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MedAssets Reports Second Quarter and Six-Month 2014 Financial

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ATLANTA, July 30, 2014 (GLOBE NEWSWIRE) -- MedAssets, Inc. (Nasdaq:MDAS) today announced results for its second quarter and six-month period ended June 30, 2014.

Second Quarter
(In millions, except per share) 2Q'14 2Q'13 % Change
Net Revenue:
Spend and Clinical Resource Mgmt (SCM) $ 105.9 $ 105.3 0.6%
Revenue Cycle Management (RCM) 69.5 65.4 6.2
Total Net Revenue 175.4 170.7 2.7
Net income 6.6 5.1 29.7
Earnings per share (EPS) - diluted 0.11 0.08 37.5
Non-GAAP adjusted EBITDA 54.3 52.5 3.4
Non-GAAP adjusted EPS - diluted $0.30 $0.30 0.0
Weighted average shares - diluted 60.9 60.7 0.5%

Net Revenue

Total net revenue for the second quarter of 2014 increased 2.7% to $175.4 million from $170.7 million for the second quarter of 2013. Net revenue in the SCM segment increased 0.6% to $105.9 million from $105.3 million for the second quarter of 2013 due to growth in advisory, consulting and other service fees, partially offset by lower group purchasing net administrative fees. Net revenue in the RCM segment increased 6.2% to $69.5 million from $65.4 million for the second quarter of 2013 as technology-related revenue (68.3% of RCM segment revenue) increased 4.9%, while services-related revenue rose 9.2%, including certain one-time items.

Non-GAAP Adjusted EBITDA

Total non-GAAP adjusted EBITDA was $54.3 million, or 31.0% of total net revenue, for the second quarter of 2014, a 3.4% increase from total non-GAAP adjusted EBITDA of $52.5 million, or 30.8% of total net revenue, for the second quarter of 2013.

Net Income and Non-GAAP Adjusted Earnings Per Share (EPS)

Net income for the second quarter of 2014 increased 29.7% to $6.6 million, or $0.11 per share, compared with net income of $5.1 million, or $0.08 per share, for the second quarter of 2013. Non-GAAP adjusted EPS (defined as EPS excluding non-cash acquisition-related intangible amortization and depreciation, non-cash share-based compensation, certain restructuring, acquisition and integration-related expenses and non-recurring items on a tax-adjusted basis) was $0.30 per share for the second quarter of 2014, compared with $0.30 per share for the second quarter of 2013.

Six-Month Period
(In millions, except per share) 6 mos. '14 6 mos. '13 % Change
Net Revenue:
Spend and Clinical Resource Mgmt (SCM) $214.5 $214.8 (0.1)%
Revenue Cycle Management (RCM) 131.8 128.8 2.3
Total Net Revenue 346.3 343.6 0.8
Net income 14.3 12.8 11.6
Earnings per share (EPS) – diluted 0.23 0.21 9.5
Non-GAAP adjusted EBITDA 111.0 114.2 (2.8)
Non-GAAP adjusted EPS - diluted $0.62 $0.71 (12.7)
Weighted average shares – diluted 61.4 60.6 1.3%

Net Revenue

Total net revenue for the six months ended June 30, 2014 increased 0.8% to $346.3 million from $343.6 million for the first six months of 2013. Net revenue in the SCM segment declined 0.1% to $214.5 million from $214.8 million for the first half of 2013. Net revenue in the RCM segment rose 2.3% to $131.8 million from $128.8 million for the first half of 2013 as technology-related revenue (69.6% of RCM segment revenue) increased 3.4% while services-related revenue declined 0.1%.

Non-GAAP Adjusted EBITDA

For the first six months of 2014, total non-GAAP adjusted EBITDA was $111.0 million, or 32.1% of total net revenue, a 2.8% decrease from adjusted EBITDA of $114.2 million, or 33.2% of total net revenue, for the first half of 2013.

Net Income and Non-GAAP Adjusted Earnings Per Share (EPS)

Net income for the first six months of 2014 increased 11.6% to $14.3 million, or $0.23 per share, compared with $12.8 million, or $0.21 per share, for the first half of 2013. Non-GAAP adjusted EPS was $0.62 per share for the first six months of 2014, a 12.7% decrease from $0.71 per share for the first half of 2013.

Cash Flow and Capital Resources

Cash provided by operating activities in the first six months of 2014 was $50.8 million versus $67.6 million for the first half of 2013. Non-GAAP free cash flow (defined as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs) decreased to $22.7 million versus $43.4 million for the first half of 2013 due to higher cash tax payments, increased investments, and the timing of changes in working capital in the first half of 2014. The company's balance sheet at June 30, 2014 included $780.8 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to leverage of approximately 3.6 times non-GAAP adjusted EBITDA for the trailing twelve-month period. The company repurchased 1.1 million shares of common stock in the second quarter, for a total of 1.8 million in share repurchases in the first six months of 2014.

Non-GAAP Contracted Revenue

At June 30, 2014, MedAssets' rolling 12-month non-GAAP contracted revenue estimate was $627.9 million (SCM segment - $383.8 million; RCM segment - $244.1 million), a year-over-year increase of 1.8%. Non-GAAP contracted revenue is the company's estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period.

2014 Financial Guidance
MedAssets updated its full-year 2014 financial guidance ranges, as follows:
($ in millions, except per share) FY'14 Y-Y % change
Net Revenue:
SCM segment $ 431.0 - 439.0 1.5 - 3.4%
RCM segment 266.0 - 272.0 3.9 - 6.3
Total Net Revenue 698.0 - 710.0 2.6 - 4.3
Non-GAAP adjusted EBITDA 231.0 - 239.0 4.6 - 8.2
GAAP EPS – diluted 0.55 - 0.63 22.2 - 40.0
Non-GAAP adjusted EPS – diluted $ 1.32 - 1.40 0.0 - 6.1%

Excluding performance-related fees from both 2014 and 2013, total net revenue in 2014 is expected to grow approximately 4.0% at the midpoint of the guidance range.

Conference Call Information
Time/Date: 5:00 p.m. ET today, Wednesday, July 30, 2014
Phone: 888-517-2464 (or 630-827-6816 for international/local callers), PIN code 9160777
Webcast: http://ir.medassets.com, "Events & Presentations" page; Archive will be available for at least 30 days
Replay: Call 888-843-7419 or 630-652-3042 (PIN code 9160777)

Note: The live webcast will include a slide presentation, a copy of which is available on http://ir.medassets.com in the "Events & Presentations" section in conjunction with today's event.

About MedAssets

MedAssets (Nasdaq:MDAS) is a healthcare performance improvement company focused on helping providers realize financial and operational gains so that they can sustainably serve the needs of their community. More than 4,400 hospitals and 122,000 non-acute healthcare providers currently use the company's evidence-based solutions, best practice processes and analytics to help reduce the total cost of care, enhance operational efficiency, align clinical delivery, and improve revenue performance across the care continuum. For more information, please visit www.medassets.com.

Use of Non-GAAP Financial Information

In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the company supplements its condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; diluted adjusted EPS; free cash flow; and contracted revenue. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures, where possible, are included in the accompanying financial schedules. Also, see "Use of Non-GAAP Financial Measures" following the financial schedules for more information.

Safe Harbor Statement

This Press Release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, and include the intent, belief or current expectations of the company and its management team with respect to the company's future business operations that include, but are not limited to: 2014 financial guidance, revenue growth and other financial projections and forecasts. Any forward-looking statements are not guarantees of future performance, involve risks and uncertainties, and actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to: failure to realize improvements in performance, efficiency and profitability; failure to complete anticipated sales under negotiations; failure to successfully implement revenue backlog; lack of revenue growth; customer losses; and adverse developments with respect to the operation or performance of the company's business units or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can also be found in the company's Risk Factor disclosures in its Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission and available at http://ir.medassets.com. The company disclaims any responsibility to update any forward-looking statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In 000s, except per share data Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 % Change 2014 2013 % Change
Revenue:
Administrative fees, net $ 70,091 $ 70,502 -0.6% $ 146,337 $ 147,021 -0.5%
Other service fees 105,324 100,240 5.1% 199,945 196,558 1.7%
Total net revenue 175,415 170,742 2.7% 346,282 343,579 0.8%
Operating expenses:
Cost of revenue (inclusive of certain amortization expense) 40,361 37,496 7.6% 77,792 71,764 8.4%
Product development expenses 6,642 7,975 -16.7% 14,039 16,476 -14.8%
Selling and marketing expenses 20,721 20,285 2.1% 35,914 34,027 5.5%
General and administrative expenses 59,529 57,199 4.1% 118,332 115,819 2.2%
Restructuring, acquisition and integration-related expenses -- 1,435 -100.0% 1,697 9,465 -82.1%
Depreciation 11,862 9,876 20.1% 23,402 19,053 22.8%
Amortization of intangibles 14,027 16,115 -13.0% 28,053 32,616 -14.0%
Total operating expenses 153,142 150,381 1.8% 299,229 299,220 0.0%
Operating income 22,273 20,361 9.4% 47,053 44,359 6.1%
Other income (expense):
Interest expense (11,114) (12,381) -10.2% (22,287) (23,730) -6.1%
Other income 31 276 -88.8% 89 317 -71.9%
Income before income taxes 11,190 8,256 35.5% 24,855 20,946 18.7%
Income tax expense 4,594 3,172 44.8% 10,581 8,158 29.7%
Net income 6,596 5,084 29.7% 14,274 12,788 11.6%
Basic net income per share 0.11 0.09 22.2% 0.24 0.22 9.1%
Diluted net income per share $ 0.11 $ 0.08 37.5% $ 0.23 $ 0.21 9.5%
Weighted average shares — basic 59,752 59,387 0.6% 60,189 59,198 1.7%
Weighted average shares — diluted 60,946 60,665 0.5% 61,419 60,628 1.3%
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
In 000s, except share and per share amounts 2014 2013
ASSETS
Current assets
Cash and cash equivalents $ 6,004 $ 2,790
Accounts receivable, net of allowances of $2,627 and $2,568 as of June 30, 2014 and December 31, 2013, respectively 97,901 87,636
Deferred tax asset, current 1,269 4,535
Prepaid expenses and other current assets 26,795 24,059
Total current assets 131,969 119,020
Property and equipment, net 160,274 157,747
Other long term assets
Goodwill 1,027,847 1,027,847
Intangible assets, net 239,387 267,440
Other 41,063 41,695
Other long term assets 1,308,297 1,336,982
Total assets $ 1,600,540 $ 1,613,749
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 16,609 $ 24,066
Accrued revenue share obligation and rebates 77,697 77,398
Accrued payroll and benefits 29,511 41,587
Other accrued expenses 12,154 12,126
Current portion of deferred revenue 55,645 46,523
Current portion of notes payable 18,625 15,500
Current portion of finance obligation 280 255
Total current liabilities 210,521 217,455
Notes payable, less current portion 443,125 424,000
Bonds payable 325,000 325,000
Finance obligation, less current portion 8,625 8,781
Deferred revenue, less current portion 17,233 16,369
Deferred tax liability 113,041 121,083
Other long term liabilities 10,900 11,272
Total liabilities 1,128,445 1,123,960
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 150,000,000 shares authorized; 60,089,000 and 61,740,000 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively 601 617
Additional paid in capital 685,180 717,132
Accumulated deficit (213,686) (227,960)
Total stockholders' equity 472,095 489,789
Total liabilities and stockholders' equity $ 1,600,540 $ 1,613,749
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
In 000s June 30, June 30,
2014 2013
Operating activities:
Net income $ 14,274 $ 12,788
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Bad debt expense 100 --
Depreciation 24,474 20,222
Amortization of intangibles 28,053 32,616
Impairment of assets -- 2,403
Loss (gain) on sale of assets 16 (123)
Noncash stock compensation expense 9,894 7,422
Excess tax benefit from exercise of equity awards (1,557) (3,035)
Amortization of debt issuance costs 1,880 1,908
Noncash interest expense, net 208 239
Deferred income tax benefit (4,837) (2,560)
Changes in assets and liabilities (21,716) (4,296)
Cash provided by operating activities 50,789 67,584
Investing activities:
Purchases of property, equipment, and software (7,201) (5,328)
Capitalized software development costs (20,878) (18,861)
Cash used in investing activities (28,079) (24,189)
Financing activities:
Borrowings from revolving credit facility 74,080 --
Repayment of notes payable (17,750) (62,750)
Repayment of revolving credit facility (34,080) --
Repayment of finance obligation (338) (338)
Excess tax benefit from exercise of equity awards 1,557 3,035
Issuance of common stock, net of offering costs 2,559 3,640
Purchase of treasury shares, including shares surrendered for tax witholdings (45,524) --
Cash used in financing activities (19,496) (56,413)
Net increase (decrease) in cash and cash equivalents 3,214 (13,018)
Cash and cash equivalents, beginning of period 2,790 13,734
Cash and cash equivalents, end of period $ 6,004 $ 716
SUPPLEMENTAL REVENUE REPORTING
RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE
(UNAUDITED)
In 000s Three Months Ended June 30,
2014 2013 % Change
Non-GAAP gross administrative fees $ 119,406 $115,488 3.4%
Other service fees 105,324 100,240 5.1%
Non-GAAP gross fees 224,730 RSO % 215,728 RSO % 4.2%
Non-GAAP revenue share obligation (RSO) (49,315) 41.3% (44,986) 39.0% 9.6%
Net revenue $ 175,415 $170,742 2.7%
In 000s
Six Months Ended June 30,
2014 2013 % Change
Non-GAAP gross administrative fees $ 245,767 $236,124 4.1%
Other service fees 199,945 196,558 1.7%
Non-GAAP gross fees 445,712 RSO % 432,682 RSO % 3.0%
Non-GAAP RSO (99,430) 40.5% (89,103) 37.7% 11.6%
Net revenue $ 346,282 $343,579 0.8%
SUPPLEMENTAL SEGMENT REPORTING WITH SELECTED NON-GAAP MEASURES
(UNAUDITED)
In 000s Three Months Ended June 30,
2014 2013 % Change
Net revenue
Spend and Clinical Resource Management (SCM) $ 105,907 $105,308 0.6%
Revenue Cycle Management (RCM) 69,508 65,434 6.2%
Total net revenue 175,415 170,742 2.7%
Non-GAAP Adjusted EBITDA % margin % margin
SCM $ 42,300 39.9% $ 42,942 40.8% -1.5%
RCM 19,613 28.2% 17,022 26.0% 15.2%
Corporate (7,589) (7,427) 2.2%
Total non-GAAP Adjusted EBITDA 54,324 31.0% 52,537 30.8% 3.4%
In 000s Six Months Ended June 30,
2014 2013 % Change
Net revenue
SCM $ 214,524 $214,816 -0.1%
RCM 131,758 128,763 2.3%
Total net revenue 346,282 343,579 0.8%
Non-GAAP Adjusted EBITDA % margin % margin
SCM $ 92,250 43.0% $ 96,654 45.0% -4.6%
RCM 33,014 25.1% 31,712 24.6% 4.1%
Corporate (14,223) (14,183) 0.3%
Total non-GAAP Adjusted EBITDA 111,041 32.1% 114,183 33.2% -2.8%
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
SUPPLEMENTAL REPORTING OF ADJUSTED EBITDA
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
In 000s Three Months Ended June 30, Six Months Ended June 30,
2014 2013 2014 2013
Net income $ 6,596 $ 5,084 $ 14,274 $ 12,788
Depreciation 11,862 9,876 23,402 19,053
Depreciation (included in cost of revenue) 648 571 1,072 1,169
Amortization of intangibles 14,027 16,115 28,053 32,616
Interest expense, net 11,114 12,382 22,287 23,731
Income tax expense 4,594 3,172 10,581 8,158
Non-GAAP EBITDA $ 48,841 $ 47,200 $ 99,669 $ 97,515
Share-based compensation 5,592 4,011 9,894 7,422
Rental income from capitalized building lease (109) (109) (219) (219)
Restructuring, acquisition and integration-related expenses -- 1,435 1,697 9,465
Non-GAAP Adjusted EBITDA $ 54,324 $ 52,537 $ 111,041 $ 114,183
SUPPLEMENTAL NET INCOME AND EARNINGS PER SHARE REPORTING
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
In 000s, except per share data Three Months Ended June 30, Six Months Ended June 30,
2014 2013 2014 2013
Net income $ 6,596 $ 5,084 $ 14,274 $ 12,788
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 14,027 16,589 28,053 33,564
Pre-tax non-cash, share-based compensation 5,592 4,011 9,894 7,422
Pre-tax restructuring, acquisition and integration-related expenses -- 1,435 1,697 9,465
Tax effect on pre-tax adjustments a (7,847) (8,814) (15,857) (20,180)
Non-GAAP adjusted net income $ 18,368 $ 18,305 $ 38,061 $ 43,059
Income Per Share (EPS) - diluted $ 0.11 $ 0.08 $ 0.23 $ 0.21
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 0.23 0.27 0.46 0.55
Pre-tax non-cash, share-based compensation 0.09 0.07 0.16 0.12
Pre-tax restructuring, acquisition and integration-related expenses -- 0.02 0.03 0.16
Tax effect on pre-tax adjustments a (0.13) (0.14) (0.26) (0.33)
Non-GAAP adjusted EPS - diluted $ 0.30 $ 0.30 $ 0.62 $ 0.71
Weighted average shares - diluted 60,946 60,665 61,419 60,628
(a) The Company used a tax rate of 40.0% for the three and six months ended June 30, 2014 and 2013 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate.
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
SUPPLEMENTAL 2014 ADJUSTED EBITDA GUIDANCE
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
Guidance Range for
Twelve Months Ending
In 000s December 31, 2014
(Low) (High)
Net Income $ 33,600 $ 38,400
Depreciation 49,000 49,000
Depreciation (included in cost of revenue) 3,100 3,100
Amortization of intangibles, acquisition-related 55,000 55,000
Interest expense, net 44,700 44,700
Income tax expense 23,300 26,500
Non-GAAP EBITDA 208,700 216,700
Share-based compensation 21,000 21,000
Restructuring, acquisition and integration-related expenses 1,700 1,700
Rental income from capitalized building lease (400) (400)
Non-GAAP adjusted EBITDA $ 231,000 $ 239,000
SUPPLEMENTAL 2014 EARNINGS PER SHARE GUIDANCE
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
Guidance Range for
Twelve Months Ending
In 000s, except per share data December 31, 2014
(Low) (High)
Net Income $ 33,600 $ 38,400
EPS - diluted 0.55 0.63
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 0.90 0.90
Pre-tax non-cash, share-based compensation 0.34 0.34
Pre-tax restructuring, acquisition and integration-related expenses 0.03 0.03
Tax effect on pre-tax adjustments b (0.51) (0.51)
Non-GAAP adjusted EPS - diluted c $ 1.32 $ 1.40
Fully diluted weighted average shares outstanding 60,900 60,900
(b) The Company used a tax rate of 40.0% for the full year ending December 31, 2014 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate.
(c) Column amounts may not add to total due to rounding.
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES
(UNAUDITED)
In Millions June 30, March 31, Dec. 31, Sept. 30, June 30,
2014 2014 2013 2013 2013
Revenue Cycle Technology (RCT) $ 177.6 $ 174.4 $ 173.9 $ 173.3 $ 175.5
Revenue Cycle Services (RCS) 66.5 69.5 65.4 60.8 62.9
RCM segment Total 244.1 243.9 239.4 234.1 238.4
SCM segment 383.8 394.2 386.0 391.0 378.4
Total d $ 627.9 638.1 $ 625.4 $ 625.1 $ 616.8
SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION
EXPENSE INCLUDED IN OPERATING EXPENSES
(UNAUDITED)
In 000s Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
Amount of share-based compensation included in:
Cost of revenue $ 1,863 $ 1,463 $ 3,029 $ 2,176
Product development expense 391 225 635 343
Selling & marketing expense 845 590 1,372 969
General & administrative expense 2,493 1,733 4,858 3,934
Total $ 5,592 $ 4,011 $ 9,894 $ 7,422
SUPPLEMENTAL REPORTING OF FREE CASH FLOW
RECONCILIATION OF SELECTED NON-GAAP TO GAAP MEASURES
(UNAUDITED)
In 000s Six Months Ended
June 30,
2014 2013
Cash provided by operating activities $ 50,789 $ 67,584
Purchases of property, equipment and software (7,201) (5,328)
Capitalized software development costs (20,878) (18,861)
Non-GAAP free cash flow $ 22,710 $ 43,395
(d) Column amounts may not add to total due to rounding.
See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures.
Use of Non-GAAP Financial Measures
In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the Company supplements its condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; diluted adjusted EPS; free cash flow; and contracted revenue.
These non-GAAP financial measures may have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. The Company compensates for such limitations by relying primarily on the Company's GAAP results and using non-GAAP financial measures only supplementally. Where possible, the Company provides reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. Investors are encouraged to carefully review those reconciliations. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by the Company, may differ from and may not be comparable to similarly titled measures used by other companies.
Gross fees include gross administrative fees the Company receives pursuant to its vendor contracts and all other fees the Company receives from clients. The Company's revenue share obligation represents the portion of the gross administrative fees the Company is contractually obligated to share with certain of its GPO clients. Net administrative fees (a GAAP measure) are the Company's gross administrative fees net of its revenue share obligation. Total net revenue (a GAAP measure) reflects the Company's gross fees net of its revenue share obligation. These non-GAAP measures assist management and the board of directors and may be helpful to investors in analyzing the Company's growth in its Spend and Clinical Resource Management segment given that administrative fees constitute a material portion of the Company's revenue and are paid to the Company by suppliers and other vendors contracted by its GPO, and that the Company's revenue share obligation constitutes a significant outlay to certain of its GPO clients.
The Company defines: EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization; and adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and other non-recurring, non-cash or non-operating items. EBITDA and adjusted EBITDA are used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period and provides for a more complete understanding of factors and trends affecting our business. These measures assist management and the board of directors and may be useful to investors in comparing the Company's operating performance consistently over time as it removes the impact of its capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of the management team (taxes), as well as other non-cash (purchase accounting adjustments and imputed rental income) and non-recurring items, from the Company's operational results. Adjusted EBITDA also removes the impact of non-cash share-based compensation expense and certain restructuring, acquisition and integration-related charges. EBITDA and adjusted EBITDA are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities.
The Company defines adjusted net income as earnings excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain restructuring, acquisition and integration-related expenses on a tax-adjusted basis and diluted adjusted EPS as earnings per share excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain restructuring, acquisition and integration-related expenses on a tax-adjusted basis. Adjusted net income and diluted adjusted EPS are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities. Use of this measure for this purpose allows management and the board of directors to analyze the Company's operating performance on a consistent basis by removing the impact of certain non-cash and non-recurring items from our operations, and by rewarding organic growth and accretive business transactions. As a significant portion of senior management's incentive based compensation has historically been based on the achievement of certain diluted adjusted EPS growth over time, investors may find such information useful.
The Company defines free cash flow as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs. Management believes free cash flow is an important measure because it represents the cash that the Company is able to generate after spending capital on infrastructure to maintain its business and investing in new and upgraded products and services to support future growth. Free cash flow is important because it allows the Company to pursue opportunities that are intended to enhance shareholder value, which could include debt reduction, share repurchases, partnerships, alliances and acquisitions, and/or dividend payments. The Company's definition of free cash flow does not consider non-discretionary cash payments, such as debt.
Contracted revenue is a forward-looking operating measure used by management and the board of directors to better understand revenue growth trends within the Company's business segments as it reflects the Company's current estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period. Such information may be useful to investors in their analysis of the Company's revenue growth trends. A reconciliation to the most directly comparable GAAP measure cannot be performed without unreasonable effort.

CONTACT: Robert Borchert 678.248.8194 rborchert@medassets.com

Source:MedAssets