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MedAssets Reports Third Quarter and Nine-Month 2011 Financial Results

MedAssets Reports Third Quarter and Nine-Month 2011 Financial Results 

MedAssets, Inc has announced results for its third quarter and nine months ended September 30, 2011 

Total net revenue for the third quarter of 2011 increased 49.8% to $143.6 million from $95.9 million in the third quarter of 2010, due primarily to the acquisition of Broadlane on November 16, 2010.

Comparing period-over-period organic growth, total non-GAAP net revenue of $143.7 million in the third quarter of 2011 increased 2.5% from total non-GAAP acquisition-affected net revenue of $140.2 million in the third quarter of 2010. Non-GAAP net revenue in the SCM segment grew 7.5% to $90.6 million from non-GAAP acquisition-affected net revenue of $84.3 million in the third quarter of 2010 primarily due to the early recognition of approximately $3.0 million of guarantee-related revenue and solid growth in group purchasing-related administrative fees. Total net revenue in the RCM segment declined 5.0% to $53.1 million from $55.9 million in the third quarter of 2010 as technology-related revenue grew 4.8% but services-related revenue declined 22.1%, as expected, when compared to the third quarter last year.

Nine-Month Period

Total net revenue for the first nine months of 2011 increased 48.2% to $421.5 million from $284.4 million in the first nine months of 2010, due primarily to the acquisition of Broadlane.

Comparing period-over-period organic growth, total non-GAAP net revenue of $427.7 million in the first nine months of 2011 increased 3.1% from total non-GAAP acquisition-affected net revenue of $415.0 million in the first nine months of 2010. Non-GAAP net revenue in the SCM segment grew 4.9% to $267.1 million from non-GAAP acquisition-affected net revenue of $254.7 million in the first nine months of 2010. Total net revenue in the RCM segment increased 0.2% to $160.6 million from $160.3 million in the first nine months of 2010 as technology-related revenue grew 4.8% but was offset by a 8.8% decline in services-related revenue.

Non-GAAP Adjusted EBITDA

Third Quarter

In the third quarter of 2011, total non-GAAP adjusted EBITDA was $45.2 million, or 31.5% of total net revenue, a 34.7% increase over total non-GAAP adjusted EBITDA of $33.6 million, or 35.0% of total net revenue, in the third quarter of 2010. 

Comparing period-over-period organic growth, total non-GAAP adjusted EBITDA in the third quarter of 2011 was $45.2 million, or 31.4% of total non-GAAP net revenue, a 0.2% increase from total non-GAAP acquisition-affected adjusted EBITDA of $45.1 million, or 32.2% of total non-GAAP acquisition-affected net revenue, in the third quarter of 2010. 

Nine-Month Period

In the first nine months of 2011, total non-GAAP adjusted EBITDA was $130.4 million, or 30.9% of total net revenue, a 50.3% increase over total non-GAAP adjusted EBITDA of $86.8 million, or 30.5% of total net revenue, in the first nine months of 2010 

Comparing period-over-period organic growth, total non-GAAP adjusted EBITDA in the first nine months of 2011 was $130.4 million, or 30.5% of total non-GAAP net revenue, an increase of 7.6% from non-GAAP acquisition-affected adjusted EBITDA of $121.2 million, or 29.2% of total non-GAAP acquisition-affected net revenue, in the first nine months of 2010.

Net (Loss) Income and Per Share

Third Quarter

Net loss in the third quarter of 2011 was $1.0 million, or a loss of $0.02 per diluted share, versus net income of $8.5 million, or earnings of $0.14 per diluted share, in the third quarter of 2010. The net loss in the third quarter of 2011 was primarily due to acquisition and integration-related expenses, an increase in interest expense and non-cash amortization related to the acquisition of Broadlane, as well as RCM management restructuring expenses.

Non-GAAP adjusted EPS, defined as EPS excluding non-cash acquisition-related intangible amortization, share-based compensation, acquisition-related expenses and other non-recurring items on a tax-adjusted basis, was $0.26 per diluted share in the third quarter of 2011, versus non-GAAP adjusted EPS of $0.25 per diluted share in the third quarter of 2010.

Nine-Month Period

Net loss in the first nine months of 2011 was $19.6 million, or a loss of $0.34 per diluted share, versus net income of $17.3 million, or earnings of $0.29 per diluted share, in the first nine months of 2010. The net loss in the first nine months of 2011 was primarily due to an increase in interest expense and non-cash amortization related to the acquisition of Broadlane, as well as acquisition and integration-related expenses and RCM management restructuring expenses.

Non-GAAP adjusted EPS was $0.66 per diluted share in the first nine months of 2011, versus non-GAAP adjusted EPS of $0.61 per diluted share in the first nine months of 2010.

Cash Flow and Capital Resources

Net cash provided by operating activities in the first nine months of 2011 increased 60.7% to $75.7 million from $47.1 million in the same period of 2010. The company's balance sheet at September 30, 2011 included $861.6 million in total bank and bond debt, net of cash and cash equivalents, which represented leverage of approximately 4.8 times trailing 12-month total non-GAAP acquisition-affected adjusted EBITDA. This is exclusive of the $120.3 million deferred purchase consideration due on or before January 4, 2012.

2011 Financial Guidance

MedAssets updated its full-year 2011 financial guidance, as follows: total non-GAAP net revenue is expected to be in a range of $576-582 million SCM segment net revenue is expected to be in range of $363-367 million, and RCM segment net revenue is expected to be in a range of $212-216 million non-GAAP adjusted EBITDA is expected to be in a range of $185-189 million and non-GAAP diluted adjusted EPS is expected to be in a range of $0.96-1.02.

Contracted Revenue

At September 30, 2011, the Company's rolling 12-month non-GAAP contracted revenue was an estimated $561.3 million ($348.3 million from the SCM segment and $213.0 million from the RCM segment), which is a sequential increase of 0.5% from the second quarter of 2011.

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