Change Healthcare Inc. Reports Second Quarter Fiscal 2021 Financial Results
“Our second quarter results reflect continued improvement in both healthcare utilization in the
Fiscal 2021 Second Quarter Highlights:
Financial Summary
-
Total revenue of
$755.9 million , including solutions revenue of$705.9 million -
Net loss of
$42.6 million , resulting in net loss of$0.13 per diluted share -
Adjusted net income of
$103.5 million , resulting in adjusted net income of$0.32 per diluted share -
Adjusted EBITDA of
$231.8 million
Recent Business Highlights
- Announced a new consumer engagement and revenue cycle management solution for pharmacies that makes it easier for consumers to get COVID-19 testing in their local pharmacies. Pharmacies can now electronically bill for COVID-19 tests just as easily as they bill for prescriptions and flu shots.
-
Integrated our SmartPay™ Consumer Payment solution with Epic MyChart and encrypted device integration within Hyperspace, allowing providers to offer their patients a wide range of payment options––letting them easily pay their healthcare bills how and when they want, with
Change Healthcare providing phone and mail-in payment channels to give providers a multi-channel payment solution. -
Acquired Nucleus.io, a leader in the development of advanced, fully enabled, cloud-native imaging and workflow technology including its market-leading medical image exchange solution currently utilized by over 7,500 organizations across
the United States . - Acquired Prometheus Analytics®, the industry-standard for value-based care reimbursement models based on medical episodes of care. Prometheus is used by payer-provider collaborations nationwide, uniquely providing a proven and fair blueprint for value-based payments.
- Announced innovative new Artificial Intelligence models, trained by expert physicians, which extract meaningful diagnostic information from text in EHRs. The first application of this technology is within our InterQual AutoReview™ solution, which automates medical necessity reviews using real-time data from EHRs.
Impact of McKesson Exit on Comparability of Results
On
Financial Results
-
Solutions revenue was
$705.9 million for the current period, inclusive of the impact of the fair value adjustment to deferred revenue resulting from the McKesson exit, which reduced revenue recognized in the quarter by$38.9 million . Total revenue, which includes postage revenue, was$755.9 million . For the second quarter of fiscal 2020, the Joint Venture reported$738.7 million of solutions revenue and$795.8 million of total revenue. Solutions revenue for the current period, including the$15.5 million net favorable impact of acquisitions and divestitures, was negatively impacted by the COVID-19 pandemic. Partially offsetting this impact were new sales volumes across all three segments. -
Net loss was
$42.6 million , resulting in net loss of$0.13 per diluted share. For the second quarter of fiscal 2020, the Joint Venture reported net loss of$0.1 million or$0.00 per diluted unit. Net loss for the current period was negatively impacted by the COVID-19 pandemic, partially offset by new sales volumes, productivity improvements and cost initiatives. -
Adjusted net income was
$103.5 million , resulting in adjusted net income of$0.32 per diluted share. For the second quarter of fiscal 2020, the Joint Venture reported adjusted net income of$86.6 million or$0.27 per diluted unit. Net loss per diluted share and adjusted net income per diluted share for the current period is based on 321 million shares compared to 324 million units in the prior year period. -
Adjusted EBITDA was
$231.8 million for the current period. For the second quarter of fiscal 2020, the Joint Venture reported adjusted EBITDA of$217.7 million . The results in the current quarter reflect approximately$15 million in lower SMG&A expenses primarily related to a one-time change in benefits policy, reduced healthcare benefits as a result of lower employee healthcare utilization, and timing related to deferred hiring as a result of COVID-19. The majority of these impacts are expected to normalize in the 3rd fiscal quarter.
Cash Flow and Balance Sheet Highlights
Net cash provided by operating activities was
Net cash provided by operating activities, free cash flow, and adjusted free cash flow each is affected by pass-thru funds we receive from certain pharmaceutical industry participants in advance of our obligation to remit these funds to participating retail pharmacies. Such pass-thru funds on hand decreased by
The Company ended the quarter with approximately
Third Quarter Fiscal Year 2021 Guidance
Due to uncertainty around the duration of the COVID-19 pandemic, the Company will only be providing quarterly guidance.
For the third quarter of fiscal year 2021, the Company expects solutions revenue to be in the range of
The third quarter fiscal year 2021 outlook reflects the Company’s current expectation that the impact from the COVID-19 pandemic will continue to be gradually reduced throughout the remainder of the fiscal year as healthcare utilization trends improve and is also subject to risk factors such as those described in the Forward-Looking Statements below.
Supplemental Forward-Looking Expectations and Assumptions for Fiscal 2021
While the Company is not providing guidance for the full fiscal year 2021 due to the uncertainty of COVID-19, the Company has determined to provide the following supplemental expectations and assumptions that it has made regarding its fiscal year 2021 results to provide further transparency to investors into the Company’s current beliefs regarding fiscal year 2021, all of which are subject to change:
-
Expect free cash flow of
$250 million to$300 million . - Capital expenditures of approximately 7.5% - 8.0% of solutions revenue excluding the impact of fair value adjustments and excluding integration related capital expenditures.
-
Integration related operating expense for the fiscal year of approximately
$80 million and integration related capital expenditures of approximately$20 million . -
Interest expense in the range of
$245 million to$255 million . - Adjusted effective tax rate of approximately 25%.
- Basic and fully diluted shares outstanding of 321 million.1
A reconciliation of the forward-looking third quarter fiscal year 2021 adjusted EBITDA outlook to net income, adjusted effective tax rate outlook for our effective tax rate outlook and free cash flow outlook to cash provided by (used in) operating activities cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons,
| _______________________________ |
|
1 Diluted shares outstanding includes the impact of the minimum issuable shares attributable to the TEUs and excludes the effect of potential shares that would be antidilutive to Diluted EPS, based on expected GAAP Net Income (Loss) for FY2021. |
Conference Call and Webcast Information
A webcast replay will be available for on-demand listening shortly after the completion of the call until the second quarter fiscal year 2022 earnings call, at the aforementioned URL. In addition, a digital audio playback will be available until
About
CHNG-IR
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of federal securities laws. Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including, but not limited to, our third quarter fiscal year 2021 guidance, the supplemental information and assumptions regarding fiscal year 2021, the potential length and impact of COVID-19 and descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “potential,” “continues,” “seeks,” “predicts,” and the negatives of these words and other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, including, but not limited to, the uncertainty around the length and severity of the COVID-19 pandemic; the ongoing impact of the COVID-19 pandemic on our operations and financial results, on our customers and on national, state and local economies; and new risks that may arise due to responses to the pandemic by the government, our customers and us, and other factors disclosed in our Annual Report on Form 10-K for the fiscal year ended
Non-GAAP Financial Measures
In the company’s earnings releases, prepared remarks, conference calls, slide presentations and webcasts, there may be use or discussion of non-GAAP financial measures. We believe such measures provide supplemental information to investors with regard to our operating performance and assist investors’ ability to compare our financial results to those of other companies in the same industry. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between the comparable GAAP financial measure and each non-GAAP financial measure are included in this press release after the consolidated financial statements. These non-GAAP financial measures are calculated and presented on the basis of methodologies other than in accordance with GAAP. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP and may be defined and calculated differently by others in the same industry.
|
Consolidated Statements of Operations Quarter to Date (unaudited and amounts in thousands, except share and per share amounts) |
||||||||||||
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||||||||||||
|
|
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Three Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|||
|
Solutions revenue |
|
$ |
705,913 |
|
|
$ |
— |
|
|
$ |
738,701 |
|
|
Postage revenue |
|
|
50,023 |
|
|
|
— |
|
|
|
57,110 |
|
|
Total revenue |
|
|
755,936 |
|
|
|
— |
|
|
|
795,811 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
|
Cost of operations (exclusive of depreciation and amortization below) |
|
|
326,653 |
|
|
|
— |
|
|
|
331,234 |
|
|
Research and development |
|
|
54,052 |
|
|
|
— |
|
|
|
51,783 |
|
|
Sales, marketing, general and administrative |
|
|
171,606 |
|
|
|
1,138 |
|
|
|
190,039 |
|
|
Customer postage |
|
|
50,023 |
|
|
|
— |
|
|
|
57,110 |
|
|
Depreciation and amortization |
|
|
146,869 |
|
|
|
— |
|
|
|
77,448 |
|
|
Accretion and changes in estimate with related parties, net |
|
|
3,564 |
|
|
|
48,363 |
|
|
|
3,214 |
|
|
Gain on sale of businesses |
|
|
(176 |
) |
|
|
— |
|
|
|
— |
|
|
Total operating expenses |
|
|
752,591 |
|
|
|
49,501 |
|
|
|
710,828 |
|
|
Operating income (loss) |
|
|
3,345 |
|
|
|
(49,501 |
) |
|
|
84,983 |
|
|
Non-operating (income) and expense |
|
|
|
|
|
|
|
|
|
|||
|
Interest expense, net |
|
|
61,627 |
|
|
|
— |
|
|
|
69,901 |
|
|
Contingent consideration |
|
|
(550 |
) |
|
|
— |
|
|
|
1,700 |
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
— |
|
|
|
16,900 |
|
|
Loss from |
|
|
— |
|
|
|
56,179 |
|
|
|
— |
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
2,435 |
|
|
|
— |
|
|
Other, net |
|
|
(3,211 |
) |
|
|
(560 |
) |
|
|
(4,386 |
) |
|
Total non-operating (income) and expense |
|
|
59,355 |
|
|
|
58,054 |
|
|
|
84,115 |
|
|
Income (loss) before income tax provision (benefit) |
|
|
(56,010 |
) |
|
|
(107,555 |
) |
|
|
868 |
|
|
Income tax provision (benefit) |
|
|
(13,388 |
) |
|
|
(13,620 |
) |
|
|
998 |
|
|
Net income (loss) |
|
$ |
(42,622 |
) |
|
$ |
(93,935 |
) |
|
$ |
(130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|||
|
Basic and Diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.66 |
) |
|
$ |
— |
|
|
Weighted average common shares outstanding: (1) |
|
|
|
|
|
|
|
|
|
|||
|
Basic and Diluted |
|
|
320,638,116 |
|
|
|
142,223,836 |
|
|
|
318,219,028 |
|
|
(1) |
Prior to the McKesson exit, common units of |
|
Consolidated Statements of Operations Year to Date (unaudited and amounts in thousands, except share and per share amounts) |
|||||||||||||
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Six Months Ended |
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|
|
|
2020 |
|
2019 |
|
2019 |
|||||||
|
|
|
|
|
Change
|
|||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
||||
|
Solutions revenue |
|
$ |
1,354,325 |
|
|
$ |
— |
|
|
$ |
1,535,773 |
|
|
|
Postage revenue |
|
|
95,795 |
|
|
|
— |
|
|
|
115,594 |
|
|
|
Total revenue |
|
|
1,450,120 |
|
|
|
— |
|
|
|
1,651,367 |
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
|
Cost of operations (exclusive of depreciation and amortization below) |
|
|
645,195 |
|
|
|
— |
|
|
|
658,181 |
|
|
|
Research and development |
|
|
109,787 |
|
|
|
— |
|
|
|
101,122 |
|
|
|
Sales, marketing, general and administrative |
|
|
337,080 |
|
|
|
1,389 |
|
|
|
383,312 |
|
|
|
Customer postage |
|
|
95,795 |
|
|
|
— |
|
|
|
115,594 |
|
|
|
Depreciation and amortization |
|
|
285,409 |
|
|
|
— |
|
|
|
148,764 |
|
|
|
Accretion and changes in estimate with related parties, net |
|
|
9,459 |
|
|
|
48,363 |
|
|
|
7,094 |
|
|
|
Gain on sale of businesses |
|
|
(28,270 |
) |
|
|
— |
|
|
|
— |
|
|
|
Total operating expenses |
|
|
1,454,455 |
|
|
|
49,752 |
|
|
|
1,414,067 |
|
|
|
Operating income (loss) |
|
|
(4,335 |
) |
|
|
(49,752 |
) |
|
|
237,300 |
|
|
|
Non-operating (income) and expense |
|
|
|
|
|
|
|
|
|
||||
|
Interest expense, net |
|
|
124,294 |
|
|
|
— |
|
|
|
153,307 |
|
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
— |
|
|
|
909 |
|
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
— |
|
|
|
16,900 |
|
|
|
Loss from |
|
|
— |
|
|
|
95,732 |
|
|
|
— |
|
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
2,435 |
|
|
|
— |
|
|
|
Other, net |
|
|
1,047 |
|
|
|
(664 |
) |
|
|
(8,164 |
) |
|
|
Total non-operating (income) and expense |
|
|
123,830 |
|
|
|
97,503 |
|
|
|
162,952 |
|
|
|
Income (loss) before income tax provision (benefit) |
|
|
(128,165 |
) |
|
|
(147,255 |
) |
|
|
74,348 |
|
|
|
Income tax provision (benefit) |
|
|
(26,849 |
) |
|
|
(15,804 |
) |
|
|
2,563 |
|
|
|
Net income (loss) |
|
$ |
(101,316 |
) |
|
$ |
(131,451 |
) |
|
$ |
71,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
(0.32 |
) |
|
$ |
(1.20 |
) |
|
$ |
0.25 |
|
|
|
Diluted |
|
$ |
(0.32 |
) |
|
$ |
(1.20 |
) |
|
$ |
0.25 |
|
|
|
Weighted average common shares outstanding: (1) |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
|
320,347,128 |
|
|
|
109,111,853 |
|
|
|
285,107,046 |
|
|
|
Diluted |
|
|
320,347,128 |
|
|
|
109,111,853 |
|
|
|
288,809,850 |
|
|
|
(1) |
Prior to the McKesson exit, common units of |
|
Consolidated Balance Sheets (unaudited and amounts in thousands, except share and per share amounts) |
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|
|
|
|
|
|
||||
|
Assets |
|
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
167,477 |
|
|
$ |
410,405 |
|
|
Accounts receivable, net |
|
|
626,991 |
|
|
|
740,105 |
|
|
Contract assets, net |
|
|
135,388 |
|
|
|
132,704 |
|
|
Prepaid expenses and other current assets |
|
|
125,996 |
|
|
|
117,967 |
|
|
Total current assets |
|
|
1,055,852 |
|
|
|
1,401,181 |
|
|
Property and equipment, net |
|
|
193,904 |
|
|
|
206,196 |
|
|
Operating lease right-of-use assets, net |
|
|
106,790 |
|
|
|
— |
|
|
|
|
|
4,126,481 |
|
|
|
3,795,325 |
|
|
Intangible assets, net |
|
|
4,418,079 |
|
|
|
4,365,806 |
|
|
Investment in business purchase option |
|
|
— |
|
|
|
146,500 |
|
|
Other noncurrent assets, net |
|
|
309,107 |
|
|
|
192,372 |
|
|
Total assets |
|
$ |
10,210,213 |
|
|
$ |
10,107,380 |
|
|
Liabilities |
|
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
|
||
|
Accounts payable |
|
$ |
47,351 |
|
|
$ |
68,169 |
|
|
Accrued expenses |
|
|
452,974 |
|
|
|
390,294 |
|
|
Deferred revenue |
|
|
319,115 |
|
|
|
302,313 |
|
|
Due to related parties, net |
|
|
11,606 |
|
|
|
20,234 |
|
|
Current portion of long-term debt |
|
|
30,488 |
|
|
|
278,779 |
|
|
Current portion of operating lease liabilities |
|
|
32,060 |
|
|
|
— |
|
|
Total current liabilities |
|
|
893,594 |
|
|
|
1,059,789 |
|
|
Long-term debt, excluding current portion |
|
|
4,983,737 |
|
|
|
4,710,294 |
|
|
Long-term operating lease liabilities |
|
|
88,239 |
|
|
|
— |
|
|
Deferred income tax liabilities |
|
|
627,919 |
|
|
|
615,904 |
|
|
Tax receivable agreement obligations to related parties |
|
|
98,658 |
|
|
|
177,826 |
|
|
Tax receivable agreement obligations |
|
|
232,009 |
|
|
|
164,633 |
|
|
Other long-term liabilities |
|
|
76,807 |
|
|
|
93,487 |
|
|
Total liabilities |
|
|
7,000,963 |
|
|
|
6,821,933 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
||
|
Stockholders' Equity |
|
|
|
|
|
|
||
|
Common Stock (par value, |
|
|
304 |
|
|
|
303 |
|
|
Preferred stock (par value, |
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
|
4,242,721 |
|
|
|
4,222,580 |
|
|
Accumulated other comprehensive income (loss) |
|
|
(1,978 |
) |
|
|
(7,372 |
) |
|
Accumulated deficit |
|
|
(1,031,797 |
) |
|
|
(930,064 |
) |
|
Total stockholders' equity |
|
|
3,209,250 |
|
|
|
3,285,447 |
|
|
Total liabilities and stockholders' equity |
|
$ |
10,210,213 |
|
|
$ |
10,107,380 |
|
|
Consolidated Statements of Cash Flows (unaudited and amounts in thousands) |
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|
|
||||||||||||
|
|
|
Six Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
$ |
(101,316 |
) |
|
$ |
(131,451 |
) |
|
$ |
71,785 |
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|||
|
Loss from |
|
|
— |
|
|
|
95,732 |
|
|
|
— |
|
|
Depreciation and amortization |
|
|
285,409 |
|
|
|
— |
|
|
|
148,764 |
|
|
Amortization of capitalized software developed for sale |
|
|
89 |
|
|
|
— |
|
|
|
6,698 |
|
|
Accretion and changes in estimate, net |
|
|
11,188 |
|
|
|
— |
|
|
|
7,094 |
|
|
Equity compensation |
|
|
23,914 |
|
|
|
— |
|
|
|
15,207 |
|
|
Deferred income tax expense (benefit) |
|
|
(28,590 |
) |
|
|
(15,806 |
) |
|
|
1,473 |
|
|
Amortization of debt discount and issuance costs |
|
|
16,551 |
|
|
|
212 |
|
|
|
9,941 |
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
— |
|
|
|
909 |
|
|
Gain on sale of businesses |
|
|
(28,270 |
) |
|
|
— |
|
|
|
— |
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
— |
|
|
|
16,900 |
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
2,435 |
|
|
|
— |
|
|
Non-cash lease expense |
|
|
14,629 |
|
|
|
— |
|
|
|
— |
|
|
Other, net |
|
|
7,530 |
|
|
|
— |
|
|
|
(111 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
|
Accounts receivable, net |
|
|
114,052 |
|
|
|
— |
|
|
|
54,240 |
|
|
Contract assets, net |
|
|
(3,786 |
) |
|
|
— |
|
|
|
12,688 |
|
|
Prepaid expenses and other assets |
|
|
(48,382 |
) |
|
|
(2,136 |
) |
|
|
(8,583 |
) |
|
Accounts payable |
|
|
(28,666 |
) |
|
|
— |
|
|
|
(15,209 |
) |
|
Accrued expenses and other liabilities |
|
|
27,687 |
|
|
|
48,640 |
|
|
|
(16,311 |
) |
|
Deferred revenue |
|
|
36,029 |
|
|
|
— |
|
|
|
(69,471 |
) |
|
Due to the Joint Venture, net |
|
|
— |
|
|
|
2,374 |
|
|
|
— |
|
|
Due to related party, net |
|
|
— |
|
|
|
— |
|
|
|
(12,150 |
) |
|
Net cash provided by (used in) operating activities |
|
|
296,557 |
|
|
|
— |
|
|
|
223,864 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
|
Capitalized expenditures |
|
|
(126,432 |
) |
|
|
— |
|
|
|
(129,847 |
) |
|
Acquisitions, net of cash acquired |
|
|
(439,483 |
) |
|
|
— |
|
|
|
— |
|
|
Proceeds from sale of businesses |
|
|
54,369 |
|
|
|
— |
|
|
|
— |
|
|
Investments in businesses |
|
|
— |
|
|
|
— |
|
|
|
(18,946 |
) |
|
Investment in the Joint Venture |
|
|
— |
|
|
|
(609,818 |
) |
|
|
— |
|
|
Investment in debt and equity securities of the Joint Venture |
|
|
— |
|
|
|
(278,875 |
) |
|
|
— |
|
|
Other, net |
|
|
1,100 |
|
|
|
3,621 |
|
|
|
— |
|
|
Net cash provided by (used in) investing activities |
|
|
(510,446 |
) |
|
|
(885,072 |
) |
|
|
(148,793 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
|
Payments on Revolving Facility |
|
|
(250,000 |
) |
|
|
— |
|
|
|
— |
|
|
Payments on Term Loan Facility |
|
|
(50,000 |
) |
|
|
— |
|
|
|
(902,750 |
) |
|
Proceeds from issuance of Senior Notes |
|
|
325,000 |
|
|
|
— |
|
|
|
— |
|
|
Payments under tax receivable agreements with related parties |
|
|
(20,691 |
) |
|
|
— |
|
|
|
(27,227 |
) |
|
Receipts (payments) on derivative instruments |
|
|
(14,810 |
) |
|
|
— |
|
|
|
3,109 |
|
|
Employee tax withholding on vesting of equity compensation awards |
|
|
(3,131 |
) |
|
|
— |
|
|
|
— |
|
|
Payments on deferred financing obligations |
|
|
(6,547 |
) |
|
|
— |
|
|
|
— |
|
|
Payment of senior amortizing notes |
|
|
(7,680 |
) |
|
|
(3,621 |
) |
|
|
— |
|
|
Payment of debt issued to |
|
|
— |
|
|
|
— |
|
|
|
(3,621 |
) |
|
Proceeds from exercise of equity awards |
|
|
2,584 |
|
|
|
1,139 |
|
|
|
— |
|
|
Capital contribution from Members from exercise of equity compensation awards |
|
|
— |
|
|
|
— |
|
|
|
1,139 |
|
|
Proceeds from initial public offering, net of issuance costs |
|
|
— |
|
|
|
608,679 |
|
|
|
— |
|
|
Proceeds from |
|
|
— |
|
|
|
— |
|
|
|
608,679 |
|
|
Proceeds from issuance of debt component of tangible equity units |
|
|
— |
|
|
|
47,367 |
|
|
|
— |
|
|
Proceeds from debt issued to |
|
|
— |
|
|
|
— |
|
|
|
47,367 |
|
|
Proceeds from issuance of equity component of tangible equity units, net of issuance costs |
|
|
— |
|
|
|
232,929 |
|
|
|
— |
|
|
Proceeds from forward purchase contract with |
|
|
— |
|
|
|
— |
|
|
|
232,929 |
|
|
Other, net |
|
|
(6,454 |
) |
|
|
(1,421 |
) |
|
|
(10,897 |
) |
|
Net cash provided by (used in) financing activities |
|
|
(31,729 |
) |
|
|
885,072 |
|
|
|
(51,272 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
2,690 |
|
|
|
— |
|
|
|
299 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(242,928 |
) |
|
|
— |
|
|
|
24,098 |
|
|
Cash and cash equivalents at beginning of period |
|
|
410,405 |
|
|
|
3,409 |
|
|
|
48,894 |
|
|
Cash and cash equivalents at end of period |
|
$ |
167,477 |
|
|
$ |
3,409 |
|
|
$ |
72,992 |
|
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA Quarter to Date (unaudited and amounts in thousands) |
||||||||||||
|
|
||||||||||||
|
|
|
Three Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Net income (loss) |
|
$ |
(42,622 |
) |
|
$ |
(93,935 |
) |
|
$ |
(130 |
) |
|
Income tax provision (benefit) |
|
|
(13,388 |
) |
|
|
(13,620 |
) |
|
|
998 |
|
|
Income (loss) before income tax provision (benefit) |
|
|
(56,010 |
) |
|
|
(107,555 |
) |
|
|
868 |
|
|
Amortization of capitalized software developed for sale |
|
|
12 |
|
|
|
|
|
|
3,249 |
|
|
|
Depreciation and amortization |
|
|
146,869 |
|
|
|
|
|
|
77,448 |
|
|
|
Interest expense, net |
|
|
61,627 |
|
|
|
|
|
|
69,901 |
|
|
|
Equity compensation |
|
|
14,331 |
|
|
|
|
|
|
9,345 |
|
|
|
Acquisition accounting adjustments |
|
|
34,686 |
|
|
|
|
|
|
553 |
|
|
|
Acquisition and divestiture-related costs |
|
|
2,337 |
|
|
|
|
|
|
414 |
|
|
|
Integration and related costs |
|
|
7,536 |
|
|
|
|
|
|
19,781 |
|
|
|
Strategic initiatives, duplicative and transition costs |
|
|
3,765 |
|
|
|
|
|
|
6,120 |
|
|
|
Severance costs |
|
|
3,172 |
|
|
|
|
|
|
2,929 |
|
|
|
Accretion and changes in estimate, net |
|
|
5,293 |
|
|
|
|
|
|
3,214 |
|
|
|
Management fees and related costs |
|
|
— |
|
|
|
|
|
|
2,413 |
|
|
|
Impairment of long-lived assets and other |
|
|
7,447 |
|
|
|
|
|
|
— |
|
|
|
Gain on sale of business |
|
|
(176 |
) |
|
|
|
|
|
— |
|
|
|
Contingent consideration |
|
|
(550 |
) |
|
|
|
|
|
1,700 |
|
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
|
|
|
16,900 |
|
|
|
Other non-routine, net |
|
|
13 |
|
|
|
|
|
|
2,858 |
|
|
|
Adjusted EBITDA |
|
$ |
231,841 |
|
|
|
|
|
$ |
217,693 |
|
|
|
(1) |
Prior to the McKesson exit, |
|
Reconciliation of Net Income (Loss) to Adjusted EBITDA Year to Date (unaudited and amounts in thousands) |
||||||||||||
|
|
||||||||||||
|
|
|
Six Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Net income (loss) |
|
$ |
(101,316 |
) |
|
$ |
(131,451 |
) |
|
$ |
71,785 |
|
|
Income tax provision (benefit) |
|
|
(26,849 |
) |
|
|
(15,804 |
) |
|
|
2,563 |
|
|
Income (loss) before income tax provision (benefit) |
|
|
(128,165 |
) |
|
$ |
(147,255 |
) |
|
|
74,348 |
|
|
Amortization of capitalized software developed for sale |
|
|
89 |
|
|
|
|
|
|
6,698 |
|
|
|
Depreciation and amortization |
|
|
285,409 |
|
|
|
|
|
|
148,764 |
|
|
|
Interest expense, net |
|
|
124,294 |
|
|
|
|
|
|
153,307 |
|
|
|
Equity compensation |
|
|
23,914 |
|
|
|
|
|
|
15,207 |
|
|
|
Acquisition accounting adjustments |
|
|
83,225 |
|
|
|
|
|
|
927 |
|
|
|
Acquisition and divestiture-related costs |
|
|
7,458 |
|
|
|
|
|
|
1,073 |
|
|
|
Integration and related costs |
|
|
17,894 |
|
|
|
|
|
|
45,507 |
|
|
|
Strategic initiatives, duplicative and transition costs |
|
|
8,845 |
|
|
|
|
|
|
9,688 |
|
|
|
Severance costs |
|
|
7,876 |
|
|
|
|
|
|
10,099 |
|
|
|
Accretion and changes in estimate, net |
|
|
11,188 |
|
|
|
|
|
|
7,094 |
|
|
|
Management fees and related costs |
|
|
— |
|
|
|
|
|
|
5,060 |
|
|
|
Impairment of long-lived assets and other |
|
|
13,760 |
|
|
|
|
|
|
(840 |
) |
|
|
Gain on sale of business |
|
|
(28,270 |
) |
|
|
|
|
|
— |
|
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
|
|
|
909 |
|
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
|
|
|
16,900 |
|
|
|
Other non-routine, net |
|
|
2,690 |
|
|
|
|
|
|
4,008 |
|
|
|
Adjusted EBITDA |
|
$ |
428,696 |
|
|
|
|
|
$ |
498,749 |
|
|
|
(1) |
Prior to the McKesson exit, |
|
Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) (unaudited and amounts in thousands, except share and per share amounts) |
||||||||||||
|
|
||||||||||||
|
|
|
Three Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Net income (loss) |
|
$ |
(42,622 |
) |
|
$ |
(93,935 |
) |
|
$ |
(130 |
) |
|
Amortization expense resulting from acquisition method adjustments |
|
|
115,873 |
|
|
|
|
|
|
35,054 |
|
|
|
EBITDA adjustments |
|
|
79,343 |
|
|
|
|
|
|
66,227 |
|
|
|
Tax effect of EBITDA adjustments and amortization expense |
|
|
(49,107 |
) |
|
|
|
|
|
(14,527 |
) |
|
|
Adjusted net income (loss) |
|
$ |
103,487 |
|
|
|
|
|
$ |
86,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Adjusted net income (loss) per diluted share (2) |
|
$ |
0.32 |
|
|
|
|
|
$ |
0.27 |
|
|
|
|
||||||||||||
|
|
|
Six Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Net income (loss) |
|
$ |
(101,316 |
) |
|
$ |
(131,451 |
) |
|
$ |
71,785 |
|
|
Amortization expense resulting from acquisition method adjustments |
|
|
228,898 |
|
|
|
|
|
|
69,702 |
|
|
|
EBITDA adjustments |
|
|
147,069 |
|
|
|
|
|
|
115,632 |
|
|
|
Tax effect of EBITDA adjustments and amortization expense |
|
|
(89,966 |
) |
|
|
|
|
|
(28,991 |
) |
|
|
Adjusted net income (loss) |
|
$ |
184,685 |
|
|
|
|
|
$ |
228,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Adjusted net income (loss) per diluted share (2) |
|
$ |
0.58 |
|
|
|
|
|
$ |
0.79 |
|
|
|
(1) |
Prior to the McKesson exit, |
|
(2) |
Prior to the McKesson exit, Common units of |
|
Segment Results (unaudited and amounts in thousands) |
||||||||||||
|
|
||||||||||||
|
|
|
Three Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Segment revenue |
|
|
|
|
|
|
|
|
|
|||
|
Software and Analytics |
|
$ |
354,860 |
|
|
|
N/A |
|
|
$ |
372,990 |
|
|
Network Solutions |
|
|
184,095 |
|
|
|
N/A |
|
|
|
144,276 |
|
|
Technology-Enabled Services |
|
|
231,817 |
|
|
|
N/A |
|
|
|
247,341 |
|
|
Postage and Eliminations (3) |
|
|
24,073 |
|
|
|
N/A |
|
|
|
31,204 |
|
|
Purchase Accounting Adjustment (4) |
|
|
(38,909 |
) |
|
|
N/A |
|
|
|
— |
|
|
Net revenue |
|
$ |
755,936 |
|
|
|
N/A |
|
|
$ |
795,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Segment adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|||
|
Software and Analytics |
|
$ |
117,393 |
|
|
|
N/A |
|
|
$ |
110,993 |
|
|
Network Solutions |
|
|
94,508 |
|
|
|
N/A |
|
|
|
79,526 |
|
|
Technology-Enabled Services |
|
|
19,940 |
|
|
|
N/A |
|
|
|
27,174 |
|
|
Postage and Eliminations |
|
|
— |
|
|
|
N/A |
|
|
|
— |
|
|
Total adjusted EBITDA |
|
$ |
231,841 |
|
|
|
N/A |
|
|
$ |
217,693 |
|
|
|
||||||||||||
|
|
|
Six Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Segment revenue |
|
|
|
|
|
|
|
|
|
|||
|
Software and Analytics |
|
$ |
746,449 |
|
|
|
N/A |
|
|
$ |
806,811 |
|
|
Network Solutions |
|
|
326,921 |
|
|
|
N/A |
|
|
|
285,888 |
|
|
Technology-Enabled Services |
|
|
419,523 |
|
|
|
N/A |
|
|
|
494,854 |
|
|
Postage and Eliminations (3) |
|
|
51,136 |
|
|
|
N/A |
|
|
|
63,814 |
|
|
Purchase Accounting Adjustment (4) |
|
|
(93,909 |
) |
|
|
N/A |
|
|
|
— |
|
|
Net revenue |
|
$ |
1,450,120 |
|
|
|
N/A |
|
|
$ |
1,651,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Segment adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|||
|
Software and Analytics |
|
$ |
261,325 |
|
|
|
N/A |
|
|
$ |
287,494 |
|
|
Network Solutions |
|
|
165,011 |
|
|
|
N/A |
|
|
|
158,748 |
|
|
Technology-Enabled Services |
|
|
2,360 |
|
|
|
N/A |
|
|
|
52,507 |
|
|
Postage and Eliminations |
|
|
— |
|
|
|
N/A |
|
|
|
— |
|
|
Total adjusted EBITDA |
|
$ |
428,696 |
|
|
|
N/A |
|
|
$ |
498,749 |
|
|
(1) |
Prior to the McKesson exit, |
|
(2) |
The prior year results of |
|
(3) |
Revenue for Postage and Eliminations includes postage revenue of |
|
(4) |
Amount reflects the impact to deferred revenue resulting from the McKesson exit which reduced revenue recognized during the three and six months ended |
|
Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow (unaudited and amounts in thousands) |
||||||||||||
|
|
||||||||||||
|
|
|
Six Months Ended |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
|
Change
|
||||||||
|
Cash provided by (used in) operating activities (2) |
|
$ |
296,557 |
|
|
$ |
— |
|
|
$ |
223,864 |
|
|
Capital expenditures |
|
|
(126,432 |
) |
|
|
— |
|
|
|
(129,847 |
) |
|
Free cash flow |
|
|
170,125 |
|
|
|
— |
|
|
|
94,017 |
|
|
Adjustments to free cash flow (3): |
|
|
|
|
|
|
|
|
|
|||
|
Integration and related costs |
|
|
17,894 |
|
|
|
|
|
|
45,507 |
|
|
|
Strategic initiatives, duplicative and transition costs |
|
|
8,845 |
|
|
|
|
|
9,688 |
|
||
|
Severance costs |
|
|
7,876 |
|
|
|
|
|
|
10,099 |
|
|
|
Integration and strategic capital expenditures |
|
|
5,938 |
|
|
|
|
|
|
14,546 |
|
|
|
Adjusted free cash flow |
|
$ |
210,678 |
|
|
|
|
|
$ |
173,858 |
|
|
|
(1) |
Prior to the McKesson exit, |
|
(2) |
Includes cash used in pass-thru funds of |
|
(3) |
All operating costs and integration and strategic capital expenditures are presented on an as-incurred basis. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20201104005552/en/
Investor Relations
404-338-2225
Evan.Smith@changehealthcare.com
630-624-9142
Katherine.Wojtecki@changehealthcare.com
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