Change Healthcare Inc. Reports Third Quarter Fiscal 2021 Financial Results
“Our third quarter results demonstrate the strength of the
Fiscal 2021 Third Quarter Highlights:
Financial Summary
-
Total revenue of
$785.1 million , including solutions revenue of$735.3 million -
Net income of
$2.2 million , resulting in net income of$0.01 per diluted share -
Adjusted net income of
$110.1 million , resulting in adjusted net income of$0.34 per diluted share -
Adjusted EBITDA of
$233.4 million
Recent Business Highlights
-
Announced agreement with Carnegie Mellon University’s
Delphi Research Group for the launch of Delphi's enhanced COVIDcast real-time COVID-19 indicators. COVIDcast is taking a further step by adding de-identified COVID-19 claims fromChange Healthcare to its unique combination of survey, testing, and mobility data. - Completed the divestiture of Capacity Management business. The sale supported our strategy to focus on and invest in core aspects of our business to fuel growth and advance innovation.
- Launched Social Determinants of Health (SDoH) Analytics, an innovative national data resource to help health systems, insurers, and life sciences organizations explore how geodemographic factors affect patient outcomes.
-
Subsequent to quarter-end, announced proposed merger with
OptumInsight , a diversified health services company and part of UnitedHealth Group.
Impact of McKesson Exit on Comparability of Results
On
Financial Results
-
Solutions revenue was
$735.3 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$24.2 million . Total revenue, which includes postage revenue, was$785.1 million . For the third quarter of fiscal 2020, the Joint Venture reported$752.5 million of solutions revenue and$808.2 million of total revenue. Solutions revenue for the current period reflects the$18.3 million net favorable impact of acquisitions and divestitures including the negative$2.2 million impact during the quarter from the divestiture of the Capacity Management business which closed onDecember 2, 2020 . The quarter was also negatively impacted by the COVID-19 pandemic, which was partially offset by new sales volumes across all three segments. -
Net income was
$2.2 million , resulting in net income of$0.01 per diluted share. For the third quarter of fiscal 2020, the Joint Venture reported net income of$31.2 million or$0.10 per diluted unit. Net income for the current period was positively impacted by new sales volumes, productivity improvements and cost initiatives, partially offset by the COVID-19 pandemic. -
Adjusted net income was
$110.1 million , resulting in adjusted net income of$0.34 per diluted share. For the third quarter of fiscal 2020, the Joint Venture reported adjusted net income of$106.3 million or$0.33 per diluted unit. Net income per diluted share and adjusted net income per diluted share for the current period is based on 325 million shares compared to 322 million units in the prior year period. -
Adjusted EBITDA was
$233.4 million for the current period. For the third quarter of fiscal 2020, the Joint Venture reported adjusted EBITDA of$232.6 million . The results in the current quarter reflect continued productivity and synergy realization which offset investments and COVID-19 revenue impacts.
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
Proposed Merger with
On
Guidance
Due to the recently proposed Merger, we will no longer be providing financial guidance.
Webcast Information
Investors and other interested parties are invited to listen to the conference call via the Company's website at https://ir.changehealthcare.com/. The webcast will be available for on-demand listening at the aforementioned URL until
About
CHNG-IR
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and businesses of
Factors that could cause Change Healthcare’s actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; risks related to disruption of management’s attention from Change Healthcare’s ongoing business operations due to the transaction; the effect of the announcement of the proposed merger on Change Healthcare’s relationships with its customers, operating results and business generally; the risk that the proposed merger will not be consummated in a timely manner; exceeding the expected costs of the merger; Change Healthcare’s ability to retain or renew existing customers and attract new customers; macroeconomic and industry trends and adverse developments in the debt, consumer credit and financial services markets; uncertainty and risks related to the impact of the COVID-19 pandemic on the national and global economy, Change Healthcare’s business, suppliers, customers, and employees; Change Healthcare’s ability to connect a large number of payers and providers; Change Healthcare’s ability to provide competitive services and prices while maintaining its margins; further consolidation in end-customer markets; Change Healthcare’s ability to effectively manage costs; Change Healthcare’s ability to effectively develop and maintain relationships with channel partners; a decline in transaction volume in the
Change Healthcare’s forward-looking statements speak only as of the date of this press release or as of the date they are made.
Additional Information and Where to Find It
This press release may be deemed solicitation material in respect of the proposed acquisition of
Investors will be able to obtain free of charge the proxy statement and other documents filed with the
The directors, executive officers and certain other members of management and employees of
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 regards 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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Three Months Ended |
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2020 |
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2019 |
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2019 |
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Change
|
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Revenue: |
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|
|
|
|
|
|
|
|||
Solutions revenue |
|
$ |
735,264 |
|
|
$ |
— |
|
|
$ |
752,533 |
|
Postage revenue |
|
|
49,877 |
|
|
|
— |
|
|
|
55,693 |
|
Total revenue |
|
|
785,141 |
|
|
|
— |
|
|
|
808,226 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Cost of operations (exclusive of depreciation and amortization below) |
|
|
332,373 |
|
|
|
— |
|
|
|
339,413 |
|
Research and development |
|
|
58,323 |
|
|
|
— |
|
|
|
50,618 |
|
Sales, marketing, general and administrative |
|
|
161,959 |
|
|
|
1,115 |
|
|
|
185,661 |
|
Customer postage |
|
|
49,877 |
|
|
|
— |
|
|
|
55,693 |
|
Depreciation and amortization |
|
|
151,143 |
|
|
|
— |
|
|
|
77,330 |
|
Accretion and changes in estimate with related parties, net |
|
|
956 |
|
|
|
(1,191 |
) |
|
|
3,245 |
|
Gain on sale of businesses |
|
|
(32,217 |
) |
|
|
— |
|
|
|
— |
|
Total operating expenses |
|
|
722,414 |
|
|
|
(76 |
) |
|
|
711,960 |
|
Operating income (loss) |
|
|
62,727 |
|
|
|
76 |
|
|
|
96,266 |
|
Non-operating (income) and expense |
|
|
|
|
|
|
|
|
|
|||
Interest expense, net |
|
|
61,439 |
|
|
|
1 |
|
|
|
66,353 |
|
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
900 |
|
Loss on extinguishment of debt |
|
|
6,145 |
|
|
|
— |
|
|
|
2,514 |
|
Loss from |
|
|
— |
|
|
|
8,764 |
|
|
|
— |
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
(74,084 |
) |
|
|
— |
|
Other, net |
|
|
(2,491 |
) |
|
|
(580 |
) |
|
|
(2,718 |
) |
Total non-operating (income) and expense |
|
|
65,093 |
|
|
|
(65,899 |
) |
|
|
67,049 |
|
Income (loss) before income tax provision (benefit) |
|
|
(2,366 |
) |
|
|
65,975 |
|
|
|
29,217 |
|
Income tax provision (benefit) |
|
|
(4,562 |
) |
|
|
15,240 |
|
|
|
(1,974 |
) |
Net income (loss) |
|
$ |
2,196 |
|
|
$ |
50,735 |
|
|
$ |
31,191 |
|
|
|
|
|
|
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Net income (loss) per common share: |
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Basic |
|
$ |
0.01 |
|
|
$ |
0.35 |
|
|
$ |
0.10 |
|
Diluted |
|
$ |
0.01 |
|
|
$ |
0.35 |
|
|
$ |
0.10 |
|
Weighted average common shares outstanding: (1) |
|
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|
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|
|
|
|||
Basic |
|
|
321,013,595 |
|
|
|
143,392,295 |
|
|
|
319,387,487 |
|
Diluted (2) |
|
|
324,815,524 |
|
|
|
146,201,860 |
|
|
|
322,197,051 |
|
(1) |
Prior to the McKesson exit, common units of |
(2) |
Diluted shares outstanding includes the dilutive impact of tangible equity units and equity compensation arrangements. |
Consolidated Statements of Operations Year to Date (unaudited and amounts in thousands, except share and per share amounts) |
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Nine Months Ended |
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2020 |
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2019 |
|
2019 |
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Change
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Revenue: |
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Solutions revenue |
|
$ |
2,089,589 |
|
|
$ |
— |
|
|
$ |
2,288,305 |
|
|
Postage revenue |
|
|
145,672 |
|
|
|
— |
|
|
|
171,288 |
|
|
Total revenue |
|
|
2,235,261 |
|
|
|
— |
|
|
|
2,459,593 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
Cost of operations (exclusive of depreciation and amortization below) |
|
|
977,568 |
|
|
|
— |
|
|
|
998,943 |
|
|
Research and development |
|
|
168,110 |
|
|
|
— |
|
|
|
151,778 |
|
|
Sales, marketing, general and administrative |
|
|
499,039 |
|
|
|
2,504 |
|
|
|
567,586 |
|
|
Customer postage |
|
|
145,672 |
|
|
|
— |
|
|
|
171,288 |
|
|
Depreciation and amortization |
|
|
436,552 |
|
|
|
— |
|
|
|
226,094 |
|
|
Accretion and changes in estimate with related parties, net |
|
|
10,414 |
|
|
|
47,172 |
|
|
|
10,339 |
|
|
Gain on sale of businesses |
|
|
(60,487 |
) |
|
|
— |
|
|
|
— |
|
|
Total operating expenses |
|
|
2,176,868 |
|
|
|
49,676 |
|
|
|
2,126,028 |
|
|
Operating income (loss) |
|
|
58,393 |
|
|
|
(49,676 |
) |
|
|
333,565 |
|
|
Non-operating (income) and expense |
|
|
|
|
|
|
|
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|
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Interest expense, net |
|
|
185,733 |
|
|
|
1 |
|
|
|
219,661 |
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
— |
|
|
|
1,809 |
|
|
Loss on extinguishment of debt |
|
|
7,634 |
|
|
|
— |
|
|
|
19,414 |
|
|
Loss from |
|
|
— |
|
|
|
104,497 |
|
|
|
— |
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
(71,649 |
) |
|
|
— |
|
|
Other, net |
|
|
(1,443 |
) |
|
|
(1,245 |
) |
|
|
(10,881 |
) |
|
Total non-operating (income) and expense |
|
|
188,924 |
|
|
|
31,604 |
|
|
|
230,003 |
|
|
Income (loss) before income tax provision (benefit) |
|
|
(130,531 |
) |
|
|
(81,280 |
) |
|
|
103,562 |
|
|
Income tax provision (benefit) |
|
|
(31,411 |
) |
|
|
(564 |
) |
|
|
589 |
|
|
Net income (loss) |
|
$ |
(99,120 |
) |
|
$ |
(80,716 |
) |
|
$ |
102,973 |
|
|
|
|
|
|
|
|
|
|
|
|
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Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(0.31 |
) |
|
$ |
(0.67 |
) |
|
$ |
0.35 |
|
|
Diluted |
|
$ |
(0.31 |
) |
|
$ |
(0.67 |
) |
|
$ |
0.34 |
|
|
Weighted average common shares outstanding: (1) |
|
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|
|
|
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|
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|
||||
Basic |
|
|
320,570,092 |
|
|
|
120,657,859 |
|
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|
296,653,051 |
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|
Diluted |
|
|
320,570,092 |
|
|
|
120,657,859 |
|
|
|
300,058,108 |
|
(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 |
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Current assets: |
|
|
|
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|
||
Cash and cash equivalents |
|
$ |
137,357 |
|
|
$ |
410,405 |
|
Accounts receivable, net |
|
|
697,948 |
|
|
|
740,105 |
|
Contract assets, net |
|
|
125,509 |
|
|
|
132,704 |
|
Prepaid expenses and other current assets |
|
|
127,442 |
|
|
|
117,967 |
|
Total current assets |
|
|
1,088,256 |
|
|
|
1,401,181 |
|
Property and equipment, net |
|
|
183,843 |
|
|
|
206,196 |
|
Operating lease right-of-use assets, net |
|
|
99,258 |
|
|
|
— |
|
|
|
|
4,105,413 |
|
|
|
3,795,325 |
|
Intangible assets, net |
|
|
4,302,594 |
|
|
|
4,365,806 |
|
Investment in business purchase option |
|
|
— |
|
|
|
146,500 |
|
Other noncurrent assets, net |
|
|
368,448 |
|
|
|
192,372 |
|
Total assets |
|
$ |
10,147,812 |
|
|
$ |
10,107,380 |
|
Liabilities |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
59,664 |
|
|
$ |
68,169 |
|
Accrued expenses |
|
|
502,992 |
|
|
|
390,294 |
|
Deferred revenue |
|
|
393,823 |
|
|
|
302,313 |
|
Due to related parties, net |
|
|
11,606 |
|
|
|
20,234 |
|
Current portion of long-term debt |
|
|
37,019 |
|
|
|
278,779 |
|
Current portion of operating lease liabilities |
|
|
30,813 |
|
|
|
— |
|
Total current liabilities |
|
|
1,035,917 |
|
|
|
1,059,789 |
|
Long-term debt, excluding current portion |
|
|
4,780,828 |
|
|
|
4,710,294 |
|
Long-term operating lease liabilities |
|
|
80,789 |
|
|
|
— |
|
Deferred income tax liabilities |
|
|
618,397 |
|
|
|
615,904 |
|
Tax receivable agreement obligations to related parties |
|
|
99,614 |
|
|
|
177,826 |
|
Tax receivable agreement obligations |
|
|
228,294 |
|
|
|
164,633 |
|
Other long-term liabilities |
|
|
70,235 |
|
|
|
93,487 |
|
Total liabilities |
|
|
6,914,074 |
|
|
|
6,821,933 |
|
Commitments and contingencies |
|
|
|
|
|
|
||
Stockholders' Equity |
|
|
|
|
|
|
||
Common Stock (par value, |
|
|
305 |
|
|
|
303 |
|
Preferred stock (par value, |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
4,253,567 |
|
|
|
4,222,580 |
|
Accumulated other comprehensive income (loss) |
|
|
9,467 |
|
|
|
(7,372 |
) |
Accumulated deficit |
|
|
(1,029,601 |
) |
|
|
(930,064 |
) |
Total stockholders' equity |
|
|
3,233,738 |
|
|
|
3,285,447 |
|
Total liabilities and stockholders' equity |
|
$ |
10,147,812 |
|
|
$ |
10,107,380 |
|
Consolidated Statements of Cash Flows (unaudited and amounts in thousands) |
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Nine Months Ended |
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|
|
2020 |
|
2019 |
|
2019 |
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Change
|
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Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net income (loss) |
|
$ |
(99,120 |
) |
|
$ |
(80,716 |
) |
|
$ |
102,973 |
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|||
Loss from |
|
|
— |
|
|
|
104,497 |
|
|
|
— |
|
Depreciation and amortization |
|
|
436,552 |
|
|
|
— |
|
|
|
226,094 |
|
Amortization of capitalized software developed for sale |
|
|
550 |
|
|
|
— |
|
|
|
10,456 |
|
Accretion and changes in estimate, net |
|
|
8,429 |
|
|
|
— |
|
|
|
10,339 |
|
Equity compensation |
|
|
34,858 |
|
|
|
— |
|
|
|
24,914 |
|
Deferred income tax expense (benefit) |
|
|
(33,905 |
) |
|
|
(564 |
) |
|
|
(189 |
) |
Amortization of debt discount and issuance costs |
|
|
24,587 |
|
|
|
403 |
|
|
|
14,406 |
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
— |
|
|
|
1,809 |
|
Gain on sale of businesses |
|
|
(60,487 |
) |
|
|
— |
|
|
|
— |
|
Loss on extinguishment of debt |
|
|
7,634 |
|
|
|
— |
|
|
|
19,414 |
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
(71,649 |
) |
|
|
— |
|
Non-cash lease expense |
|
|
21,930 |
|
|
|
— |
|
|
|
— |
|
Other, net |
|
|
7,681 |
|
|
|
1,526 |
|
|
|
3,374 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable, net |
|
|
28,331 |
|
|
|
— |
|
|
|
14,719 |
|
Contract assets, net |
|
|
5,201 |
|
|
|
— |
|
|
|
19,525 |
|
Prepaid expenses and other assets |
|
|
(69,609 |
) |
|
|
(1,335 |
) |
|
|
(23,224 |
) |
Accounts payable |
|
|
(15,785 |
) |
|
|
— |
|
|
|
(32,031 |
) |
Accrued expenses and other liabilities |
|
|
68,708 |
|
|
|
47,255 |
|
|
|
13,994 |
|
Deferred revenue |
|
|
124,679 |
|
|
|
— |
|
|
|
(1,213 |
) |
Due to the Joint Venture, net |
|
|
— |
|
|
|
583 |
|
|
|
— |
|
Due to related party, net |
|
|
— |
|
|
|
— |
|
|
|
(4,404 |
) |
Net cash provided by (used in) operating activities |
|
|
487,234 |
|
|
|
— |
|
|
|
400,956 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Capitalized expenditures |
|
|
(182,929 |
) |
|
|
— |
|
|
|
(187,177 |
) |
Acquisitions, net of cash acquired |
|
|
(439,483 |
) |
|
|
— |
|
|
|
— |
|
Proceeds from sale of businesses |
|
|
117,124 |
|
|
|
— |
|
|
|
— |
|
Proceeds from sale of real estate |
|
|
|
|
|
— |
|
|
|
29,813 |
|
|
Investments in businesses |
|
|
— |
|
|
|
— |
|
|
|
(19,010 |
) |
Investment in the Joint Venture |
|
|
— |
|
|
|
(610,784 |
) |
|
|
— |
|
Investment in debt and equity securities of the Joint Venture |
|
|
— |
|
|
|
(278,875 |
) |
|
|
— |
|
Other, net |
|
|
1,100 |
|
|
|
7,332 |
|
|
|
— |
|
Net cash provided by (used in) investing activities |
|
|
(504,188 |
) |
|
|
(882,327 |
) |
|
|
(176,374 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Payments on Revolving Facility |
|
|
(250,000 |
) |
|
|
— |
|
|
|
— |
|
Payments on Term Loan Facility |
|
|
(265,000 |
) |
|
|
— |
|
|
|
(1,052,750 |
) |
Proceeds from issuance of Senior Notes |
|
|
325,000 |
|
|
|
— |
|
|
|
— |
|
Payments under tax receivable agreements |
|
|
(20,691 |
) |
|
|
— |
|
|
|
(27,227 |
) |
Receipts (payments) on derivative instruments |
|
|
(22,255 |
) |
|
|
— |
|
|
|
2,403 |
|
Employee tax withholding on vesting of equity compensation awards |
|
|
(3,425 |
) |
|
|
— |
|
|
|
— |
|
Payments on deferred financing obligations |
|
|
(9,081 |
) |
|
|
— |
|
|
|
(2,441 |
) |
Payment of senior amortizing notes |
|
|
(11,599 |
) |
|
|
(7,332 |
) |
|
|
— |
|
Payment of debt issued to |
|
|
— |
|
|
|
— |
|
|
|
(7,332 |
) |
Proceeds from exercise of equity awards |
|
|
4,158 |
|
|
|
2,105 |
|
|
|
— |
|
Capital contribution from Members from exercise of equity compensation awards |
|
|
— |
|
|
|
— |
|
|
|
2,338 |
|
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 |
|
|
(6,650 |
) |
|
|
(1,421 |
) |
|
|
(3,471 |
) |
Net cash provided by (used in) financing activities |
|
|
(259,543 |
) |
|
|
882,327 |
|
|
|
(199,505 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
3,449 |
|
|
|
— |
|
|
|
526 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
(273,048 |
) |
|
|
— |
|
|
|
25,603 |
|
Cash and cash equivalents at beginning of period |
|
|
410,405 |
|
|
|
3,409 |
|
|
|
48,894 |
|
Cash and cash equivalents at end of period |
|
$ |
137,357 |
|
|
$ |
3,409 |
|
|
$ |
74,497 |
|
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) |
|
$ |
2,196 |
|
|
$ |
50,735 |
|
$ |
31,191 |
|
Income tax provision (benefit) |
|
|
(4,562 |
) |
|
|
15,240 |
|
|
(1,974 |
) |
Income (loss) before income tax provision (benefit) |
|
|
(2,366 |
) |
|
|
65,975 |
|
|
29,217 |
|
Amortization of capitalized software developed for sale |
|
|
460 |
|
|
|
|
|
|
3,755 |
|
Depreciation and amortization |
|
|
151,143 |
|
|
|
|
|
|
77,330 |
|
Interest expense, net |
|
|
61,439 |
|
|
|
|
|
|
66,353 |
|
Equity compensation |
|
|
10,944 |
|
|
|
|
|
|
9,707 |
|
Acquisition accounting adjustments |
|
|
20,601 |
|
|
|
|
|
|
440 |
|
Acquisition and divestiture-related costs |
|
|
2,661 |
|
|
|
|
|
|
1,481 |
|
Integration and related costs |
|
|
9,688 |
|
|
|
|
|
|
21,470 |
|
Strategic initiatives, duplicative and transition costs |
|
|
4,324 |
|
|
|
|
|
|
4,645 |
|
Severance costs |
|
|
2,591 |
|
|
|
|
|
|
4,191 |
|
Accretion and changes in estimate, net |
|
|
(2,759 |
) |
|
|
|
|
|
3,245 |
|
Management fees and related costs |
|
|
— |
|
|
|
|
|
|
2,648 |
|
Impairment of long-lived assets and other |
|
|
658 |
|
|
|
|
|
|
(435 |
) |
Gain on sale of business |
|
|
(32,217 |
) |
|
|
|
|
|
— |
|
Contingent consideration |
|
|
— |
|
|
|
|
|
|
900 |
|
Loss on extinguishment of debt |
|
|
6,145 |
|
|
|
|
|
|
2,514 |
|
Other non-routine, net |
|
|
112 |
|
|
|
|
|
|
5,166 |
|
Adjusted EBITDA |
|
$ |
233,424 |
|
|
|
|
|
$ |
232,627 |
|
(1) |
Prior to the McKesson exit, |
Reconciliation of Net Income (Loss) to Adjusted EBITDA Year to Date (unaudited and amounts in thousands) |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|||
|
|
Nine Months Ended |
||||||||||
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
|
Change
|
||||||||
Net income (loss) |
|
$ |
(99,120 |
) |
|
$ |
(80,716 |
) |
|
$ |
102,973 |
|
Income tax provision (benefit) |
|
|
(31,411 |
) |
|
|
(564 |
) |
|
|
589 |
|
Income (loss) before income tax provision (benefit) |
|
|
(130,531 |
) |
|
|
(81,280 |
) |
|
|
103,562 |
|
Amortization of capitalized software developed for sale |
|
|
550 |
|
|
|
|
|
|
10,456 |
|
|
Depreciation and amortization |
|
|
436,552 |
|
|
|
|
|
|
226,094 |
|
|
Interest expense, net |
|
|
185,733 |
|
|
|
|
|
|
219,661 |
|
|
Equity compensation |
|
|
34,858 |
|
|
|
|
|
|
24,914 |
|
|
Acquisition accounting adjustments |
|
|
103,826 |
|
|
|
|
|
|
1,367 |
|
|
Acquisition and divestiture-related costs |
|
|
10,119 |
|
|
|
|
|
|
2,554 |
|
|
Integration and related costs |
|
|
27,581 |
|
|
|
|
|
|
66,976 |
|
|
Strategic initiatives, duplicative and transition costs |
|
|
13,169 |
|
|
|
|
|
|
14,334 |
|
|
Severance costs |
|
|
10,467 |
|
|
|
|
|
|
14,290 |
|
|
Accretion and changes in estimate, net |
|
|
8,429 |
|
|
|
|
|
|
10,339 |
|
|
Management fees and related costs |
|
|
— |
|
|
|
|
|
|
7,708 |
|
|
Impairment of long-lived assets and other |
|
|
14,418 |
|
|
|
|
|
|
(1,275 |
) |
|
Gain on sale of business |
|
|
(60,487 |
) |
|
|
|
|
|
— |
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
|
|
|
1,809 |
|
|
Loss on extinguishment of debt |
|
|
7,634 |
|
|
|
|
|
|
19,414 |
|
|
Other non-routine, net |
|
|
2,801 |
|
|
|
|
|
|
9,174 |
|
|
Adjusted EBITDA |
|
$ |
662,119 |
|
|
|
|
|
$ |
731,377 |
|
(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) |
|
$ |
2,196 |
|
|
$ |
50,735 |
|
$ |
31,191 |
|
|
Amortization expense resulting from acquisition method adjustments |
|
|
117,075 |
|
|
|
|
|
|
34,922 |
|
|
EBITDA adjustments |
|
|
22,748 |
|
|
|
|
|
|
55,972 |
|
|
Tax effect of EBITDA adjustments and amortization expense |
|
|
(31,945 |
) |
|
|
|
|
|
(15,760 |
) |
|
Adjusted net income (loss) |
|
$ |
110,074 |
|
|
|
|
|
$ |
106,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Adjusted net income (loss) per diluted share (2) |
|
$ |
0.34 |
|
|
|
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|||||
|
Nine Months Ended |
|||||||||||
|
2020 |
|
2019 |
|
2019 |
|||||||
|
|
|
|
Change
|
||||||||
Net income (loss) |
$ |
(99,120 |
) |
$ |
(80,716 |
) |
|
$ |
102,973 |
|
||
Amortization expense resulting from acquisition method adjustments |
|
345,972 |
|
|
|
|
|
104,624 |
|
|||
EBITDA adjustments |
|
169,815 |
|
|
|
|
|
171,604 |
|
|||
Tax effect of EBITDA adjustments and amortization expense |
|
(121,911 |
) |
|
|
|
|
(44,751 |
) |
|||
Adjusted net income (loss) |
$ |
294,756 |
|
|
|
|
$ |
334,450 |
|
|||
|
|
|
|
|
|
|
|
|||||
Adjusted net income (loss) per diluted share (2) |
$ |
0.92 |
|
|
|
|
$ |
1.11 |
|
|||
(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 |
|
$ |
372,212 |
|
|
|
N/A |
|
$ |
387,331 |
Network Solutions |
|
|
192,588 |
|
|
|
N/A |
|
|
150,697 |
Technology-Enabled Services |
|
|
222,514 |
|
|
|
N/A |
|
|
241,465 |
Postage and Eliminations (3) |
|
|
22,006 |
|
|
|
N/A |
|
|
28,733 |
Purchase Accounting Adjustment (4) |
|
|
(24,179 |
) |
|
|
N/A |
|
|
— |
Net revenue |
|
$ |
785,141 |
|
|
|
N/A |
|
$ |
808,226 |
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Software and Analytics |
|
$ |
120,779 |
|
|
|
N/A |
|
$ |
127,793 |
Network Solutions |
|
|
103,847 |
|
|
|
N/A |
|
|
87,571 |
Technology-Enabled Services |
|
|
8,798 |
|
|
|
N/A |
|
|
17,262 |
Postage and Eliminations |
|
|
— |
|
|
|
N/A |
|
|
— |
Total adjusted EBITDA |
|
$ |
233,424 |
|
|
|
N/A |
|
$ |
232,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
||||||||
|
|
2020 |
|
2019 |
|
2019 |
||||
|
|
|
|
|
||||||
Segment revenue |
|
|
|
|
|
|
|
|
|
|
Software and Analytics |
|
$ |
1,118,661 |
|
|
|
N/A |
|
$ |
1,194,142 |
Network Solutions |
|
|
519,509 |
|
|
|
N/A |
|
|
436,585 |
Technology-Enabled Services |
|
|
642,037 |
|
|
|
N/A |
|
|
736,240 |
Postage and Eliminations (3) |
|
|
73,142 |
|
|
|
N/A |
|
|
92,626 |
Purchase Accounting Adjustment (4) |
|
|
(118,088 |
) |
|
|
N/A |
|
|
— |
Net revenue |
|
$ |
2,235,261 |
|
|
|
N/A |
|
$ |
2,459,593 |
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
Software and Analytics |
|
$ |
382,103 |
|
|
|
N/A |
|
$ |
415,287 |
Network Solutions |
|
|
268,858 |
|
|
|
N/A |
|
|
246,319 |
Technology-Enabled Services |
|
|
11,158 |
|
|
|
N/A |
|
|
69,769 |
Postage and Eliminations |
|
|
— |
|
|
|
N/A |
|
|
— |
Total adjusted EBITDA |
|
$ |
662,119 |
|
|
|
N/A |
|
$ |
731,375 |
(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 nine 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) |
|||||||||||
|
|
|
|
|
|
|
|
|
|
||
|
|
Nine Months Ended |
|||||||||
|
|
2020 |
|
2019 |
|
2019 |
|||||
|
|
|
|
Change
|
|||||||
Cash provided by (used in) operating activities (2) |
|
$ |
487,234 |
|
|
$ |
— |
|
$ |
400,956 |
|
Capital expenditures |
|
|
(182,929 |
) |
|
|
— |
|
|
(187,177 |
) |
Free cash flow |
|
|
304,305 |
|
|
|
— |
|
|
213,779 |
|
Adjustments to free cash flow (3): |
|
|
|
|
|
|
|
|
|
||
Integration and related costs |
|
|
27,581 |
|
|
|
|
|
|
66,976 |
|
Strategic initiatives, duplicative and transition costs |
|
|
13,169 |
|
|
|
|
|
|
14,334 |
|
Severance costs |
|
|
10,467 |
|
|
|
|
|
|
14,290 |
|
Integration and strategic capital expenditures |
|
|
9,494 |
|
|
|
|
|
|
15,532 |
|
Adjusted free cash flow |
|
$ |
365,016 |
|
|
|
|
|
$ |
324,911 |
|
(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/20210203005152/en/
Investor Relations
404-338-2225
Evan.Smith@changehealthcare.com
630-624-9142
Katherine.Wojtecki@changehealthcare.com
Source: