Exhibit 99.1
Claimsnet.com inc. Analyst and Investor Conference Call
August 14, 2001
Chaired by Bo W. Lycke with Paul Miller
[BO] Good morning and thank you for joining us for Claimsnet's second quarter
2001 conference call. Our press release with second quarter results was issued
early this morning, and I hope that you have all been able to access it by now.
This morning we will be reviewing the financial and operating results
of our second quarter and first six months of 2001. In addition, we will be
discussing our progress with existing partners and describing one very promising
new one. One of the things that you will be hearing about this morning is our
stronger focus on the payer market. We consider the payer market to be among our
most significant nearer term opportunity and I will be addressing this in more
detail shortly.
As is our custom, I am pleased to have Paul Miller, our chief operating
and financial officer, with me 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] 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 changes in our focus to reflect the evolving nature of our market, future
economic, political, competitive, and market conditions,
and future business decisions, all of which are difficult or impossible 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] Thanks Paul. Please continue with an overview of our second quarter
results.
[PAUL] Good morning and thank you for joining our call today. We are pleased to
report a continuing upward trend in our operating performance for both the
second quarter and first six months of 2001. We processed over a million and a
half transactions during the quarter, which is 32% higher than second quarter
2000, making it another record quarter in our Company's history. Here are some
of the other highlights:
For the second quarter 2001 as compared to the second quarter 2000:
o Claims processing increased over 26%
o And patient statements increased 128%
o We concluded the quarter with 16% more accounts, bringing the total to 440.
o In addition, we had a 6+% increase in both the average number of physicians
per account and the average number of transactions per physician.
o As a result, we enjoyed a 13% increase in the average number of
transactions per account, which was 3,572, as compared with only 3,158 last
year.
In summary, we had more accounts, larger accounts and more productive accounts.
The consistent upward trend in our key metrics continues to reflect increasing
utilization of the Company's online services by its customers and a gradual
transition among US physicians from paper and legacy-based EDI to Internet-based
healthcare transaction processing.
o In keeping with our rising utilization during the second quarter, revenues
from transactions increased 27% to $170,000.
o Total revenues for the quarter were $263,000. Total revenues in the second
quarter 2000 were $330,000, which included $131,000 in license fee revenue
from McKesson Corporation. There was no corresponding license fee revenue
in the second quarter 2001, as a result of the restructured agreement with
McKesson. Excluding McKesson license revenue, the $263,000 of second
quarter 2001 revenue represents a 32% increase from the $199,000 of revenue
in the second quarter 2000.
o Although we addressed the McKesson restructuring in our last quarterly
conference call, it is such an important event that I want to review it
again briefly. Early in the second quarter, we restructured our agreement
with McKesson to better reflect the current conditions and opportunities in
our companies and in the marketplace. Under the new agreement, McKesson
purchased 1.5 million shares of Claimsnet.com common stock at the market
price of $1.75 per share and the previously issued stock warrant was
cancelled. As a result of that transaction, McKesson now holds a 14.5%
stake in Claimsnet. In addition to the stock purchase, McKesson made a
one-time cash payment of $200,000 and extinguished its former obligation to
pay future license fees and to pay certain ongoing fixed service fees of
approximately $150,000 per quarter, while Claimsnet extinguished certain of
our former expense obligations. But more importantly, the new agreement
also called for a potentially wider opportunity for the partnership,
extending beyond the physician market. We consider this new agreement to be
a very important event in our history, and are delighted to have McKesson
as a major stakeholder in our Company.
Getting back to the second quarter numbers:
o The net loss for the second quarter 2001 came down by over 85% to $1.4
million, or $0.14 per share, as compared with a net loss of $9.3 million,
or $1.20 per share in fiscal 2000.
o I should point out that the second quarter 2000 net loss included a
one-time charge of $6.1 million, related to the asset purchase of
HealthExchange.com. Without giving effect to this one-time charge, the net
loss for the second quarter 2000 would have been $3.1 million, or $0.40 per
share, which still equates to a 55% reduction in the net loss between the
second quarters of 2000 and 2001. The improvement in our bottom line
reflects a reduction in cost of sales and an improvement in our operating
leverage as well as a significant reduction in our
operating expenses. The latter is related to the belt tightening that we did at
the beginning of the year and our more focused strategy.
For the six months ended June 30, 2001, our performance was marked by trends
that are consistent with those of the second quarter. As compared with the first
six months of fiscal 2000:
o Total transactions increased 23%, exceeding 3,000,000 for the six month
period.
o Total revenues increased 30% to $795,000
o And revenues from transactions and related services increased 90%.
o The net loss for the first half of 2001 declined 76% to $2.7 million, or
$0.29 per share. Without giving effect to the one-time charges in the
second quarter 2000, the net loss for the first half of 2001 still declined
over 46%.
In summary, we have truly streamlined our operations and sharpened our marketing
efforts, but still remain very conscious of our resource allocation and cash
flow. Bo has dedicated much of his time to raising the additional capital that
is needed to support the continuing implementation of what we believe is a
well-crafted strategy.
I will now turn the call back to you, Bo to provide more specifics on how our
strategy is working.
[BO] Thank you very much Paul. I will move on to key events and a
progress report. But first, let me address the payer opportunity in general, as
it is rapidly becoming central to our efforts. In short, the payers, including
managed care organizations, insurers and TPAs, are proving to be excellent
conduits to the physician market for our services. There are a number of
important reasons for this. First, they are looking to reduce the cost of paper
claims processing expenses. Secondly, for competitive reasons, they are looking
for mechanisms or programs by which to improve and strengthen their
relationships with their physician panels. By offering the physicians a custom
website for Internet claims processing along with other important services,
payers are beginning to believe that they can contribute to both objectives.
With these incentives, the payers could prove to be "the missing link" in the
physicians' transition to Internet-based transaction processing.
Given the payers' concerns, they are specifically interested in
targeting providers who are submitting the highest volume of paper claims and
providers who are politically important to the payer. These groups are of
paramount importance to Claimsnet as well.
Now on to news in a related event.
I am pleased to announce this morning that we have entered into a new,
very exciting partnership with Columbia, Maryland-based, Dakota Imaging. Dakota
Imaging was founded in 1989, and is a leading provider of turnkey systems and
Business Processing Outsourcing for the insurance claims industry. Among Dakota
Imaging's key capabilities, is its ability to convert paper claims into
electronic records. This capability, combined with our Internet-based claims
processing capabilities, will provide the total claims management solution that
many insurers seek. Together, we will serve as a single vendor for payers that
process information for commercial, Medicare, Medicaid and Blue Cross/Blue
Shield claims. The payer gets the immediate benefit of receiving 100% electronic
claims and the ability to reduce some of the costly paper claim processing. Let
me add that at this time we estimate that more than 50% of physician claims and
80% of dental claims are submitted in paper format. That comes to about 1.3
billion claims per year. We estimate that the cost of processing a paper claim
is 10 times greater than the cost of processing one via the Internet. Now you
can see the power of this partnership and the huge market potential.
I might add that both Dakota and Claimsnet are experiencing success
with the payer market. Claimsnet, with several of its other partners, is already
sponsoring or co-branding Internet sites for payers to offer their physician
networks. Dakota serves the vast payer market and has many established
relationships in place. We believe that we can complement each other, from a
marketing, technology and functionality perspective.
A few words now on our existing partnerships.
First, Passport Health. We are making progress with the continued
rollout of online claims submission to Passports' customers, which include many
national, regional and local payer organizations and we will be supporting the
integration of their recent acquisition of Medicheck clients. At Passport's
request, Claimsnet will expand our services for Passport clients from backend
claims processing services only to include first line customer support as well.
This will allow both companies to move forward more expeditiously. We also
expect to be offering more of Passport's value added services to our customers
soon.
Next, I will address our progress with ProxyMed. Overall, our
co-branded claims submission Internet sites are expanding in number, and we are
looking for continued growth into the third and fourth quarter. We have begun to
use ProxyMed's clearinghouse services for some payers, and are very pleased with
the results so far. This appears to be a very mutually satisfying partnership.
Our partnership with QCSI is progressing extremely well. We are moving
from the technical to the deployment phase as we speak. We have already secured
two agreements on behalf of QCSI's payer customers to roll out the @Qclaims
service this year. There is emerging interest from other QCSI payers, which
suggests an expanding opportunity here.
The opportunity for our partnership with Synertech, which also focuses
on the payer market, has recently expanded with Synertech's acquisition of the
Amisys system. Our progress however has been slowed by our partner's priority on
assimilating this acquisition. We remain very confident in the potential of our
relationship with Synertech, which has grown even more attractive with Amisys.
Last, but definitely not least, let me say a few words about our
relationship with McKesson. As mentioned, our agreement with McKesson has
changed, bringing us closer in many respects and providing for a broader
opportunity. We are enjoying a much closer working relationship than we had
prior to the restructuring and we are now discussing expanded
opportunities for both the provider and payer markets. While I cannot disclose
any more specific details at this time, we will keep you posted on our progress.
In closing my formal remarks, I want you to know that I believe that we
are in a fine strategic position, although we are still trying to deal with the
question of timing. Our technology remains highly competitive, and it is proving
through our excellent partnerships to be a great part of a payer to physician
solution.
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.