ELMWOOD PARK, N.J., Feb. 28 /PRNewswire-FirstCall/ -- Emdeon Corporation today announced financial results for the quarter and year ended December 31, 2005.
"I am pleased with the progress we have made in light of the challenges we faced in the second half of 2005," said Kevin Cameron, Chief Executive Officer of Emdeon. "During 2005, we improved our operations, introduced enhanced products and extended the value proposition we offer our customers. Our businesses are well positioned to grow as we facilitate improved revenue cycle management, the capturing and sharing of clinical information and the empowerment of the patient."
Key Financial Highlights
Revenue for the fourth quarter was $327.2 million compared to $307.6 million in the prior year period, an increase of 6.4%. Earnings before restructuring, interest, taxes, non-cash and other items ("Adjusted EBITDA") for the fourth quarter was $52.3 million or $0.15 per share compared to $47.4 million or $0.14 per share a year ago. Net Income for the fourth quarter was $32.9 million or $0.09 per share compared to net income of $19.7 million or $0.06 per share a year ago.
Revenue for 2005 was $1.28 billion compared to $1.16 billion a year ago, an increase of 10%. Adjusted EBITDA for 2005 increased 28% to $183.7 million or $0.52 per share from $143.5 million or $0.43 per share in the prior year. Net Income for 2005 increased 85.5% to $73.0 million or $0.21 per share from $39.3 million or $0.12 per share a year ago.
Emdeon highlighted today that its previously reported results, financial guidance and analyst consensus estimates referenced "income before restructuring, taxes, non-cash and other items" rather than Adjusted EBITDA. Net interest income was included in the prior measure; however, it is not included in Adjusted EBITDA and the related per share amounts discussed above. Net interest income (expense) for the fourth quarter was $3.5 million or $0.01 per share compared to $(0.6) million or $0.00 per share a year ago. Net interest income (expense) for 2005 was $5.2 million or $0.02 per share compared to $(0.5) million or $0.00 per share a year ago. Accordingly, to compare today's reported results to prior guidance and analyst consensus estimates, the amounts for net interest income as discussed above should be added to the Adjusted EBITDA reported today. On that basis, Emdeon would have reported "income before restructuring, taxes, non-cash and other items" of $0.16 per share and $0.54 per share for the fourth quarter and full year 2005, respectively. Emdeon intends to report Adjusted EBITDA in the future.
As of December 31, 2005, Emdeon had approximately $427 million in cash and short-term investments on a consolidated basis, including $154 million in cash and short-term investments held by WebMD Health Corp., its 85.8% owned subsidiary.
Segment Operating Results
Emdeon Business Services revenue was $191.1 million for the fourth quarter compared to $182.1 million in the prior year period, an increase of 4.9%. The increase in Emdeon Business Services revenue was attributable to growth in our paid-claims communications services, patient statement services and government business. Adjusted EBITDA was $39.9 million compared to $41.3 million in the prior year period. Operating margins decreased as a result of revenue mix and higher sales, marketing, general and administrative expenses.
Emdeon Practice Services revenue was $77.1 million for the fourth quarter compared to $76.4 million in the prior year period, an increase of 0.9%. Adjusted EBITDA was $9.2 million compared to $5.6 million in the prior year period. Operating margins increased from 7.3% in the prior year period to 11.9% as a result of revenue mix and improvements in our delivery and service infrastructure.
As previously announced on February 23, 2006, WebMD revenue was $49.1 million for the fourth quarter compared to $39.1 million in the prior year period, an increase of 25.5%, driven by continued growth in our online public and private portals. Adjusted EBITDA was $12.4 million compared to $8.7 million in the prior year.
Porex revenue was $18.5 million for the fourth quarter compared to $18.6 million in the prior year period. Adjusted EBITDA for the fourth quarter was $4.7 million compared to $5.5 million in the prior year period.
Financial Guidance
Emdeon's current expectations are consistent with previously disclosed financial guidance, after taking into account the impact of the completion of the Company's December 2005 tender offer which reduced the number of its outstanding common shares by approximately 67 million. Due to the use of approximately $550 million to purchase those shares, interest income in 2006 is now expected to be reduced by approximately $20 million.
Emdeon expects revenue in 2006 to be approximately $1.365 billion to $1.415 billion, an increase of approximately 7% to 11% over 2005. Adjusted EBITDA is expected to increase 9% to 25% over 2005 to approximately $200 million to $230 million, or $0.67 to $0.77 per share. Net Income is expected to be approximately $45 million to $65 million, or $0.15 to $0.22 per share, which includes approximately $49.0 million to $51.0 million, or $0.16 to $0.17 per share of non-cash stock-based compensation expense in accordance with SFAS 123R.
A schedule outlining Emdeon's financial guidance for 2006 is attached to this press release.
Evaluating Strategic Alternatives Related to Emdeon Business Services and Emdeon Practice Services
In connection with inquiries received from several potential strategic buyers that have expressed an interest in acquiring Emdeon Business Services and Emdeon Practice Services, the Board of Directors of Emdeon has commenced a process to evaluate strategic alternatives as it relates to these businesses to maximize stockholder value. Emdeon's ViPS business unit, currently part of Emdeon Business Services, is not included in the evaluation process and will be retained by Emdeon.
Analyst and Investor Conference Call
As previously announced, Emdeon will hold a conference call with investors and analysts to discuss these results at 4:45 pm (eastern) on February 28, 2006. The call can be accessed at http://www.emdeon.com (in the About Emdeon section). A replay of the audio webcast will be available at the same web address.
ABOUT EMDEON
Emdeon is a leading provider of business, technology and information solutions that transform both the financial and clinical aspects of healthcare delivery. At the core of Emdeon's vision is the commitment to connect providers, payers, employers, physicians and consumers in order to simplify business processes, to provide actionable knowledge at the right time and place and to improve healthcare quality.
Emdeon Business Services provides revenue cycle management and clinical communication solutions that enable payers, providers and patients to improve healthcare business processes. Emdeon Practice Services provides physician practice management and electronic health record software and services that increase practice efficiency and enhance patient care. WebMD provides health information services for consumers, physicians, healthcare professionals, employers and health plans through its public and private online portals and health-focused publications. Porex is a developer, manufacturer and distributor of proprietary porous plastic products and components used in healthcare, industrial and consumer applications.
All statements contained in this press release, other than statements of historical fact, are forward-looking statements, including those regarding: guidance on our future financial results and other projections or measures of our future performance; the amount and timing of the benefits expected from strategic initiatives and acquisitions or from deployment of new or updated technologies, products, services or applications; and other potential sources of additional revenue; and explorations regarding possible transactions or other alternatives with respect to Emdeon Business Services and Emdeon Practice Services. These statements speak only as of the date of this release and are based on our current plans and expectations, and they involve risks and uncertainties that could cause actual future events or results to be different than those described in or implied by such forward-looking statements. These risks and uncertainties include those relating to: market acceptance of our products and services; difficulties in integrating acquired businesses; relationships with customers and strategic partners; changes in economic, political or regulatory conditions or other trends affecting the healthcare, Internet, information technology and plastics industries, including matters relating to the Health Insurance Portability and Accountability Act of 1996 (HIPAA); our ability to attract and retain qualified personnel; and uncertainties regarding the outcome of the process of exploring alternatives with respect to Emdeon Business Services and Emdeon Practice Services and its effects on those segments. Further information about these matters can be found in our Securities and Exchange Commission filings. We expressly disclaim any intent or obligation to update these forward-looking statements.
This press release includes both financial measures in accordance with U.S. generally accepted accounting principles, or GAAP, as well as non-GAAP financial measures. The non-GAAP financial measures include: our earnings before restructuring, interest, taxes, non-cash and other items (which we refer to as "Adjusted EBITDA"); income before restructuring, taxes, non-cash and other items; and related per share amounts. We believe that those non- GAAP measures, and changes in those measures, are meaningful indicators of our company's performance and provide additional information that our management finds useful in evaluating such performance and in planning for future periods. Accordingly, we believe that such additional information may be useful to investors. The non-GAAP financial measures should be viewed as supplemental to, and not as an alternative for, the GAAP financial measures. The tables attached to this press release contain historical GAAP financial measures and a reconciliation between historical GAAP and non-GAAP financial measures. The guidance summary attached to this press release includes a reconciliation of certain forward-looking non-GAAP information to forward- looking GAAP financial information.
WebMD(R), WebMD Health(R), Emdeon(TM), Emdeon Business Services(TM), Emdeon Practice Services(TM) and POREX(R) are trademarks of Emdeon Corporation or its subsidiaries.
EMDEON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data, unaudited) Three Months Ended Years Ended December 31, December 31, 2005 2004 2005 2004 Revenue $327,236 $307,641 $1,276,879 $1,160,351 Costs and expenses: Cost of operations 180,024 171,257 717,047 666,431 Development and engineering 14,716 15,682 58,494 54,161 Sales, marketing, general and administrative 85,270 78,973 333,288 324,027 Depreciation and amortization 18,827 16,843 71,767 57,765 Legal expense 3,488 2,653 17,835 9,230 Restructuring and integration charge - - - 4,535 Loss (gain) on investments 2,723 - 6,365 (457) Interest income 8,149 4,211 21,531 18,717 Interest expense 4,652 4,824 16,324 19,253 Other expense (income), net - - 3,765 (121) Income before income tax (benefit) provision and minority interest 25,685 21,620 73,525 44,244 Income tax (benefit) provision (8,037) 1,931 (357) 4,910 Minority interest in WebMD Health Corp., net of tax 870 - 908 - Net income $32,852 $19,689 $72,974 $39,334 Net income per common share: Basic and diluted $0.09 $0.06 $0.21 $0.12 Weighted-average shares outstanding used in computing net income per common share: Basic 348,261 312,745 341,747 320,080 Diluted 355,782 333,576 352,852 333,343 EMDEON CORPORATION CONSOLIDATED SEGMENT INFORMATION (In thousands, except per share data, unaudited) Three Months Ended Years Ended December 31, December 31, 2005 2004 2005 2004 Revenues Emdeon Business Services $191,102 $182,126 $758,851 $686,585 Emdeon Practice Services 77,062 76,412 304,175 296,115 WebMD 49,104 39,139 168,238 134,317 Porex 18,461 18,556 79,124 77,099 Inter-segment eliminations (8,493) (8,592) (33,509) (33,765) $327,236 $307,641 $1,276,879 $1,160,351 Earnings before restructuring, interest, taxes, non-cash and other items ("Adjusted EBITDA") Emdeon Business Services $39,913 $41,320 $154,512 $131,834 Emdeon Practice Services 9,166 5,555 29,378 14,533 WebMD (a) 12,446 8,735 27,546 26,307 Porex 4,678 5,510 22,524 22,650 Corporate (a) (13,854) (13,724) (50,301) (51,791) $52,349 $47,396 $183,659 $143,533 Adjusted EBITDA per basic common share (b) $0.15 $0.15 $0.54 $0.45 Adjusted EBITDA per diluted common share (b) $0.15 $0.14 $0.52 $0.43 Restructuring, interest, taxes, non-cash and other items (c ) Depreciation and amortization $(18,827) $(16,843) $(71,767) $(57,765) Amortization of non-cash advertising and distribution services (3,871) (3,933) (10,870) (18,826) Non-cash stock-based compensation (1,252) (1,734) (4,739) (8,975) Legal expense (3,488) (2,653) (17,835) (9,230) (Loss) gain on investments (2,723) - (6,365) 457 Restructuring and integration charge - - - (4,535) Interest income 8,149 4,211 21,531 18,717 Interest expense (4,652) (4,824) (16,324) (19,253) Other (expense) income, net - - (3,765) 121 Minority interest in WebMD Health Corp., net of tax (870) - (908) - Income tax benefit (provision) 8,037 (1,931) 357 (4,910) Net income $32,852 $19,689 $72,974 $39,334 Net income per common share: Basic and diluted $0.09 $0.06 $0.21 $0.12 Weighted-average shares outstanding used in computing net income per common share: Basic 348,261 312,745 341,747 320,080 Diluted 355,782 333,576 352,852 333,343 (a) Adjusted EBITDA during prior periods, for the Corporate and WebMD segments, has been reclassified to conform to the current period presentation. (b) Adjusted EBITDA per basic and diluted common share is based on the weighted-average shares outstanding used in computing net income per common share (basic and diluted). (c) Reconciliation of Adjusted EBITDA to net income. EMDEON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) December 31, December 31, 2005 2004 Assets (Unaudited) Cash and cash equivalents $159,510 $46,019 Short-term investments 267,387 61,675 Accounts receivable, net 233,070 204,447 Inventory 14,251 14,367 Prepaid expenses and other current assets 34,615 40,224 Total current assets 708,833 366,732 Marketable debt securities - 511,864 Marketable equity securities 4,481 4,017 Property and equipment, net 116,032 89,677 Goodwill 1,075,549 1,010,564 Intangible assets, net 240,510 260,509 Other assets 50,278 48,871 Total Assets $2,195,683 $2,292,234 Liabilities and Stockholders' Equity Accounts payable $11,611 $17,366 Accrued expenses 186,381 198,311 Deferred revenue 115,840 99,543 Total current liabilities 313,832 315,220 Convertible notes 650,000 649,999 Other long-term liabilities 15,353 4,500 Minority interest in WebMD Health Corp. 43,229 - Convertible redeemable exchangeable preferred stock 98,533 98,299 Stockholders' equity 1,074,736 1,224,216 Total Liabilities and Stockholders' Equity $2,195,683 $2,292,234 EMDEON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Years Ended December 31, 2005 2004 Cash flows from operating activities: Net income $72,974 $39,334 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 71,767 57,765 Minority interest in WebMD Health Corp., net of tax 908 - Amortization of debt issuance costs 2,541 2,975 Non-cash advertising and distribution services 10,870 18,826 Non-cash stock-based compensation 4,739 8,975 Bad debt expense 6,410 3,606 Loss (gain) on investments 6,365 (457) Gain on sale of property and equipment - (121) Loss on redemption of convertible debt 1,902 - Non-cash reversal of income tax valuation allowance 444 - Changes in operating assets and liabilities: Accounts receivable (30,613) (16,152) Inventory (224) (1,077) Prepaid expenses and other, net 2,683 3,514 Accounts payable (6,074) 5,577 Accrued expenses and other long-term liabilities 7,526 (43,703) Deferred revenue 9,068 10,982 Net cash provided by operating activities 161,286 90,044 Cash flows from investing activities: Proceeds from maturities and sales of available-for-sale securities 1,063,606 1,408,091 Purchases of available-for-sale securities (758,687) (1,308,303) Purchases of property and equipment (62,645) (38,800) Proceeds received from sale of property and equipment 400 417 Cash paid in business combinations, net of cash acquired (93,742) (249,557) Net cash provided by (used in) investing activities 148,932 (188,152) Cash flows from financing activities: Proceeds from issuance of common stock 48,571 38,052 Purchases of treasury stock under repurchase program (21,246) (32,110) Purchases of treasury stock in Tender Offer (549,268) - Net proceeds from issuance of convertible debt 289,875 - Issuance of WebMD Health Corp. Class A common stock 123,344 - Net proceeds from issuance of preferred shares - 98,115 Redemption of convertible debt (86,694) - Payments of notes payable and other (631) (602) Net cash (used in) provided by financing activities (196,049) 103,455 Effect of exchange rates on cash (678) 1,024 Net increase in cash and cash equivalents 113,491 6,371 Cash and cash equivalents at beginning of period 46,019 39,648 Cash and cash equivalents at end of period $159,510 $46,019 2006 Consolidated Financial Guidance Summary (in millions, except per share amounts) Quarterly Mix Range Q1 Q2 Q3 Q4 Revenue $1,365 $1,415 24% 25% 25% 26% Earnings before interest, taxes, non-cash and other items ("Adjusted EBITDA") $200 $230 20% 24% 26% 30% Interest expense 3.0 4.0 Depreciation and amortization 80.0 85.0 23% 24% 26% 27% Non-cash stock-based compensation 49.0 51.0 25% 27% 27% 21% Non-cash advertising 7.3 7.5 21% 24% 21% 34% Income tax provision 16.0 17.2 20% 24% 26% 30% Minority interest in WebMD Health Corp. (0.3) 0.3 Net income $45.0 $65.0 13% 22% 27% 38% Adjusted EBITDA per diluted share $0.67 $0.77 Net income per diluted share $0.15 $0.22 Operating Segments Revenue: * Business Services - Approximately 59% of consolidated revenue in Q1, decreasing sequentially to approximately 56% by Q4. * Practice Services - Approximately 23% of consolidated revenue throughout the year. * WebMD - Approximately 14% of consolidated revenue in Q1, increasing to approximately 18% by Q4. * Porex - Approximately 6% of consolidated revenue throughout the year. * Eliminations - Approximately 2.5% of consolidated revenue. Adjusted EBITDA: * Business Services - Approximately 19% of segment revenue in Q1 and Q2 and 20% in Q3 and Q4. * Practice Services - Approximately 10% of segment revenue in Q1, increasing sequentially to 13% by Q4. * WebMD - Approximately 12% of segment revenue in Q1, increasing sequentially to about 30% in Q4. * Porex - Approximately 27% of segment revenue throughout the year, slightly higher margins in the seasonally stronger Q2. * Corporate - Approximately 3.6% of consolidated revenue. Other Assumptions * Historically, the Company has measured and reported its operating results using the term "income before taxes, non-cash and other items," which included net interest income and expense. Going forward, the Company will exclude interest income and expense from this measure, and accordingly will report "Earnings before interest, taxes, non-cash and other items." This measure will be referred to as "Adjusted EBITDA." This presentation is consistent with our publicly traded subsidiary, WebMD Health Corp. All amounts presented in the above table reflect this modified presentation. * The 2006 guidance does not reflect any projected expenses related to the on-going Department of Justice Investigation. * Adjusted EBITDA per diluted share and net income per diluted share are both calculated on an assumed share count of approximately 300 million. * Non-cash stock-based compensation expense considers the January 1, 2006 adoption of SFAS 123R, "Share-Based Payment."
Emdeon CorporationCONTACT: Investors - Risa Fisher, rfisher@emdeon.com, +1-201-414-2002; orMedia - Jennifer Newman, jnewman@emdeon.com, +1-212-624-3912, both ofEmdeon Corporation
Web site: http://www.emdeon.com/
