1.75 per
share. As a result of both of these transactions, Claimsnet raised cash of
$3,480,000 in the first quarter. We are quite pleased with both the amount of
funds raised and the cost of those funds.
Now on to our progress report on strategic partnerships.
First, let me add to my remarks about our partnership with
McKessonHBOC. The McKesson system is operational and, even without any real
marketing effort to-date for the online claims processing service, we have begun
to set up new accounts. Let me say that while McKesson is in the process of
reorganizing, we are keeping our short-term expectations conservative but, as
mentioned earlier, the potential of this relationship has expanded with the new
agreement.
2
Progress has been made with both Passport Health and ProxyMed. Passport
Health is now offering our online claims processing services along with its
well-established online eligibility services. Our first significant joint
customer is Blue Cross of Tennessee. Blue Cross currently receives about 40% of
its claims electronically and is implementing a joint initiative with Passport
and Claimsnet to achieve their goal of 70% electronic claims by the end of this
year. This is working very well, and we expect it to be gradually contributing
to our performance over the next few quarters. In addition, we are continuing
discussions with a second very large managed care corporation, which we cannot
identify yet.
Our partnership with ProxyMed, Inc is also progressing well. Our joint
online claims processing service is now completely configured and fully
operational. We recognized a milestone payment for this during the first
quarter. Seven to eight new accounts are set-up, some with multiple submitting
sites, and more are in the pipeline for service. Again, we expect this
partnership to begin to contribute to our performance over the next few
quarters.
Our relationships with Synertech and QCSI, Inc. continue to progress.
The Claimsnet alliance is a key part of Synertech's web strategy. The timing of
implementation for the Synertech payers is dependent on other projects currently
in progress. The QCSI relationship is off to a good start. The QCSI @QCLAIM(TM)
service powered by Claimsnet.com was introduced at the QCSI client conference in
Arizona last week and received a lot of attention. Several QCSI payer clients
appear to want to move forward rapidly. We are staying on top of these
alliances, but cannot always control the speed of implementation. We are ready
to perform, our partners and their payer clients continue to express interest,
and we believe that many good things will come from these agreements.
Let me conclude our remarks this morning with our perspective on our
opportunity. First, although the timing of online Internet claims processing
remains elusive, we believe in its future. It simply makes financial sense and
responds better to the demand for patient record confidentiality than anything
based in a legacy system. We are banking on the emergence of an efficient market
dynamic, with a little push from the US Department of Health and Human
Services---HIPAA, the new federal regulations covering many aspects of
transaction processing.
3
A number of independent analysts predict that a large percentage of
health claims and related transactions will migrate to the Internet over the
next few years. A recent survey conducted by the American Medical Association
indicated that only 8% of physicians are currently using the Internet for claim
processing. That would indicate that Claimsnet's own user base of 3,600 already
represents about a 6% market share. With the addition of market share from our
partners and with fewer competitors entering the market, we believe that we are
very well positioned to service a very significant market share of the remaining
92%.
The slow emergence of this market has caused most of the players to
regroup in some way. As mentioned earlier, we believe that the solution to being
able to offer online transaction processing without incurring great financial
losses, is partnering and/or consolidating resources. We believe that that is
what we are doing with our partners and particularly with our new relationship
to McKessonHBOC.
Our job is to remain well positioned technically and
strategically...and that is where we are investing our limited resources...
I continue to believe that we have a GREAT solution for our partners
and the healthcare industry.
With that, I will turn this call over to you for your questions.
[QUESTION AND ANSWER SESSION]
With that, let me thank you for your patience and support and wish you a good
day.