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MedAssets reports Q2 & half year results

Second Quarter

(In millions, except per share) 

 2Q'14

 2Q'13

 % Change

Net Revenue: 

 Spend and Clinical Resource Mgmt (SCM)

$ 105.9

$ 105.3

0.6%

 Revenue Cycle Management (RCM)

69.5

65.4

6.2

Total Net Revenue 

175.4

170.7

2.7

Net income

6.6

5.1

29.7

Earnings per share (EPS) - diluted

0.11

0.08

37.5

Non-GAAP adjusted EBITDA 

54.3

52.5

3.4

Non-GAAP adjusted EPS - diluted 

$0.30

$0.30

0.0

Weighted average shares - diluted

60.9

60.7

0.5%

Net Revenue

Total net revenue for the second quarter of 2014 increased 2.7% to $175.4 million from$170.7 million for the second quarter of 2013. Net revenue in the SCM segment increased 0.6% to $105.9 million from $105.3 million for the second quarter of 2013 due to growth in advisory, consulting and other service fees, partially offset by lower group purchasing net administrative fees. Net revenue in the RCM segment increased 6.2% to $69.5 million from$65.4 million for the second quarter of 2013 as technology-related revenue (68.3% of RCM segment revenue) increased 4.9%, while services-related revenue rose 9.2%, including certain one-time items.

Non-GAAP Adjusted EBITDA

Total non-GAAP adjusted EBITDA was $54.3 million, or 31.0% of total net revenue, for the second quarter of 2014, a 3.4% increase from total non-GAAP adjusted EBITDA of $52.5 million, or 30.8% of total net revenue, for the second quarter of 2013.

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

Net income for the second quarter of 2014 increased 29.7% to $6.6 million, or $0.11 per share, compared with net income of $5.1 million, or $0.08 per share, for the second 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 $0.30 per share for the second quarter of 2014, compared with $0.30 per share for the second quarter of 2013.

Six-Month Period

(In millions, except per share) 

 6 mos. '14

 6 mos. '13

 % Change

Net Revenue: 

 Spend and Clinical Resource Mgmt (SCM)

$214.5

$214.8

(0.1)%

 Revenue Cycle Management (RCM)

131.8

128.8

2.3

Total Net Revenue

346.3

343.6

0.8

Net income

14.3

12.8

11.6

Earnings per share (EPS) - diluted

0.23

0.21

9.5

Non-GAAP adjusted EBITDA 

111.0

114.2

(2.8)

Non-GAAP adjusted EPS - diluted 

$0.62

$0.71

(12.7)

Weighted average shares - diluted

61.4

60.6

1.3%

Net Revenue

Total net revenue for the six months ended June 30, 2014 increased 0.8% to $346.3 millionfrom $343.6 million for the first six months of 2013. Net revenue in the SCM segment declined 0.1% to $214.5 million from $214.8 million for the first half of 2013. Net revenue in the RCM segment rose 2.3% to $131.8 million from $128.8 million for the first half of 2013 as technology-related revenue (69.6% of RCM segment revenue) increased 3.4% while services-related revenue declined 0.1%.

Non-GAAP Adjusted EBITDA

For the first six months of 2014, total non-GAAP adjusted EBITDA was $111.0 million, or 32.1% of total net revenue, a 2.8% decrease from adjusted EBITDA of $114.2 million, or 33.2% of total net revenue, for the first half of 2013.

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

Net income for the first six months of 2014 increased 11.6% to $14.3 million, or $0.23 per share, compared with $12.8 million, or $0.21 per share, for the first half of 2013. Non-GAAP adjusted EPS was $0.62 per share for the first six months of 2014, a 12.7% decrease from $0.71 per share for the first half of 2013.

Cash Flow and Capital Resources

Cash provided by operating activities in the first six months of 2014 was $50.8 millionversus $67.6 million for the first half 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 $22.7 million versus $43.4 millionfor the first half of 2013 due to higher cash tax payments, increased investments, and the timing of changes in working capital in the first half of 2014. The company's balance sheet at June 30, 2014 included $780.8 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to leverage of approximately 3.6 times non-GAAP adjusted EBITDA for the trailing twelve-month period. The company repurchased 1.1 million shares of common stock in the second quarter, for a total of 1.8 million in share repurchases in the first six months of 2014.

Non-GAAP Contracted Revenue

At June 30, 2014, MedAssets' rolling 12-month non-GAAP contracted revenue estimate was $627.9 million (SCM segment - $383.8 million RCM segment - $244.1 million), a year-over-year increase of 1.8%. 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 updated its full-year 2014 financial guidance ranges, as follows:

($ in millions, except per share) 

 FY'14

 Y-Y % change

Net Revenue: 

 SCM segment

$ 431.0 - 439.0

 1.5 - 3.4%

 RCM segment

266.0 - 272.0

 3.9 - 6.3

Total Net Revenue 

698.0 - 710.0

 2.6 - 4.3

Non-GAAP adjusted EBITDA 

231.0 - 239.0

 4.6 - 8.2

GAAP EPS - diluted

0.55 - 0.63

22.2 - 40.0

Non-GAAP adjusted EPS - diluted

$ 1.32 - 1.40

 0.0 - 6.1%

Excluding performance-related fees from both 2014 and 2013, total net revenue in 2014 is expected to grow approximately 4.0% at the midpoint of the guidance range.

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