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27.10.2010 20:04:00
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MedAssets Reports Third Quarter and Nine-Month 2010 Financial Results
MedAssets, Inc. (NASDAQ: MDAS) today announced results for its third quarter and nine-month period ended September 30, 2010, as summarized below:
| (In millions, except per share) | 3Q-10 a | 3Q-09 | 9 mos-10 | 9 mos-09 | ||||||||
| Net Revenue: | ||||||||||||
| Revenue Cycle Management (RCM) | $ | 60.5 | $ | 51.6 | $ | 176.4 | $ | 149.4 | ||||
| Spend Management (SM) | 35.3 | 30.8 | 108.0 | 96.2 | ||||||||
| Total Net Revenue | 95.9 | 82.4 | 284.4 | 245.6 | ||||||||
| Net Income | 8.5 | 5.9 | 17.3 | 10.0 | ||||||||
| Earnings per share (EPS) - diluted | 0.14 | 0.10 | 0.29 | 0.17 | ||||||||
| Non-GAAP adjusted EBITDA | 33.6 | 28.5 | 86.8 | 75.4 | ||||||||
| Non-GAAP cash EPS - diluted | $ | 0.25 | $ | 0.22 | $ | 0.61 | $ | 0.54 | ||||
| Weighted average shares - diluted | 59.8 | 57.9 | 59.3 | 57.2 | ||||||||
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(a) Column amounts may not add to total amount due to rounding |
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Net Revenue
Third Quarter
Total net revenue for the third quarter of 2010 increased 16.3% to $95.9 million from $82.4 million in the third quarter of 2009. RCM segment revenue growth of 17.2% was driven by an increase in revenue cycle services and solid growth in technology solutions, offset by a decline in decision support license fees. Revenue growth of 14.8% in the SM segment was generated by continued strong demand for medical device consulting and strategic sourcing services, and 8.8% growth in net administrative fees in its group purchasing organization.
Nine-month Period
Total net revenue for the nine-month period ended September 30, 2010 increased 15.8% to $284.4 million from $245.6 million in the first nine months of 2009.
Non-GAAP Adjusted EBITDA
Third Quarter
In the third quarter of 2010, non-GAAP total adjusted EBITDA was $33.6 million, or 35.0% of total net revenue, a 17.5% increase over non-GAAP total adjusted EBITDA of $28.5 million, or 34.6% of total net revenue, in the third quarter of 2009.
Nine-month Period
In the first nine months of 2010, non-GAAP total adjusted EBITDA was $86.8 million, or 30.5% of total net revenue, a 15.1% increase over non-GAAP total adjusted EBITDA of $75.4 million, or 30.7% of total net revenue, in the first nine months of 2009.
Net Income and Earnings per Share
Third Quarter
Net income in the third quarter of 2010 was $8.5 million, or $0.14 per diluted share, versus net income of $5.9 million, or $0.10 per diluted share, in the third quarter of 2009. Non-GAAP cash EPS, defined as EPS excluding acquisition-related intangible amortization, share-based compensation and other acquisition-related expense items on a tax-adjusted basis, was $0.25 per diluted share in the third quarter of 2010, versus non-GAAP cash EPS of $0.22 per diluted share in the third quarter of 2009.
Nine-month Period
Net income in the first nine months of 2010 was $17.3 million, or $0.29 per diluted share, versus net income of $10.0 million, or $0.17 per diluted share, in the first nine months of 2009. Non-GAAP cash EPS was $0.61 per diluted share in the first nine months of 2010, compared to non-GAAP cash EPS of $0.54 per diluted share in the first nine months of 2009.
Cash Flow and Capital Resources
Net cash provided by operating activities in the first nine months of 2010 increased 17.9% to $47.1 million from $40.0 million in the first nine months of 2009. MedAssets’ balance sheet at September 30, 2010 included $173.5 million in total bank debt, which represented leverage of approximately 1.4 times trailing 12-month non-GAAP adjusted EBITDA.
Broadlane Transaction Update
MedAssets anticipates closing its proposed acquisition of The Broadlane Group within the next 30 days, and the Company is in the process of completing the debt financing to fund the acquisition. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 was terminated with respect to the proposed acquisition on October 14, 2010, and the transaction is subject only to customary closing conditions.
Financial Guidance
Below is the updated 2010 financial guidance for MedAssets on a standalone basis, excluding acquisition-related expenses to be incurred in the fourth quarter due to the Broadlane transaction:
| (In millions, except EPS) | 12 Months | ||
| Net Revenue: | ending 12/31/10 | ||
| Revenue Cycle Management | $ | 237 – 241 | |
| Spend Management | 150 – 154 | ||
| Total Net Revenue | 389 – 393 | ||
| EPS – diluted | 0.44 – 0.49 | ||
| Non-GAAP adjusted EBITDA | 120 – 124 | ||
| Non-GAAP cash EPS - diluted | $ | 0.85 – 0.90 | |
At September 30, 2010, the Company’s rolling 12-month non-GAAP contracted revenue was an estimated $375.9 million ($229.9 million from the RCM segment and $146.0 million from the SM segment). This is a year-over-year increase of 5.6% on a consolidated basis, and a 2.3% increase when compared to the rolling 12-month total of $367.5 million as of June 30, 2010.
Conference Call Information
| Time/Date: | 5:00 p.m. ET today, Wednesday, October 27, 2010 | ||
| Phone: | 866-811-1812 (or 702-696-4559 international/local), conference ID 16593425 | ||
| Webcast: |
http://ir.medassets.com, "Events & Presentations” page |
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| Replay: | Webcast will be archived for at least 30 days, or call 800-642-1687 (conf ID # 16593425) | ||
The Company intends to file its Form 10-Q for the three and nine-month periods ended September 30, 2010 with the Securities and Exchange Commission on or before November 9, 2010, and this filing will contain additional information about the Company’s results of operations.
About MedAssets
MedAssets (NASDAQ: MDAS) partners with healthcare providers to improve their financial strength by implementing spend management and revenue cycle solutions that help control cost, improve margins and cash flow, increase regulatory compliance, and optimize operational efficiency. MedAssets serves more than 125 health systems, 3,300 hospitals and 40,000 non-acute healthcare providers. For more information, go to 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 in its financial and operational decision-making, the Company supplements its consolidated financial statements presented on a GAAP basis with non-GAAP financial information, including: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; diluted cash EPS; 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 these 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. Forward-looking statements 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: 2010 financial guidance, costs and revenue growth, margin and other financial projections; contracted revenue forecasts; and the company’s ability to successfully integrate and capitalize on synergies associated with the proposed acquisition of The Broadlane Group and any other future acquisitions. Investors are cautioned that any forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that 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; client losses; and adverse developments with respect to the operation or performance of the Company’s business units, The Broadlane Group 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, 2009 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.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||
|
(UNAUDITED) |
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| In 000s, except per share data | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||||
| 2010 | 2009 | % Change | 2010 | 2009 | % Change | ||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Administrative fees, net | $ | 27,883 | $ | 25,631 | 8.8 | % | $ | 84,437 | $ | 78,495 | 7.6 | % | |||||||||||
| Other service fees | 67,969 | 56,762 | 19.7 | % | 199,948 | 167,091 | 19.7 | % | |||||||||||||||
| Total net revenue | 95,852 | 82,393 | 16.3 | % | 284,385 | 245,586 | 15.8 | % | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Cost of revenue | 22,697 | 21,472 | 5.7 | % | 67,176 | 55,830 | 20.3 | % | |||||||||||||||
| Product development expenses | 4,666 | 4,156 | 12.3 | % | 14,859 | 15,424 | -3.7 | % | |||||||||||||||
| Selling and marketing expenses | 8,671 | 10,038 | -13.6 | % | 35,348 | 36,529 | -3.2 | % | |||||||||||||||
| General and administrative expenses | 29,196 | 23,039 | 26.7 | % | 91,425 | 77,971 | 17.3 | % | |||||||||||||||
| Acquisition related expenses | 2,482 | - | 100.0 | % | 4,351 | - | 100.0 | % | |||||||||||||||
| Depreciation | 5,235 | 3,125 | 67.5 | % | 14,068 | 9,020 | 56.0 | % | |||||||||||||||
| Amortization of intangibles | 5,596 | 7,018 | -20.3 | % | 17,706 | 21,029 | -15.8 | % | |||||||||||||||
| Total operating expenses | 78,543 | 68,848 | 14.1 | % | 244,933 | 215,803 | 13.5 | % | |||||||||||||||
| Operating income | 17,309 | 13,545 | 27.8 | % | 39,452 | 29,783 | 32.5 | % | |||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest (expense) | (3,247 | ) | (4,259 | ) | -23.8 | % | (10,986 | ) | (14,015 | ) | -21.6 | % | |||||||||||
| Other income | 84 | 223 | -62.3 | % | 286 | 404 | -29.2 | % | |||||||||||||||
| Income before income taxes | 14,146 | 9,509 | 48.8 | % | 28,752 | 16,172 | 77.8 | % | |||||||||||||||
| Income tax expense | 5,685 | 3,613 | 57.3 | % | 11,477 | 6,196 | 85.2 | % | |||||||||||||||
| Net income | 8,461 | 5,896 | 43.5 | % | 17,275 | 9,976 | 73.2 | % | |||||||||||||||
| Basic net income per share | 0.15 | 0.11 | 0.31 | 0.18 | |||||||||||||||||||
| Diluted net income per share | $ | 0.14 | $ | 0.10 | 40.0 | % | $ | 0.29 | $ | 0.17 | 70.6 | % | |||||||||||
| Weighted average shares — basic | 56,717 | 54,792 | 56,238 | 54,589 | |||||||||||||||||||
| Weighted average shares — diluted | 59,786 | 57,855 | 3.3 | % | 59,340 | 57,223 | 3.7 | % | |||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (UNAUDITED) | ||||||||
| September 30, | December 31, | |||||||
| In 000s, except shares | 2010 | 2009 | ||||||
| ASSETS | ||||||||
| Current | ||||||||
| Cash and cash equivalents | $ | 8 | $ | 5,498 | ||||
| Accounts receivable, net of allowances of $3,720 and $4,189 as of September 30, 2010 and | ||||||||
| December 31, 2009 | 75,692 | 67,617 | ||||||
| Deferred tax asset, current | 19,846 | 14,423 | ||||||
| Prepaid expenses and other current assets | 14,599 | 8,442 | ||||||
| Total current assets | 110,145 | 95,980 | ||||||
| Property and equipment, net | 61,318 | 54,960 | ||||||
| Other long term assets | ||||||||
| Goodwill | 512,485 | 511,861 | ||||||
| Intangible assets, net | 79,529 | 95,589 | ||||||
| Other | 18,857 | 20,154 | ||||||
| Other long term assets | 610,871 | 627,604 | ||||||
| Total assets | $ | 782,334 | $ | 778,544 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 7,325 | $ | 8,680 | ||||
| Accrued revenue share obligation and rebates | 25,153 | 31,948 | ||||||
| Accrued payroll and benefits | 6,867 | 12,874 | ||||||
| Other accrued expenses | 11,409 | 7,410 | ||||||
| Deferred revenue, current portion | 30,514 | 24,498 | ||||||
| Current portion of notes payable | 2,499 | 13,771 | ||||||
| Current portion of finance obligation | 177 | 163 | ||||||
| Total current liabilities | 83,944 | 99,344 | ||||||
| Notes payable, less current portion | 171,016 | 201,390 | ||||||
| Finance obligation, less current portion | 9,557 | 9,694 | ||||||
| Deferred revenue, less current portion | 9,057 | 7,380 | ||||||
| Deferred tax liability | 28,037 | 19,239 | ||||||
| Other long term liabilities | 2,668 | 4,125 | ||||||
| Total liabilities | 304,279 | 341,172 | ||||||
| Stockholders’ equity | ||||||||
|
Common stock, $0.01 par value, 150,000,000 shares authorized;
57,964,000 and 56,715,000 |
580 | 567 | ||||||
| Additional paid in capital | 662,133 | 639,315 | ||||||
| Accumulated other comprehensive loss | (1,028 | ) | (1,605 | ) | ||||
| Accumulated deficit | (183,630 | ) | (200,905 | ) | ||||
| Total stockholders’ equity | 478,055 | 437,372 | ||||||
| Total liabilities and stockholders’ equity | $ | 782,334 | $ | 778,544 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (UNAUDITED) | ||||||||
| Nine Months Ended, | ||||||||
| In 000s | September 30, | September 30, | ||||||
| 2010 | 2009 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 17,275 | $ | 9,976 | ||||
| Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: | ||||||||
| Bad debt expense | 643 | 3,823 | ||||||
| Depreciation | 16,236 | 10,858 | ||||||
| Amortization of intangibles | 18,216 | 21,585 | ||||||
| Loss on sale of assets | 91 | 147 | ||||||
| Non-cash stock compensation expense | 8,653 | 12,911 | ||||||
| Excess tax benefit from exercise of equity awards | (5,097 | ) | (6,073 | ) | ||||
| Amortization of debt issuance costs | 1,372 | 1,382 | ||||||
| Noncash interest expense, net | 399 | 1,049 | ||||||
| Deferred income tax expense (benefit) | 3,408 | (36 | ) | |||||
| Changes in assets and liabilities | (14,091 | ) | (15,671 | ) | ||||
| Cash provided by operating activities | 47,105 | 39,951 | ||||||
| Investing activities: | ||||||||
| Purchases of property, equipment, and software | (9,577 | ) | (9,233 | ) | ||||
| Capitalized software development costs | (11,897 | ) | (12,268 | ) | ||||
| Acquisitions, net of cash acquired | (3,160 | ) | (18,275 | ) | ||||
| Cash used in investing activities | (24,634 | ) | (39,776 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from notes payable | - | 71,797 | ||||||
| Repayment of notes payable | (41,646 | ) | (86,638 | ) | ||||
| Repayment of finance obligation | (493 | ) | (494 | ) | ||||
| Excess tax benefit from exercise of equity awards | 5,097 | 6,073 | ||||||
| Issuance of common stock | 9,081 | 8,333 | ||||||
| Cash used in financing activities | (27,961 | ) | (929 | ) | ||||
| Net decrease in cash and cash equivalents | (5,490 | ) | (754 | ) | ||||
| Cash and cash equivalents, beginning of period | 5,498 | 5,429 | ||||||
| Cash and cash equivalents, end of period | $ | 8 | $ | 4,675 | ||||
| SUPPLEMENTAL SEGMENT REPORTING | |||||||||||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| In 000s | Three Months Ended | ||||||||||||||||
| September 30, | |||||||||||||||||
| 2010 | 2009 | % Change | |||||||||||||||
| Net revenue | |||||||||||||||||
| Revenue Cycle Management | $ | 60,530 | $ | 51,635 | 17.2 | % | |||||||||||
| Spend Management | 35,322 | 30,758 | 14.8 | % | |||||||||||||
| Total net revenue | $ | 95,852 | $ | 82,393 | 16.3 | % | |||||||||||
| Non-GAAP Adjusted EBITDA | % margin | % margin | |||||||||||||||
| Revenue Cycle Management | $ | 19,681 | 32.5 | % | $ | 17,964 | 34.8 | % | 9.6 | % | |||||||
| Spend Management | 20,120 | 57.0 | % | 15,710 | 51.1 | % | 28.1 | % | |||||||||
| Corporate | (6,244 | ) | (5,126 | ) | 21.8 | % | |||||||||||
| Total non-GAAP Adjusted EBITDA | $ | 33,557 | 35.0 | % | $ | 28,548 | 34.6 | % | 17.5 | % | |||||||
| In 000s | Nine Months Ended | ||||||||||||||||
| September 30, | |||||||||||||||||
| 2010 | 2009 | % Change | |||||||||||||||
| Net revenue | |||||||||||||||||
| Revenue Cycle Management | $ | 176,420 | $ | 149,425 | 18.1 | % | |||||||||||
| Spend Management | 107,965 | 96,161 | 12.3 | % | |||||||||||||
| Total net revenue | $ | 284,385 | $ | 245,586 | 15.8 | % | |||||||||||
| Non-GAAP Adjusted EBITDA | % margin | % margin | |||||||||||||||
| Revenue Cycle Management | $ | 54,220 | 30.7 | % | $ | 44,785 | 30.0 | % | 21.1 | % | |||||||
| Spend Management | 52,062 | 48.2 | % | 46,135 | 48.0 | % | 12.8 | % | |||||||||
| Corporate | (19,519 | ) | (15,529 | ) | 25.7 | % | |||||||||||
| Total non-GAAP Adjusted EBITDA | $ | 86,763 | 30.5 | % | $ | 75,391 | 30.7 | % | 15.1 | % | |||||||
| SUPPLEMENTAL REVENUE REPORTING | |||||||||||||||||
| RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| In 000s | Three Months Ended | ||||||||||||||||
| September 30, | |||||||||||||||||
| 2010 | 2009 | % Change | |||||||||||||||
| Non-GAAP gross administrative fees | $ | 43,625 | $ | 39,222 | 11.2 | % | |||||||||||
| Other service fees | 67,969 | 56,762 | 19.7 | % | |||||||||||||
| Non-GAAP gross fees | 111,594 | RSO % | 95,984 | RSO % | 16.3 | % | |||||||||||
| Non-GAAP revenue share obligation (RSO) | (15,742 | ) | 36.1 | % | (13,591 | ) | 34.7 | % | 15.8 | % | |||||||
| Net revenue | $ | 95,852 | $ | 82,393 | 16.3 | % | |||||||||||
| In 000s | Nine Months Ended | ||||||||||||||||
| September 30, | |||||||||||||||||
| 2010 | 2009 | ||||||||||||||||
| Non-GAAP gross administrative fees | $ | 129,527 | $ | 119,498 | 8.4 | % | |||||||||||
| Other service fees | 199,948 | 167,091 | 19.7 | % | |||||||||||||
| Non-GAAP gross fees | 329,475 | RSO % | 286,589 | RSO % | 15.0 | % | |||||||||||
| Non-GAAP revenue share obligation (RSO) | (45,090 | ) | 34.8 | % | (41,003 | ) | 34.3 | % | 10.0 | % | |||||||
| Net revenue | $ | 284,385 | $ | 245,586 | 15.8 | % | |||||||||||
| 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 | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Net Income | $ | 8,461 | $ | 5,896 | $ | 17,275 | $ | 9,976 | ||||||||
| Depreciation | 5,235 | 3,125 | 14,068 | 9,020 | ||||||||||||
| Depreciation (included in cost of revenue) | 726 | 616 | 2,167 | 1,836 | ||||||||||||
| Amortization of intangibles, acquisition-related | 5,596 | 7,018 | 17,706 | 21,029 | ||||||||||||
| Amortization of intangibles, acquisition-related (included in cost of revenue) | 139 | 185 | 509 | 555 | ||||||||||||
| Interest expense, net | 3,201 | 4,255 | 10,886 | 13,994 | ||||||||||||
| Income tax expense | 5,685 | 3,613 | 11,477 | 6,196 | ||||||||||||
| Non-GAAP EBITDA | $ | 29,043 | $ | 24,708 | $ | 74,088 | $ | 62,606 | ||||||||
| Share-based compensation | 2,142 | 3,951 | 8,653 | 12,911 | ||||||||||||
| Rental income from capitalized building lease | (110 | ) | (110 | ) | (329 | ) | (329 | ) | ||||||||
| Purchase accounting adjustments | - | (1 | ) | - | 203 | |||||||||||
| Acquisition-related charges | 2,482 | - | 4,351 | - | ||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 33,557 | $ | 28,548 | $ | 86,763 | $ | 75,391 | ||||||||
| SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION | ||||||||||||||||
| EXPENSE INCLUDED IN OPERATING EXPENSES | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| In 000s | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| Amount of share-based compensation included in: | ||||||||||||||||
| Cost of revenue | 616 | 778 | 1,843 | 2,407 | ||||||||||||
| Product development expense | 124 | 90 | 457 | 695 | ||||||||||||
| Selling & marketing expense | 433 | 680 | 1,849 | 2,242 | ||||||||||||
| General & administrative expense | 969 | 2,403 | 4,504 | 7,567 | ||||||||||||
| Total | $ | 2,142 | $ | 3,951 | $ | 8,653 | $ | 12,911 | ||||||||
| See "Use of Non-GAAP Financial Measures" following financial schedules for more information on non-GAAP measures. | ||||||||||||||||
| SUPPLEMENTAL EARNINGS PER SHARE REPORTING | ||||||||||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| Per share data | September 30, | September 30, | ||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
| EPS - diluted | $ | 0.14 | $ | 0.10 | $ | 0.29 | $ | 0.17 | ||||||||
| Pre-tax non-cash, acquisition-related intangible amortization | 0.10 | 0.12 | 0.31 | 0.38 | ||||||||||||
| Pre-tax non-cash, share-based compensation | 0.04 | 0.07 | 0.15 | 0.22 | ||||||||||||
| Pre-tax, acquisition-related charges | 0.04 | - | 0.07 | - | ||||||||||||
| Tax effect on pre-tax adjustments b | (0.07 | ) | (0.07 | ) | (0.21 | ) | (0.23 | ) | ||||||||
| Non-GAAP cash EPS - diluted | $ | 0.25 | $ | 0.22 | $ | 0.61 | $ | 0.54 | ||||||||
| Weighted average shares - diluted (in 000s) | 59,786 | 57,855 | 59,340 | 57,223 | ||||||||||||
| (b) This amount reflects the tax impact on the adjustments used to derive Non-GAAP cash EPS - diluted. The Company utilizes its effective tax rate for each respective period to calculate the tax effect of each adjustment. The effective tax rate for the three months ended September 30, 2010 and 2009 was 40.2% and 38.0%, respectively, and the effective tax rate for the nine months ended September 30, 2010 and 2009 was 39.9% and 38.3%, respectively. | ||||||||||||||||
| SUPPLEMENTAL 2010 ADJUSTED EBITDA GUIDANCE | ||||||||||||||||
| RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES | ||||||||||||||||
| (UNAUDITED) | ||||||||||||||||
| Guidance Range for | ||||||||||||||||
| Twelve Months Ending | ||||||||||||||||
| In 000s | December 31, 2010 | |||||||||||||||
| (Low) | (High) | |||||||||||||||
| Net Income | $ | 26,200 | $ | 29,000 | ||||||||||||
| Depreciation | 19,300 | 19,000 | ||||||||||||||
| Depreciation (included in cost of revenue) | 2,900 | 2,900 | ||||||||||||||
| Amortization of intangibles, acquisition-related | 23,300 | 23,300 | ||||||||||||||
| Amortization of intangibles, acquisition-related (included in cost of revenue) | 600 | 600 | ||||||||||||||
| Interest expense, net | 14,100 | 13,900 | ||||||||||||||
| Income tax expense | 17,500 | 19,400 | ||||||||||||||
| Non-GAAP EBITDA | 103,900 | 108,100 | ||||||||||||||
| Share-based compensation | 12,100 | 11,900 | ||||||||||||||
| Acquisition-related charges | 4,400 | 4,400 | ||||||||||||||
| Rental income from capitalized building lease | (400 | ) | (400 | ) | ||||||||||||
| Non-GAAP adjusted EBITDA | $ | 120,000 | $ | 124,000 | ||||||||||||
| SUPPLEMENTAL 2010 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, 2010 | |||||||||||||||
| (Low) | (High) | |||||||||||||||
| Net Income | $ | 26,200 | $ | 29,000 | ||||||||||||
| EPS - diluted | 0.44 | 0.49 | ||||||||||||||
| Pre-tax non-cash, acquisition-related intangible amortization | 0.40 | 0.40 | ||||||||||||||
| Pre-tax non-cash, share-based compensation | 0.20 | 0.20 | ||||||||||||||
| Pre-tax acquisition-related charges | 0.07 | 0.07 | ||||||||||||||
| Tax effect on pre-tax adjustments c | (0.27 | ) | (0.27 | ) | ||||||||||||
| Non-GAAP cash EPS - diluted d | $ | 0.85 | $ | 0.90 | ||||||||||||
| Fully diluted weighted average shares outstanding | 59,400 | 59,400 | ||||||||||||||
| (c) This amount reflects the tax impact to the adjustments used to derive estimated Non-GAAP cash EPS - diluted. The Company uses its estimated effective tax rate for each guidance range to tax effect the adjustments. The estimated effective tax rate for the guidance range above is 40.0%. | ||||||||||||||||
| (d) Column amounts may not add to total amount 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 consolidated financial statements presented on a GAAP basis with the following non-GAAP financial information: gross fees; gross administrative fees; revenue share obligation; EBITDA; adjusted EBITDA; adjusted EBITDA margin; diluted cash EPS; 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 customers. 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 customers. 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 Management segment given that administrative fees constitute a material portion of the Company's revenue and are paid to the Company by approximately 1,150 vendors contracted by its GPO, and that the Company's revenue share obligation constitutes a significant outlay to certain of its GPO customers. | |
|
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 acquisition-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. |
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The Company defines diluted cash 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 acquisition-related charges on a tax-adjusted basis. Diluted cash EPS is not a measure of liquidity under GAAP, or otherwise, and is not an alternative to cash flow from continuing operating activities. Diluted cash EPS growth is used by the Company as the financial performance metric tied to the vesting of certain equity awards granted pursuant to the Company’s Long-Term Performance Incentive Plan. 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 is based on the achievement of certain diluted cash EPS growth over time, investors may find such information useful. |
|
| 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 customer 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. | |
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