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
[email protected]