MedAssets Reports Third Quarter and Nine-Month 2015 Financial Results

ATLANTA, Nov. 2, 2015 (GLOBE NEWSWIRE) — MedAssets, Inc. (NASDAQ:MDAS) today announced results for its third quarter and nine-month period ended September 30, 2015, which are summarized below.

Three-Month Period
       
(In millions, except per share) 3Q’15 3Q’14 % Change
Net Revenue:      
Spend and Clinical Resource Mgmt. (SCM) $117.2 $105.8 10.8%
Revenue Cycle Management (RCM) 72.7 69.9 4.0
Total Net Revenue 190.0 175.7 8.1
Net (loss) income (2.2) 7.7 nm
Earnings (loss) per share (EPS) – diluted a (0.04) 0.13 nm
Non-GAAP adjusted EBITDA 58.8 59.5 (1.2)%
Non-GAAP adjusted EPS – diluted $0.32 $0.34 (5.9)
Weighted average shares – diluted 60.9 60.7 0.4%
(a) Given the company’s net loss in 3Q’15, loss per share was calculated by using basic weighted average shares of 59.4 million. 

Net Revenue

Total net revenue for the third quarter of 2015 increased 8.1% to $190.0 million from $175.7 million for the third quarter of 2014. Excluding the revenue contribution from Sg2 (acquired on September 22, 2014), total net revenue growth was 2.3% on a year-over-year basis. Net revenue in the SCM segment increased 10.8% to $117.2 million from $105.8 million for the third quarter of 2014 due to the contribution from Sg2 and growth in group purchasing net administrative fees. Excluding Sg2, third quarter SCM net revenue increased 1.1% on a year-over-year basis. Net revenue in the RCM segment increased 4.0% to $72.7 million from $69.9 million for the third quarter of 2014 as technology-related revenue (66.1% of RCM segment revenue) increased 1.8% while services-related revenue grew 8.7%.

Non-GAAP Adjusted EBITDA

Total non-GAAP adjusted EBITDA was $58.8 million, or 30.9% of total net revenue, for the third quarter of 2015, a 1.2% decrease from total non-GAAP adjusted EBITDA of $59.5 million, or 33.8% of total net revenue, for the third quarter of 2014.

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

Net loss for the third quarter of 2015 was $(2.2) million, or a loss of $(0.04) per share, compared with net income of $7.7 million, or $0.13 per share, for the third quarter of 2014. The net loss in the third quarter of 2015 was due to $5.0 million of restructuring charges related to the company’s expense reduction program announced in late September 2015 and $10.3 million of non-cash capitalized software impairments related to certain Revenue Cycle Management products, which is described in more detail below.

Non-GAAP adjusted EPS (defined as EPS excluding non-cash acquisition-related intangible amortization and depreciation, non-cash share-based compensation, non-cash asset impairment, certain restructuring, acquisition and integration-related expenses and non-recurring items on a tax-adjusted basis) was $0.32 per share for the third quarter of 2015, compared with non-GAAP adjusted EPS of $0.34 per share for the third quarter of 2014.

“Since February, our executive leadership team has been developing and implementing a business transformation and value creation plan. We have been making substantial progress, with our third quarter 2015 financial results coming in near or above the high end of our previous guidance for the quarter on all measures. This performance is a testament to our employees’ commitment, dedication and hard work to executing our plan,” said R. Halsey Wise, chairman and chief executive officer, MedAssets.

Nine-Month Period
 
(In millions, except per share) 9 mos. ’15 9 mos. ’14 % Change
Net Revenue:      
Spend and Clinical Resource Mgmt. (SCM) $356.6 $320.3 11.3%
Revenue Cycle Management (RCM) 209.4 201.7 3.8
Total Net Revenue 566.0 522.0 8.4
Net income 7.4 22.0 (66.2)
Earnings per share (EPS) – diluted 0.12 0.36 (66.7)
Non-GAAP adjusted EBITDA 175.3 170.5 2.8
Non-GAAP adjusted EPS – diluted $0.94 $0.96 (2.1)
Weighted average shares – diluted 60.8 61.3 (0.7)%

Net Revenue

Total net revenue for the nine months ended September 30, 2015 increased 8.4% to $566.0 million from $522.0 million for the first nine months of 2014. Excluding the contribution from Sg2, full-year total net revenue growth was 2.1% when compared with the first nine months of 2014. Net revenue in the SCM segment grew 11.3% to $356.6 million from $320.3 million for the first nine months of 2014. Excluding the contribution from Sg2, year-to-date SCM net revenue growth was 1.1%. Net revenue in the RCM segment increased 3.8% to $209.4 million from $201.7 million for the first nine months of 2014 as technology-related revenue (67.6% of RCM segment revenue) increased 1.9% while services-related revenue increased 8.1%.

Non-GAAP Adjusted EBITDA

For the first nine months of 2015, total non-GAAP adjusted EBITDA was $175.3 million, or 31.0% of total net revenue, a 2.8% increase from total non-GAAP adjusted EBITDA of $170.5 million, or 32.7% of total net revenue, for the same period in 2014.

Net Income and Non-GAAP Adjusted EPS

Net income for the first nine months of 2015 was $7.4 million, or $0.12 per share, compared with net income of $22.0 million, or $0.36 per share, for the first nine months of 2014. The year-over-year decrease was due to restructuring charges related to an expense reduction program and non-cash capitalized software impairments described in more detail below. Non-GAAP adjusted EPS was $0.94 per share for the first nine months of 2015, compared with $0.96 per share for the first nine months of 2014.

Cash Flow and Capital Resources

Cash provided by operating activities in the first nine months of 2015 was $143.6 million, up 49.5% from $96.1 million for the first nine months of 2014. Non-GAAP free cash flow (defined as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs) increased 92.7% to $107.3 million from $55.7 million for the first nine months of 2014 due to improvements in working capital during 2015.

During the quarter, the company repurchased a total of 792,148 shares of common stock for $16.4 million or an average price of $20.72 per share. Year-to-date, the company repurchased 1,207,384 shares of common stock for $25.0 million or an average price of $20.71 per share. The company also reduced its bank debt by $43.2 million in the quarter, and its balance sheet at September 30, 2015 included $789.1 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to a leverage ratio of approximately 3.3 times non-GAAP adjusted EBITDA for the trailing twelve-month period.

Non-GAAP Contracted Revenue

Non-GAAP contracted revenue is the company’s estimate of contractually committed revenue to be generated under existing customer contracts in the forward 12-month period. At September 30, 2015, the company’s non-GAAP contracted revenue estimate was $679.6 million (SCM segment – $419.0 million; RCM segment – $260.6 million), a year-over-year increase of 2.8%.

Expense Reduction Program and Impairment Charge

As previously disclosed, the company implemented an expense reduction program on September 28, 2015, to align its cost structure with expected future net revenue, while maintaining the highest level of customer service, support and satisfaction. The cost reduction program includes a reduction of approximately 5% of the company’s workforce by year-end 2015, the elimination of certain open full-time positions, and the reduction of other non-employee expenses including professional services and vendor fees in human resource, information technology, legal, and marketing service areas. The company incurred pre-tax restructuring charges of $5.0 million in the third quarter ended September 30, 2015 primarily related to one-time termination benefits. The company also announced it will eliminate certain Revenue Cycle Management products that resulted in an aggregate asset impairment charge of $10.3 million in the third quarter of 2015.

Financial Guidance and Conference Call

Given today’s announcement regarding the company’s agreement to be acquired by Pamplona Capital Management, MedAssets no longer plans to provide financial guidance and will not host a conference call to discuss financial results.

About MedAssets

MedAssets (NASDAQ:MDAS) is a healthcare performance improvement company that combines strategic market insight with rapid operational execution to help providers sustainably serve the needs of their communities. More than 4,500 hospitals and 123,000 non-acute healthcare providers rely on our solutions to reduce the total cost of care, enhance operational efficiency, align clinical delivery, and improve revenue performance across the System of CARE. For more information, please visit www.medassets.com.

Use of Non-GAAP Financial Information

In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the company supplements its condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; diluted adjusted EPS; free cash flow; and contracted revenue. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures, where possible, are included in the accompanying financial schedules. Also, see “Use of Non-GAAP Financial Measures” following the financial schedules for more information.

Safe Harbor Statement

This Press Release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, and include the intent, belief or current expectations of the company and its management team with respect to the company’s future business operations that include, but are not limited to: 2015 financial guidance, revenue growth and other financial projections and forecasts. Any forward-looking statements are not guarantees of future performance, involve risks and uncertainties, and actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to: failure to realize improvements in performance, efficiency and profitability; failure to complete anticipated sales under negotiations; failure to successfully implement revenue backlog; lack of revenue growth; customer losses; and adverse developments with respect to the operation or performance of the company’s business units or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can also be found in the company’s Risk Factor disclosures in its Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission and available at http://ir.medassets.com. The company disclaims any responsibility to update any forward-looking statements.

mdas/F

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
In 000s, except per share data Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
  2015 2014 % Change 2015 2014 % Change
Revenue:            
Administrative fees, net  $ 71,987  $ 70,788 1.7%  $ 219,471  $ 217,125 1.1%
Other service fees  117,981  104,917 12.5%  346,502  304,862 13.7%
             
Total net revenue  189,968  175,705 8.1%  565,973  521,987 8.4%
             
Operating expenses:            
Cost of revenue (inclusive of certain depreciation expense)  48,003  42,439 13.1%  138,060  120,231 14.8%
Product development expenses  8,198  8,106 1.1%  24,049  22,145 8.6%
Selling and marketing expenses  17,120  14,273 19.9%  60,480  50,187 20.5%
General and administrative expenses  64,363  57,579 11.8%  188,247  175,911 7.0%
Restructuring, acquisition and integration-related expenses  5,027  3,010 67.0%  10,022  4,707 112.9%
Depreciation  13,691  11,845 15.6%  40,589  35,247 15.2%
Amortization of intangibles  14,829  13,936 6.4%  44,816  41,989 6.7%
Impairment of property and equipment  10,309  —  nm  10,309  —  nm
             
Total operating expenses  181,540  151,188 20.1%  516,572  450,417 14.7%
             
Operating income  8,428  24,517 -65.6%  49,401  71,570 -31.0%
Other income (expense):            
Interest expense  (11,556)  (11,338) 1.9%  (35,235)  (33,625) 4.8%
Other (expense) income  (103)  273 -137.7%  (151)  362 -141.7%
             
(Loss) income before income taxes  (3,231)  13,452 -124.0%  14,015  38,307 -63.4%
Income tax (benefit) expense  (995)  5,712 -117.4%  6,584  16,293 -59.6%
             
Net (loss) income   (2,236)  7,740 -128.9%  7,431  22,014 -66.2%
             
Basic net (loss) income per share  (0.04)  0.13 -130.8%  0.12  0.37 -67.6%
             
Diluted net (loss) income per share  $ (0.04)  $ 0.13 -130.8%  $ 0.12  $ 0.36 -66.7%
             
Weighted average shares — basic 59,437 59,401 0.1% 59,678 59,917 -0.4%
Weighted average shares — diluted 59,437 60,662 -2.0% 60,822 61,269 -0.7%
             
             
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
  September 30, December 31,
In 000s, except share and per share amounts 2015 2014
     
ASSETS    
Current assets    
Cash and cash equivalents  $ —   $ 12,100
Accounts receivable, net of allowances of $2,558 and $2,641 as of September 30, 2015 and December 31, 2014, respectively  120,005  127,741
Deferred tax asset, current  5,683  5,782
Prepaid expenses and other current assets  25,138  30,557
     
Total current assets  150,826  176,180
     
Property and equipment, net  154,092  170,318
Other long term assets    
Goodwill  1,058,414  1,058,414
Intangible assets, net  231,591  276,407
Other  31,851  37,477
Other long term assets  1,321,856  1,372,298
     
Total assets  $ 1,626,774  $ 1,718,796
     
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities    
Accounts payable  $ 19,014  $ 26,910
Accrued revenue share obligation and rebates  93,769  91,864
Accrued payroll and benefits  42,013  32,784
Other accrued expenses  23,521  9,040
Current portion of deferred revenue  70,241  76,034
Current portion of notes payable  26,438  29,583
Current portion of finance obligation  315  294
     
Total current liabilities  275,311  266,509
     
Notes payable, less current portion  437,667  526,417
Bonds payable  325,000  325,000
Finance obligation, less current portion  8,236  8,475
Deferred revenue, less current portion  16,740  15,418
Deferred tax liability  107,403  116,607
Other long term liabilities  13,731  13,883
     
Total liabilities  1,184,088  1,272,309
     
Commitments and contingencies    
     
Stockholders’ equity    
Common stock, $0.01 par value, 150,000,000 shares authorized; 62,872,000 and 59,266,000 shares issued and outstanding as of September 30, 2015 and 62,598,000 and 60,199,000 shares issued and outstanding as of December 31, 2014, respectively  593  602
Additional paid in capital  683,012  694,235
Accumulated deficit  (240,919)  (248,350)
     
Total stockholders’ equity  442,686  446,487
     
Total liabilities and stockholders’ equity  $ 1,626,774  $ 1,718,796
     
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
  Nine Months Ended
In 000s September 30, September 30,
  2015 2014
     
Operating activities:    
Net income   $ 7,431  $ 22,014
     
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:    
 Bad debt expense   —   100
 Impairment of property and equipment   10,309  — 
 Depreciation   43,557  37,413
 Amortization of intangibles   44,816  41,989
 Loss on sale of assets   346  24
 Noncash stock compensation expense   16,721  14,703
 Excess tax benefit from exercise of equity awards   (543)  (1,788)
 Amortization of debt issuance costs   2,916  2,829
 Noncash interest expense, net   289  309
 Deferred income tax benefit   (9,208)  (6,883)
     
Changes in assets and liabilities  26,974  (14,658)
     
Cash provided by operating activities  143,608  96,052
     
Investing activities:    
Purchases of property, equipment and software  (6,255)  (9,820)
Capitalized software development costs  (30,069)  (30,568)
Acquisitions, net of cash acquired  —   (138,233)
     
Cash used in investing activities  (36,324)  (178,621)
     
Financing activities:    
Borrowings from revolving credit facility  —   216,080
Repayment of notes payable   (24,896)  (21,625)
Repayment of revolving credit facility  (67,000)  (59,080)
Repayment of finance obligation  (507)  (507)
Debt issuance costs  —   (569)
Excess tax benefit from exercise of equity awards  543  1,788
Issuance of common stock, net  1,389  3,378
Purchase of treasury shares, including shares surrendered for tax withholdings  (28,913)  (45,793)
     
Cash (used in) provided by financing activities  (119,384)  93,672
     
Net (decrease) increase in cash and cash equivalents  (12,100)  11,103
Cash and cash equivalents, beginning of period  12,100  2,790
     
Cash and cash equivalents, end of period  $ —   $ 13,893
     
SUPPLEMENTAL SEGMENT REPORTING WITH SELECTED NON-GAAP MEASURES
(UNAUDITED)
 
In 000s Three Months Ended September 30,    
  2015   2014   % Change
Net revenue          
Spend and Clinical Resource Management (SCM)  $ 117,232    $105,799   10.8%
Revenue Cycle Management (RCM)  72,736    69,906   4.0%
Total net revenue  $ 189,968    $175,705   8.1%
           
Non-GAAP Adjusted EBITDA   % margin   % margin  
SCM  $ 43,227 36.9%  $ 47,983 45.4% -9.9%
RCM  22,712 31.2%  17,914 25.6% 26.8%
Corporate  (7,162)    (6,429)   11.4%
Total non-GAAP Adjusted EBITDA  $ 58,777 30.9%  $ 59,468 33.8% -1.2%
           
           
In 000s Nine Months Ended September 30,    
  2015   2014   % Change
Net revenue          
Spend and Clinical Resource Management (SCM)  $ 356,578    $320,323   11.3%
Revenue Cycle Management (RCM)  209,395    201,664   3.8%
Total net revenue  $ 565,973    $521,987   8.4%
           
Non-GAAP Adjusted EBITDA   % margin   % margin  
SCM  $ 134,693 37.8%  $140,233 43.8% -4.0%
RCM  62,093 29.7%  50,928 25.3% 21.9%
Corporate  (21,499)    (20,652)   4.1%
Total non-GAAP Adjusted EBITDA  $ 175,287 31.0%  $170,509 32.7% 2.8%
           
           
           
SUPPLEMENTAL NON-GAAP CONTRACTED REVENUE ESTIMATES
(UNAUDITED)
           
In Millions Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
  2015 2015 2015 2014 2014
           
Revenue Cycle Technology (RCT)  $ 180.5  $ 180.0  $ 178.3  $ 177.4  $ 177.5
Revenue Cycle Services (RCS)  80.1  79.3  71.8  61.0  58.4
RCM segment Total  260.6  259.3  250.1  238.4  235.9
SCM segment  419.0  431.5  446.5  423.5  425.3
Total  $ 679.6  $ 690.8  $ 696.6  $ 661.9  $ 661.2
           
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 September 30,   Nine Months Ended September 30, 
  2015 2014 2015 2014
         
Net (loss) income  $ (2,236)  $ 7,740  $ 7,431  $ 22,014
         
Depreciation  13,691  11,845  40,589  35,247
Depreciation (included in cost of revenue)  1,001  1,094  2,968  2,166
Amortization of intangibles  14,829  13,936  44,816  41,989
Interest expense, net  11,555  11,338  35,232  33,625
Income tax (benefit) expense   (995)  5,712  6,584  16,293
         
Non-GAAP EBITDA  $ 37,845  $ 51,665  $ 137,620  $ 151,334
         
Impairment of property and equipment  10,309  —   10,309  — 
Share-based compensation  5,590  4,809  16,721  14,703
Rental income from capitalized building lease  (110)  (110)  (329)  (329)
Purchase accounting adjustments  116  94  944  94
Restructuring, acquisition and integration-related expenses  5,027  3,010  10,022  4,707
         
Non-GAAP Adjusted EBITDA   $ 58,777  $ 59,468  $ 175,287  $ 170,509
         
         
SUPPLEMENTAL NET INCOME AND EARNINGS PER SHARE REPORTING
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES 
(UNAUDITED)
 
In 000s, except per share data  Three Months Ended September 30,   Nine Months Ended September 30, 
  2015 2014 2015 2014
         
Net (loss) income  $ (2,236)  $ 7,740  $ 7,431  $ 22,014
         
Pre-tax non-cash, acquisition-related intangible amortization  14,829  13,936  44,816  41,989
Pre-tax non-cash, share-based compensation   5,590  4,809  16,721  14,703
Pre-tax restructuring, acquisition and integration-related expenses  5,027  3,010  10,022  4,707
Pre-tax non-cash, purchase accounting adjustment  116  94  944  94
Pre-tax non-cash, impairment of property and equipment  10,309  —   10,309  — 
Tax effect on pre-tax adjustments b  (14,348)  (8,739)  (33,124)  (24,596)
         
Non-GAAP adjusted net income  $ 19,287  $ 20,850  $ 57,119  $ 58,911
         
Income Per Share (EPS) – diluted  $ (0.04)  $ 0.13  $ 0.12  $ 0.36
         
Pre-tax non-cash, acquisition-related intangible amortization  0.25  0.23  0.74  0.69
Pre-tax non-cash, share-based compensation   0.09  0.07  0.27  0.23
Pre-tax restructuring, acquisition and integration-related expenses  0.08  0.05  0.16  0.08
Pre-tax non-cash, purchase accounting adjustment  —   —   0.02  — 
Pre-tax non-cash, impairment of property and equipment  0.17  —   0.17  — 
Tax effect on pre-tax adjustments b  (0.23)  (0.14)  (0.54)  (0.40)
         
Non-GAAP adjusted EPS – diluted  $ 0.32  $ 0.34  $ 0.94  $ 0.96
         
Weighted average shares – diluted (in 000s) c 60,884 60,662 60,822 61,269
         
(b) The Company used a tax rate of 40.0% for the three and nine months ended September 30, 2015 and 2014 to calculate the tax effect of each adjustment since it believes 40.0% will be the Company’s normalized long-term tax rate.
(c) Given the Company’s net loss for the three months ended September 30, 2015, GAAP diluted net loss per share is the same as basic net loss per share. However, the Company uses weighted average shares, diluted in its calculation of non-GAAP adjusted EPS.
 
See “Use of Non-GAAP Financial Measures” following financial schedules for more information on non-GAAP measures.
 
SUPPLEMENTAL REPORTING OF SHARE-BASED COMPENSATION
EXPENSE INCLUDED IN OPERATING EXPENSES 
(UNAUDITED)
 
         
In 000s  Three Months Ended   Nine Months Ended 
  September 30, September 30,
  2015 2014 2015 2014
Amount of share-based compensation included in:        
Cost of revenue  $ 1,565  $ 1,476  $ 4,715  $ 4,505
Product development expense  271  252  1,044  887
Selling & marketing expense  965  710  2,872  2,082
General & administrative expense  2,789  2,371  8,090  7,229
         
Total  $ 5,590  $ 4,809  $ 16,721  $ 14,703
         
         
SUPPLEMENTAL REPORTING OF FREE CASH FLOW
RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES 
(UNAUDITED)
 
         
In 000s  Nine Months Ended     
   September 30,     
  2015 2014   % Change
         
Cash provided by operating activities  $ 143,608  $ 96,052   49.5%
Purchases of property, equipment and software  (6,255)  (9,820)   -36.3%
Capitalized software development costs  (30,069)  (30,568)   -1.6%
         
Non-GAAP free cash flow  $ 107,284  $ 55,664   92.7%
         
         
         
See “Use of Non-GAAP Financial Measures” following financial schedules for more information on non-GAAP measures.
 
Use of Non-GAAP Financial Measures
In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management and the board of directors in their financial and operational decision-making, the Company supplements its condensed consolidated financial statements presented on a GAAP basis herein with the following non-GAAP financial information: EBITDA; adjusted EBITDA; adjusted EBITDA margin; adjusted net income; diluted adjusted EPS; free cash flow; and contracted revenue.
These non-GAAP financial measures may have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. The Company compensates for such limitations by relying primarily on the Company’s GAAP results and using non-GAAP financial measures only supplementally. Where possible, the Company provides reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. Investors are encouraged to carefully review those reconciliations. In addition, because these non-GAAP measures are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures, as defined by the Company, may differ from and may not be comparable to similarly titled measures used by other companies.
The Company defines EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization; and adjusted EBITDA as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and other non-recurring, non-cash or non-operating items. EBITDA and adjusted EBITDA are used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period and provides for a more complete understanding of factors and trends affecting our business. These measures assist management and the board of directors and may be useful to investors in comparing the Company’s operating performance consistently over time as it removes the impact of its capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of the management team (taxes), as well as other non-cash (purchase accounting adjustments and imputed rental income) and non-recurring items, from the Company’s operational results. Adjusted EBITDA also removes the impact of non-cash share-based compensation expense, impairments, and certain restructuring, acquisition and integration-related charges. EBITDA and adjusted EBITDA are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities. 
The Company defines adjusted net income as earnings excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense, certain restructuring, acquisition and integration-related expenses on a tax-adjusted basis, purchase accounting adjustments on a tax-adjusted basis, and diluted adjusted EPS as earnings per share excluding non-cash acquisition-related intangible amortization, depreciation and non-recurring expense items on a tax-adjusted basis, non-cash tax-adjusted shared-based compensation expense and certain restructuring, acquisition and integration-related expenses on a tax-adjusted basis. Adjusted net income and diluted adjusted EPS are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flow from continuing operating activities. Use of this measure for this purpose allows management and the board of directors to analyze the Company’s operating performance on a consistent basis by removing the impact of certain non-cash and non-recurring items from our operations, and by rewarding organic growth and accretive business transactions. As a significant portion of senior management’s incentive based compensation has historically been based on the achievement of certain diluted adjusted EPS growth over time, investors may find such information useful. 
The Company defines free cash flow as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs. Management believes free cash flow is an important measure because it represents the cash that the Company is able to generate after spending capital on infrastructure to maintain its business and investing in new and upgraded products and services to support future growth. Free cash flow is important because it allows the Company to pursue opportunities that are intended to enhance shareholder value, which could include debt reduction, share repurchases, partnerships, alliances and acquisitions, and/or dividend payments. The Company’s definition of free cash flow does not consider non-discretionary cash payments, such as debt.
Contracted revenue is a forward-looking operating measure used by management and the board of directors to better understand revenue growth trends within the Company’s business segments as it reflects the Company’s current estimate of contractually committed revenue to be generated under existing 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. 
CONTACT: Robert Borchert
         678.248.8194
         rborchert@medassets.com

Left Menu Icon
Right Menu Icon