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MedAssets reports 5.6% Q3 net revenue increase & nine-month 2014 results

Third Quarter

(In millions, except per share)

3Q'14

3Q'13

% Change

Net Revenue:

Spend and Clinical Resource Mgmt (SCM)

$105.8

$103.2 

2.5%

Revenue Cycle Management (RCM)

69.9

63.1

10.7

Total Net Revenue a

175.7

166.4

5.6

Net income

7.7

6.9

12.1

Earnings per share (EPS) - diluted

0.13

0.11

18.2

Non-GAAP adjusted EBITDA

59.5

53.9

10.3

Non-GAAP adjusted EPS - diluted

$0.34

$0.31

9.7

Weighted average shares - diluted

60.7

61.5

(1.3)%

(a)  Column amounts may not add to total due to rounding.

Net Revenue

Total net revenue for the third quarter of 2014 increased 5.6% to $175.7 million from$166.4 million for the third quarter of 2013. Net revenue in the SCM segment increased 2.5% to $105.8 million from $103.2 million for the third quarter of 2013 due to growth in group purchasing net administrative fees and other service fees. The acquisition of Sg2 on September 22, 2014 resulted in approximately $1.1 million of SCM segment and total net revenue in the most recent third quarter. Net revenue in the RCM segment increased 10.7% to $69.9 million from $63.1 million for the third quarter of 2013 as technology-related revenue (67.5% of RCM segment revenue) increased 5.1%, while services-related revenue rose 24.6%.

Non-GAAP Adjusted EBITDA

Total non-GAAP adjusted EBITDA for the third quarter of 2014 increased 10.3% to$59.5 million, or 33.8% of total net revenue, from total non-GAAP adjusted EBITDA of$53.9 million, or 32.4% of total net revenue, for the third quarter of 2013. Sg2 added approximately $0.1 million in SCM segment and total non-GAAP adjusted EBITDA in the most recent third quarter.

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

Net income for the third quarter of 2014 increased 12.1% to $7.7 million, or $0.13 per share, and included $3.0 million in expenses related to the acquisition of Sg2. This compared with net income of $6.9 million, or $0.11 per share, for the third 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) rose 9.7% to $0.34 per share for the third quarter of 2014, compared with $0.31 per share for the third quarter of 2013.

Nine-Month Period

(In millions, except per share)

9 mos. '14

9 mos. '13

% Change

Net Revenue:

Spend and Clinical Resource Mgmt (SCM)

$320.3

$318.0

0.7%

Revenue Cycle Management (RCM)

201.7

191.9

5.1

Total Net Revenue b

522.0

510.0

2.4

Net income

22.0

19.7

11.8

Earnings per share (EPS) - diluted

0.36

0.32

12.5

Non-GAAP adjusted EBITDA

170.5

168.1

1.4

Non-GAAP adjusted EPS - diluted

$0.96

$1.02

(5.9)

Weighted average shares - diluted

61.3

60.9

0.6%

(b)  Column amounts may not add to total due to rounding.

Net Revenue

Total net revenue for the nine months ended September 30, 2014 increased 2.4% to$522.0 million from $510.0 million for the first nine months of 2013. Net revenue in the SCM segment grew 0.7% to $320.3 million from $318.0 million for the first nine months of 2013. Net revenue in the RCM segment rose 5.1% to $201.7 million from$191.9 million for the first nine months of 2013 as technology-related revenue (68.9% of RCM segment revenue) increased 4.0% while services-related revenue increased 7.6%.

Non-GAAP Adjusted EBITDA

For the first nine months of 2014, total non-GAAP adjusted EBITDA was $170.5 million, or 32.7% of total net revenue, a 1.4% increase from total non-GAAP adjusted EBITDA of $168.1 million, or 33.0% of total net revenue, for the first nine months of 2013.

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

Net income for the first nine months of 2014 increased 11.8% to $22.0 million, or$0.36 per share, compared with $19.7 million, or $0.32 per share, for the first nine months of 2013. Non-GAAP adjusted EPS was $0.96 per share for the first nine months of 2014, a 5.9% decrease from $1.02 per share for the first nine months of 2013.

Cash Flow and Capital Resources

Cash provided by operating activities in the first nine months of 2014 was $96.1 million versus $109.8 million for the first nine months 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$55.7 million versus $63.4 million for the first nine months of 2013. The company's balance sheet at September 30, 2014 included $886.0 million in total bank and bond debt, net of cash and cash equivalents. Total net debt equates to leverage of approximately 4.0 times non-GAAP adjusted EBITDA for the trailing twelve-month period.

Non-GAAP Contracted Revenue

At September 30, 2014, MedAssets' rolling 12-month non-GAAP contracted revenue estimate was $661.2 million (SCM segment - $425.3 million RCM segment - $235.9 million), a year-over-year increase of 5.8%. Excluding the addition of Sg2, non-GAAP contracted revenue increased 0.4% year-over-year. 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

$ 444.0 - 448.0

4.6 - 5.5%

RCM segment

271.0 - 273.0

5.9 - 6.6

Total Net Revenue

715.0 - 721.0

5.1 - 6.0

Non-GAAP adjusted EBITDA

234.0 - 238.0

6.0 - 7.8

GAAP EPS - diluted

0.49 - 0.53

8.9 - 17.8

Non-GAAP adjusted EPS - diluted

$ 1.34 - 1.38

1.5 - 4.5%

Sg2 comprises approximately $10.5-$11.0 million in estimated SCM segment net revenue for full-year 2014. Excluding Sg2 as well as performance-related fees from both 2014 and 2013, total net revenue in full-year 2014 is expected to grow approximately 4.0% at the midpoint of the guidance range.

 

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