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MedAssets reports Q1 2014 results

($ in millions, except per share)

1Q'14

1Q'13

% Change

Net Revenue:

Spend and Clinical Resource Mgmt (SCM)

$108.6

$109.5

(0.8)%

Revenue Cycle Management (RCM)

62.3

63.3

(1.7)

Total Net Revenue

170.9

172.8

(1.1)

Net income

7.7

7.7

(0.3)

Earnings per share (EPS) - diluted

0.12

0.13

(7.7)

Non-GAAP adjusted EBITDA

56.7

61.6

(8.0)

Non-GAAP adjusted EPS - diluted

$0.32

$0.41

(22.0)

Weighted average shares - diluted

61.7

60.4

2.1%

Net Revenue

Total net revenue for the first quarter of 2014 decreased 1.1% to $170.9 million from $172.8 million for the first quarter of 2013. Excluding performance-related fees from both periods, total net revenue in the first quarter of 2014 grew 1.6% from the same period a year earlier. Net revenue in the SCM segment decreased 0.8% to $108.6 million from net revenue of $109.5 million for the first quarter of 2013, due to lower group purchasing net administrative fees and an anticipated year-over-year decrease in performance-related fees. Net revenue in the RCM segment decreased 1.7% to $62.3 million from $63.3 millionfor the first quarter of 2013 as technology-related revenue (approximately 71.0% of RCM segment revenue) increased 1.9% while services-related revenue declined 9.5% due primarily to the wind down of two clients disclosed in early 2013 and certain non-recurring revenue in the first quarter of 2013.

Non-GAAP Adjusted EBITDA

Total non-GAAP adjusted EBITDA was $56.7 million, or 33.2% of total net revenue, for the first quarter of 2014, an 8.0% decrease from total non-GAAP adjusted EBITDA of $61.6 million, or 35.7% of total net revenue, for the first quarter of 2013. This decline was due primarily to the anticipated year-over-year decrease in performance-related fees versus the first quarter of 2013.

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

Net income for the first quarter of 2014 was $7.7 million, or $0.12 per share, compared with net income of $7.7 million, or $0.13 per share, for the first quarter of 2013. Non-GAAP adjusted EPS (defined as EPS excluding non-cash acquisition-related intangible amortization and depreciation, non-cash share-based compensation, certain restructuring, acquisition and integration-related expenses and non-recurring items on a tax-adjusted basis) was $0.32 per share for the first quarter of 2014, compared with non-GAAP adjusted EPS of $0.41 per share for the first quarter of 2013.

Cash Flow and Capital Resources

Cash provided by operating activities in the first quarter of 2014 was $17.7 million, up 1.4% from $17.5 million for the first quarter of 2013. Non-GAAP free cash flow (defined as cash provided by operating activities less purchases of property, equipment and software and capitalized software development costs) decreased to $7.6 million from $8.5 million for the first quarter of 2013 due to the timing of property, equipment and software expenditures in 2013. The company's balance sheet at March 31, 2014 included $766.9 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to a leverage ratio of approximately 3.6 times non-GAAP adjusted EBITDA for the trailing twelve-month period. The company repurchased 640,000 shares of common stock in the first quarter of 2014.

Non-GAAP Contracted Revenue

At March 31, 2014, MedAssets' rolling 12-month non-GAAP contracted revenue estimate was $638.1 million (SCM segment - $394.2 million RCM segment - $243.9 million), a year-over-year increase of 6.0%. Non-GAAP contracted revenue is the company's estimate of contractually committed revenue to be generated under existing client contracts in the forward 12-month period.

2014 Financial Guidance

MedAssets maintained its full-year 2014 financial guidance ranges, as follows:

($ in millions, except per share)

FY'14

Y-Y % change

Net Revenue:

SCM segment

$ 438.0 - 446.0

3.2 - 5.1%

RCM segment

261.0 - 269.0

2.0 - 5.1

Total Net Revenue

700.0 - 714.0

2.9 - 4.9

Non-GAAP adjusted EBITDA

232.0 - 242.0

5.1 - 9.6

GAAP EPS - diluted

0.56 - 0.66

24.4 - 46.7

Non-GAAP adjusted EPS - diluted

$ 1.33 - 1.43

0.8 - 8.3%

Excluding performance-related fees from both 2013 and 2014, total net revenue in 2014 is expected to grow approximately 4.5% at the midpoint of the guidance range.

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