×

MedAssets Reports First Quarter 2015 Financial Results

ATLANTA, April 29, 2015 (GLOBE NEWSWIRE) -- MedAssets, Inc. (Nasdaq:MDAS) today announced results for its first quarter ended March 31, 2015, which are summarized below.

($ in millions, except per share) 1Q'15 1Q'14 % Change
Net Revenue:
Spend and Clinical Resource Mgmt (SCM) $119.4 $108.6 9.9%
Revenue Cycle Management (RCM) 66.2 62.3 6.3
Total Net Revenue 185.6 170.9 8.6
Net income 3.4 7.7 (56.3)
Earnings per share (EPS) – diluted 0.06 0.12 (50.0)
Non-GAAP adjusted EBITDA 57.4 56.7 1.2
Non-GAAP adjusted EPS - diluted $ 0.31 $ 0.32 (3.1)
Weighted average shares – diluted 60.5 61.7 (1.9)%

Net Revenue

Total net revenue for the first quarter of 2015 increased 8.6% to $185.6 million from $170.9 million for the first quarter of 2014. Excluding the revenue contribution from Sg2 (acquired on September 22, 2014), total net revenue growth was 2.4% on a year-over-year basis.

Net revenue in the SCM segment increased 9.9% to $119.4 million from $108.6 million for the first quarter of 2014 due to the contribution from Sg2 and growth in group purchasing net administrative fees, partially offset by a slight decline in advisory solutions consulting fees. Excluding Sg2, first quarter SCM net revenue increased 0.1%. Net revenue in the RCM segment increased 6.3% to $66.2 million from $62.3 million for the first quarter of 2014 as technology-related revenue (69.5% of RCM segment revenue) increased 4.0% while services-related revenue increased 11.8%.

Non-GAAP Adjusted EBITDA

Total non-GAAP adjusted EBITDA was $57.4 million, or 30.9% of total net revenue, for the first quarter of 2015, a 1.2% increase from total non-GAAP adjusted EBITDA of $56.7 million, or 33.2% of total net revenue, for the first quarter of 2014. The dollar increase was due to growth in net revenue noted above, partially offset by a higher proportion of revenue from lower-margin advisory, consulting and revenue cycle services.

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

Net income for the first quarter of 2015 was $3.4 million, or $0.06 per share, compared with net income of $7.7 million, or $0.12 per share, for the first quarter of 2014. 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 $0.31 per share for the first quarter of 2015, compared with non-GAAP adjusted EPS of $0.32 per share for the first quarter of 2014.

Cash Flow and Capital Resources

Cash provided by operating activities in the first quarter of 2015 was $34.6 million, up 95.1% from $17.7 million for the first quarter of 2014. Non-GAAP free cash flow (defined as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs) increased 205.5% to $23.2 million from $7.6 million for the first quarter of 2014 due to improvements in working capital during the first quarter of 2015. The company's balance sheet at March 31, 2015 included $848.8 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to a leverage ratio of approximately 3.6 times non-GAAP adjusted EBITDA for the trailing twelve-month period.

Non-GAAP Contracted Revenue

At March 31, 2015, MedAssets' rolling 12-month non-GAAP contracted revenue estimate was $696.6 million (SCM segment - $446.5 million; RCM segment - $250.1 million), a year-over-year increase of 9.2% (an increase of 3.5% excluding Sg2). 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.

2015 Financial Guidance

MedAssets reaffirmed its full-year 2015 financial guidance ranges, as follows:

(In millions, except per share) FY'15 FY'14 Y-Y %
Guidance Actual Change
Net Revenue:
SCM Segment a $ 488.0 - 496.0 $ 445.6 9.5 - 11.3%
RCM Segment b 264.0 - 272.0 274.6 (3.9) - (1.0)
Total Net Revenue c 753.0 - 767.0 720.2 4.6 - 6.5
Non-GAAP adjusted EBITDA $ 227.0 - 237.0 $ 234.0 (3.0) - 1.3%
Adjusted EBITDA margin % 29.9 - 31.2% 32.5% (263) - (131) bps
GAAP EPS - diluted $ 0.24 - 0.34 $ (0.34) nm
Non-GAAP adjusted EPS - diluted $ 1.13 - 1.23 $ 1.35 (16.3) - (8.9)%
(a) Excluding the contribution from Sg2, SCM segment revenue growth is expected to be 1.4 - 3.3% in FY'15
(b) Excluding $28 million in revenue from a large revenue cycle outsourcing agreement that ended December 31,2014, the RCM segment revenue growth is expected to be 7.0 - 10.3% in FY'15
(c) Excluding the contribution from Sg2 and $28 million in revenue from a large revenue cycle outsourcing agreement that ended December 31, 2014, total net revenue growth is expected to be 1.8 - 3.9% in FY'15

Conference Call Information

Time/Date: 5:00 p.m. ET today, Wednesday, April 29, 2015
Phone: 888-517-2464 (or 630-827-6816 for international/local callers), PIN code 9160 777
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 3931 0786)

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. Approximately 4,500 hospitals and 123,000 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: EBITDA; 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: 2015 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, 2014 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.

mdas/F

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
In 000s, except per share data Three Months Ended
March 31,
2015 2014 % Change
Revenue:
Administrative fees, net $ 77,761 $ 76,246 2.0%
Other service fees 107,820 94,621 13.9%
Total net revenue 185,581 170,867 8.6%
Operating expenses:
Cost of revenue (inclusive of certain amortization expense) 42,933 37,431 14.7%
Product development expenses 8,400 7,397 13.6%
Selling and marketing expenses 19,511 15,193 28.4%
General and administrative expenses 64,485 58,803 9.7%
Restructuring, acquisition and integration-related expenses 4,439 1,697 161.6%
Depreciation 13,347 11,540 15.7%
Amortization of intangibles 15,056 14,026 7.3%
Total operating expenses 168,171 146,087 15.1%
Operating income 17,410 24,780 -29.7%
Other income (expense):
Interest expense (11,869) (11,173) 6.2%
Other income 62 58 6.9%
Income before income taxes 5,603 13,665 -59.0%
Income tax expense 2,250 5,987 -62.4%
Net income 3,353 7,678 -56.3%
Basic net income per share 0.06 0.13 -53.8%
Diluted net income per share $ 0.06 $ 0.12 -50.0%
Weighted average shares — basic 59,736 60,648 -1.5%
Weighted average shares — diluted 60,530 61,681 -1.9%
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
In 000s, except share and per share amounts 2015 2014
ASSETS
Current assets
Cash and cash equivalents $ 18,974 $ 12,100
Accounts receivable, net of allowances of $2,651 and $2,641 as of March 31, 2015 and December 31, 2014, respectively 123,955 127,741
Deferred tax asset, current 5,825 5,782
Prepaid expenses and other current assets 26,676 30,557
Total current assets 175,430 176,180
Property and equipment, net 167,266 170,318
Other long term assets
Goodwill 1,058,414 1,058,414
Intangible assets, net 261,351 276,407
Other 35,698 37,477
Other long term assets 1,355,463 1,372,298
Total assets $ 1,698,159 $ 1,718,796
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 18,051 $ 26,910
Accrued revenue share obligation and rebates 89,948 91,864
Accrued payroll and benefits 22,644 32,784
Other accrued expenses 16,276 9,040
Current portion of deferred revenue 77,464 76,034
Current portion of notes payable 23,313 29,583
Current portion of finance obligation 301 294
Total current liabilities 247,997 266,509
Notes payable, less current portion 519,417 526,417
Bonds payable 325,000 325,000
Finance obligation, less current portion 8,397 8,475
Deferred revenue, less current portion 16,947 15,418
Deferred tax liability 113,852 116,607
Other long term liabilities 14,596 13,883
Total liabilities 1,246,206 1,272,309
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 150,000,000 shares authorized; 60,351,000 and 60,199,000 shares issued and outstanding as of March 31, 2015 and December 31, 2014, respectively 604 602
Additional paid in capital 696,346 694,235
Accumulated deficit (244,997) (248,350)
Total stockholders' equity 451,953 446,487
Total liabilities and stockholders' equity $ 1,698,159 $ 1,718,796
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
In 000s March 31, March 31,
2015 2014
Operating activities:
Net income $ 3,353 $ 7,678
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation 14,325 11,964
Amortization of intangibles 15,056 14,026
Loss (gain) on sale of assets 54 (20)
Noncash stock compensation expense 5,732 4,302
Excess tax benefit from exercise of equity awards (248) (1,382)
Amortization of debt issuance costs 978 943
Noncash interest expense, net 98 105
Deferred income tax benefit (2,863) (2,451)
Changes in assets and liabilities (1,882) (17,432)
Cash provided by operating activities 34,603 17,733
Investing activities:
Purchases of property, equipment, and software (1,322) (1,748)
Capitalized software development costs (10,054) (8,383)
Cash used in investing activities (11,376) (10,131)
Financing activities:
Borrowings from revolving credit facility -- 16,524
Repayment of notes payable (13,271) (13,875)
Repayment of revolving credit facility -- (279)
Repayment of finance obligation (169) (169)
Excess tax benefit from exercise of equity awards 248 1,382
Issuance of common stock, net 600 1,756
Purchase of treasury shares, including shares surrendered for tax witholdings (3,761) (15,731)
Cash used in financing activities (16,353) (10,392)
Net increase (decrease) in cash and cash equivalents 6,874 (2,790)
Cash and cash equivalents, beginning of period 12,100 2,790
Cash and cash equivalents, end of period $ 18,974 $ --
SUPPLEMENTAL SEGMENT REPORTING WITH SELECTED NON-GAAP MEASURES
(UNAUDITED)
In 000s Three Months Ended March 31,
2015 2014 % Change
Net revenue
Spend and Clinical Resource Management (SCM) $119,408 $108,617 9.9%
Revenue Cycle Management (RCM) 66,173 62,250 6.3%
Total net revenue $185,581 $170,867 8.6%
Non-GAAP Adjusted EBITDA % margin % margin
SCM $ 44,988 37.7% $ 49,950 46.0% -9.9%
RCM 18,750 28.3% 13,401 21.5% 39.9%
Corporate (6,365) (6,634) -4.1%
Total non-GAAP Adjusted EBITDA $ 57,373 30.9% $ 56,717 33.2% 1.2%
SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES
(UNAUDITED)
In Millions March 31, Dec. 31, Sept. 30, June 30, March 31,
2015 2014 2014 2014 2014
Revenue Cycle Technology (RCT) $ 178.3 $ 177.4 $ 177.5 $ 177.6 $ 174.4
Revenue Cycle Services (RCS) 71.8 61.0 58.4 66.5 69.5
RCM segment Total 250.1 238.4 235.9 244.1 243.9
SCM segment d 446.5 423.5 425.3 383.8 394.2
Total $ 696.6 $ 661.9 $ 661.2 $ 627.9 $ 638.1
SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION
EXPENSE INCLUDED IN OPERATING EXPENSES
(UNAUDITED)
In 000s Three Months Ended
March 31,
2015 2014
Amount of share-based compensation included in:
Cost of revenue $ 1,731 $ 1,166
Product development expense 435 244
Selling & marketing expense 1,034 527
General & administrative expense 2,532 2,365
Total $ 5,732 $ 4,302
SUPPLEMENTAL REPORTING OF FREE CASH FLOW
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
In 000s Three Months Ended
March 31,
2015 2014 % Change
Cash provided by operating activities $ 34,603 $ 17,733 95.1%
Purchases of property, equipment and software (1,322) (1,748) -24.4%
Capitalized software development costs (10,054) (8,383) 19.9%
Non-GAAP free cash flow $ 23,227 $ 7,602 205.5%
(d) The Contracted Revenue estimate in the SCM segment includes the contribution from Sg2 for the periods ended March 31, 2015, December 31, 2014 and September 30, 2014, respectively, following its acquisition by the company on September 22, 2014. Excluding the contribution from Sg2, the company's total contracted revenue estimate increased 3.5% year-over-year.
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
March 31,
2015 2014
Net income $ 3,353 $ 7,678
Depreciation 13,347 11,540
Depreciation (included in cost of revenue) 978 424
Amortization of intangibles 15,056 14,026
Interest expense, net 11,867 11,173
Income tax expense 2,250 5,987
Non-GAAP EBITDA $ 46,851 $ 50,828
Share-based compensation 5,732 4,302
Rental income from capitalized building lease (110) (110)
Purchase accounting adjustments 461 --
Restructuring, acquisition and integration-related expenses 4,439 1,697
Non-GAAP Adjusted EBITDA $ 57,373 $ 56,717
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
March 31,
2015 2014
Net income $ 3,353 $ 7,678
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 15,056 14,026
Pre-tax non-cash, share-based compensation 5,732 4,302
Pre-tax restructuring, acquisition and integration-related expenses 4,439 1,697
Pre-tax non-cash, purchase accounting adjustment 461 --
Tax effect on pre-tax adjustments e (10,275) (8,010)
Non-GAAP adjusted net income $ 18,766 $ 19,693
Income Per Share (EPS) - diluted $ 0.06 $ 0.12
Pre-tax non-cash, acquisition-related intangible amortization and depreciation 0.25 0.23
Pre-tax non-cash, share-based compensation 0.09 0.07
Pre-tax restructuring, acquisition and integration-related expenses 0.07 0.03
Pre-tax non-cash, purchase accounting adjustment 0.01 --
Tax effect on pre-tax adjustments e (0.17) (0.13)
Non-GAAP adjusted EPS - diluted $ 0.31 $ 0.32
Weighted average shares - diluted (in 000s) 60,530 61,681
(e) The Company used a tax rate of 40.0% for the three months ended March 31, 2015 and 2014 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 2015 ADJUSTED EBITDA GUIDANCE
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES
(UNAUDITED)
Guidance Range for
Twelve Months Ending
In 000s December 31, 2015
(Low) (High)
Net Income $ 15,200 $ 21,000
Depreciation 58,800 58,800
Depreciation (included in cost of revenue) 4,000 4,000
Amortization of intangibles 58,800 58,800
Interest expense, net 47,600 47,600
Income tax expense 10,900 15,100
Non-GAAP EBITDA 195,300 205,300
Share-based compensation 23,800 23,800
Restructuring, acquisition and integration-related expenses 7,400 7,400
Purchase accounting adjustments 900 900
Rental income from capitalized building lease (400) (400)
Non-GAAP adjusted EBITDA $ 227,000 $ 237,000
SUPPLEMENTAL 2015 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, 2015
(Low) (High)
Net Income $ 15,200 $ 21,000
EPS - diluted 0.24 0.34
Pre-tax non-cash, acquisition-related intangible amortization 0.95 0.95
Pre-tax non-cash, share-based compensation 0.39 0.39
Pre-tax restructuring, acquisition and integration-related expenses 0.12 0.12
Pre-tax purchase accounting adjustments 0.02 0.02
Tax effect on pre-tax adjustments f (0.59) (0.59)
Non-GAAP adjusted EPS - diluted g $ 1.13 $ 1.23
Fully diluted weighted average shares outstanding 61,700 61,700
(f) The Company used a tax rate of 40.0% for the full year ending December 31, 2015 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company's normalized long-term tax rate.
(g) 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: 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.

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, goodwill impairment, 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, certain restructuring, acquisition and integration-related expenses on a tax-adjusted basis, purchase accounting adjustments on a tax-adjusted basis, and diluted adjusted EPS as earnings per share excluding non-cash acquisition-related intangible amortization, depreciation 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