NASHVILLE, Tenn.–(BUSINESS WIRE)–Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change Healthcare”), a leading independent healthcare technology company, today reported financial results for the second quarter of fiscal year 2021 ended Sept. 30, 2020.
“Our second quarter results reflect continued improvement in both healthcare utilization in the U.S. and underlying momentum across our business. The strong support of our customers in expanding their business with us, as well as the penetration of new solutions with both existing and new customers, contributed to our strong results,” said Neil de Crescenzo, president and chief executive officer. “The pandemic has underscored the need for greater efficiency, improved access and enhanced consumer experience across the healthcare continuum. Change Healthcare remains committed to continuing to deliver value to our customers and shareholders by leveraging the strength of our platform, which has the scale, data intelligence, connectivity, interoperability, and user experience capabilities to accelerate innovation and performance.”
Fiscal 2021 Second Quarter Highlights:
Financial Summary
- Total revenue of $755.9 million, including solutions revenue of $705.9 million
- Net loss of $42.6 million, resulting in net loss of $0.13 per diluted share
- Adjusted net income of $103.5 million, resulting in adjusted net income of $0.32 per diluted share
- Adjusted EBITDA of $231.8 million
Recent Business Highlights
- Announced a new consumer engagement and revenue cycle management solution for pharmacies that makes it easier for consumers to get COVID-19 testing in their local pharmacies. Pharmacies can now electronically bill for COVID-19 tests just as easily as they bill for prescriptions and flu shots.
- Integrated our SmartPay™ Consumer Payment solution with Epic MyChart and encrypted device integration within Hyperspace, allowing providers to offer their patients a wide range of payment options––letting them easily pay their healthcare bills how and when they want, with Change Healthcare providing phone and mail-in payment channels to give providers a multi-channel payment solution.
- Acquired Nucleus.io, a leader in the development of advanced, fully enabled, cloud-native imaging and workflow technology including its market-leading medical image exchange solution currently utilized by over 7,500 organizations across the United States.
- Acquired Prometheus Analytics®, the industry-standard for value-based care reimbursement models based on medical episodes of care. Prometheus is used by payer-provider collaborations nationwide, uniquely providing a proven and fair blueprint for value-based payments.
- Announced innovative new Artificial Intelligence models, trained by expert physicians, which extract meaningful diagnostic information from text in EHRs. The first application of this technology is within our InterQual AutoReview™ solution, which automates medical necessity reviews using real-time data from EHRs.
Impact of McKesson Exit on Comparability of Results
On March 10, 2020, Change Healthcare Inc. acquired the interest in Change Healthcare LLC (“the Joint Venture”) previously held by McKesson. The transaction resulted in Change Healthcare Inc. acquiring control of the Joint Venture, which was accounted for as a business combination and resulted in a new basis of accounting, and all of the business activities of the Joint Venture are now reported by the Company. Change Healthcare Inc. financial statements for periods prior to the acquisition were primarily limited to the equity method investment in the Joint Venture, and therefore did not reflect revenue, adjusted EBITDA, and other key measures. As a result, Change Healthcare does not consider comparison of the current operating results to the reported results of Change Healthcare Inc. for the same period in the prior year to be meaningful, and instead will compare our current quarter results to the prior quarter results of the Joint Venture, which have been recast to reflect the current segment structure, including the allocation of all corporate costs to the business units. This press release includes supplemental information for the recast results of the Joint Venture for the three and six months ended September 30, 2019. The recast results for all quarters in fiscal year 2019 and fiscal year 2020 are available in the appendix to the earnings presentation and will be included as an exhibit to Change Healthcare Inc.’s Form 10-Q.
Financial Results
- Solutions revenue was $705.9 million for the current period, inclusive of the impact of the fair value adjustment to deferred revenue resulting from the McKesson exit, which reduced revenue recognized in the quarter by $38.9 million. Total revenue, which includes postage revenue, was $755.9 million. For the second quarter of fiscal 2020, the Joint Venture reported $738.7 million of solutions revenue and $795.8 million of total revenue. Solutions revenue for the current period, including the $15.5 million net favorable impact of acquisitions and divestitures, was negatively impacted by the COVID-19 pandemic. Partially offsetting this impact were new sales volumes across all three segments.
- Net loss was $42.6 million, resulting in net loss of $0.13 per diluted share. For the second quarter of fiscal 2020, the Joint Venture reported net loss of $0.1 million or $0.00 per diluted unit. Net loss for the current period was negatively impacted by the COVID-19 pandemic, partially offset by new sales volumes, productivity improvements and cost initiatives.
- Adjusted net income was $103.5 million, resulting in adjusted net income of $0.32 per diluted share. For the second quarter of fiscal 2020, the Joint Venture reported adjusted net income of $86.6 million or $0.27 per diluted unit. Net loss per diluted share and adjusted net income per diluted share for the current period is based on 321 million shares compared to 324 million units in the prior year period.
- Adjusted EBITDA was $231.8 million for the current period. For the second quarter of fiscal 2020, the Joint Venture reported adjusted EBITDA of $217.7 million. The results in the current quarter reflect approximately $15 million in lower SMG&A expenses primarily related to a one-time change in benefits policy, reduced healthcare benefits as a result of lower employee healthcare utilization, and timing related to deferred hiring as a result of COVID-19. The majority of these impacts are expected to normalize in the 3rd fiscal quarter.
Cash Flow and Balance Sheet Highlights
Net cash provided by operating activities was $296.6 million, free cash flow was $170.1 million, and adjusted free cash flow was $210.7 million, in each case, for the six months ended September 30, 2020. For the six months ended September 30, 2019, the Joint Venture reported net cash provided by operating activities, free cash flow, and adjusted free cash flow of $223.9 million, $94.0 million, and $173.9 million, respectively.
Net cash provided by operating activities, free cash flow, and adjusted free cash flow each is affected by pass-thru funds we receive from certain pharmaceutical industry participants in advance of our obligation to remit these funds to participating retail pharmacies. Such pass-thru funds on hand decreased by $1.4 million in the six months ended September 30, 2020, reducing free cash flow for the period by that amount, and increased by $12.9 million for the Joint Venture for the six months ended September 30, 2019. The increase in cash flow from operations, free cash flow, and adjusted free cash flow in the current period primarily resulted from improved working capital driven by strong collections.
The Company ended the quarter with approximately $167.5 million of cash and cash equivalents, and approximately $5,014.2 million of total debt. During the current period, the Company repaid $50.0 million on its Term Loan Facility. Subsequent to the end of the quarter, the Company repaid an additional $75.0 million on its Term Loan Facility.
Third Quarter Fiscal Year 2021 Guidance
Due to uncertainty around the duration of the COVID-19 pandemic, the Company will only be providing quarterly guidance.
For the third quarter of fiscal year 2021, the Company expects solutions revenue to be in the range of $725 million to $745 million, which includes a reduction of $24 million in revenue resulting from an adjustment of deferred revenue to fair value with no impact on adjusted EBITDA, adjusted EBITDA to be in the range of $215 million to $235 million, and adjusted EPS to be in the range of $0.28 – $0.33 per share.
The third quarter fiscal year 2021 outlook reflects the Company’s current expectation that the impact from the COVID-19 pandemic will continue to be gradually reduced throughout the remainder of the fiscal year as healthcare utilization trends improve and is also subject to risk factors such as those described in the Forward-Looking Statements below.
Supplemental Forward-Looking Expectations and Assumptions for Fiscal 2021
While the Company is not providing guidance for the full fiscal year 2021 due to the uncertainty of COVID-19, the Company has determined to provide the following supplemental expectations and assumptions that it has made regarding its fiscal year 2021 results to provide further transparency to investors into the Company’s current beliefs regarding fiscal year 2021, all of which are subject to change:
- Expect free cash flow of $250 million to $300 million.
- Capital expenditures of approximately 7.5% – 8.0% of solutions revenue excluding the impact of fair value adjustments and excluding integration related capital expenditures.
- Integration related operating expense for the fiscal year of approximately $80 million and integration related capital expenditures of approximately $20 million.
- Interest expense in the range of $245 million to $255 million.
- Adjusted effective tax rate of approximately 25%.
- Basic and fully diluted shares outstanding of 321 million.1
A reconciliation of the forward-looking third quarter fiscal year 2021 adjusted EBITDA outlook to net income, adjusted effective tax rate outlook for our effective tax rate outlook and free cash flow outlook to cash provided by (used in) operating activities cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliation that have not yet occurred, are out of our control, or cannot be reasonably predicted. For the same reasons, Change Healthcare is unable to assess the probable significance of the unavailable information, which could have a material impact on its future financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
| _______________________________ |
|
1 Diluted shares outstanding includes the impact of the minimum issuable shares attributable to the TEUs and excludes the effect of potential shares that would be antidilutive to Diluted EPS, based on expected GAAP Net Income (Loss) for FY2021. |
Conference Call and Webcast Information
Change Healthcare will host a conference call on Thursday, Nov. 5, 2020, at 8:00 a.m. ET. Investors and other interested parties are invited to listen to the conference call by dialing 1-(877) 279-0788 in the U.S.; 1-(270) 215-9894 from abroad, including the conference ID number: 6559165; or via a live, audio webcast on the Company’s website at https://ir.changehealthcare.com/.
A webcast replay will be available for on-demand listening shortly after the completion of the call until the second quarter fiscal year 2022 earnings call, at the aforementioned URL. In addition, a digital audio playback will be available until 11:00 a.m. ET on Thursday, Nov. 12, 2020, by dialing 1-(855) 859-2056 or 1-(404) 537-3406 and referencing confirmation 6559165.
About Change Healthcare
Change Healthcare (Nasdaq: CHNG) is a leading independent healthcare technology company, focused on insights, innovation, and accelerating the transformation of the U.S. healthcare system through the power of the Change Healthcare Platform. We provide data and analytics-driven solutions to improve clinical, financial, administrative, and patient engagement outcomes in the U.S. healthcare system. Learn more at changehealthcare.com.
CHNG-IR
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of federal securities laws. Any statements made in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including, but not limited to, our third quarter fiscal year 2021 guidance, the supplemental information and assumptions regarding fiscal year 2021, the potential length and impact of COVID-19 and descriptions of our business plans and strategies. These statements often include words such as “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,” “may,” “will,” “forecast,” “outlook,” “potential,” “continues,” “seeks,” “predicts,” and the negatives of these words and other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, including, but not limited to, the uncertainty around the length and severity of the COVID-19 pandemic; the ongoing impact of the COVID-19 pandemic on our operations and financial results, on our customers and on national, state and local economies; and new risks that may arise due to responses to the pandemic by the government, our customers and us, and other factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 in the section entitled “Risk Factors,” as such factors may be updated from time to time in our periodic filings with the SEC, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this release. All forward-looking statements are based on information currently available to Change Healthcare and are qualified in their entirety by this cautionary statement. The statements herein speak only as of the date such statements were first made. Except to the extent required by law, Change Healthcare assumes no obligation to update any such forward-looking statements or other statements included in this release.
Non-GAAP Financial Measures
In the company’s earnings releases, prepared remarks, conference calls, slide presentations and webcasts, there may be use or discussion of non-GAAP financial measures. We believe such measures provide supplemental information to investors with regard to our operating performance and assist investors’ ability to compare our financial results to those of other companies in the same industry. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between the comparable GAAP financial measure and each non-GAAP financial measure are included in this press release after the consolidated financial statements. These non-GAAP financial measures are calculated and presented on the basis of methodologies other than in accordance with GAAP. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP and may be defined and calculated differently by others in the same industry.
|
Consolidated Statements of Operations Quarter to Date (unaudited and amounts in thousands, except share and per share amounts) |
||||||||||||
|
|
||||||||||||
|
|
|
Three Months Ended September 30, |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
Change Healthcare Inc. |
|
Change |
||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|||
|
Solutions revenue |
|
$ |
705,913 |
|
|
$ |
— |
|
|
$ |
738,701 |
|
|
Postage revenue |
|
|
50,023 |
|
|
|
— |
|
|
|
57,110 |
|
|
Total revenue |
|
|
755,936 |
|
|
|
— |
|
|
|
795,811 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
|
Cost of operations (exclusive of depreciation and amortization below) |
|
|
326,653 |
|
|
|
— |
|
|
|
331,234 |
|
|
Research and development |
|
|
54,052 |
|
|
|
— |
|
|
|
51,783 |
|
|
Sales, marketing, general and administrative |
|
|
171,606 |
|
|
|
1,138 |
|
|
|
190,039 |
|
|
Customer postage |
|
|
50,023 |
|
|
|
— |
|
|
|
57,110 |
|
|
Depreciation and amortization |
|
|
146,869 |
|
|
|
— |
|
|
|
77,448 |
|
|
Accretion and changes in estimate with related parties, net |
|
|
3,564 |
|
|
|
48,363 |
|
|
|
3,214 |
|
|
Gain on sale of businesses |
|
|
(176 |
) |
|
|
— |
|
|
|
— |
|
|
Total operating expenses |
|
|
752,591 |
|
|
|
49,501 |
|
|
|
710,828 |
|
|
Operating income (loss) |
|
|
3,345 |
|
|
|
(49,501 |
) |
|
|
84,983 |
|
|
Non-operating (income) and expense |
|
|
|
|
|
|
|
|
|
|||
|
Interest expense, net |
|
|
61,627 |
|
|
|
— |
|
|
|
69,901 |
|
|
Contingent consideration |
|
|
(550 |
) |
|
|
— |
|
|
|
1,700 |
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
— |
|
|
|
16,900 |
|
|
Loss from Equity Method Investment in the Joint Venture |
|
|
— |
|
|
|
56,179 |
|
|
|
— |
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
2,435 |
|
|
|
— |
|
|
Other, net |
|
|
(3,211 |
) |
|
|
(560 |
) |
|
|
(4,386 |
) |
|
Total non-operating (income) and expense |
|
|
59,355 |
|
|
|
58,054 |
|
|
|
84,115 |
|
|
Income (loss) before income tax provision (benefit) |
|
|
(56,010 |
) |
|
|
(107,555 |
) |
|
|
868 |
|
|
Income tax provision (benefit) |
|
|
(13,388 |
) |
|
|
(13,620 |
) |
|
|
998 |
|
|
Net income (loss) |
|
$ |
(42,622 |
) |
|
$ |
(93,935 |
) |
|
$ |
(130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|||
|
Basic and Diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.66 |
) |
|
$ |
— |
|
|
Weighted average common shares outstanding: (1) |
|
|
|
|
|
|
|
|
|
|||
|
Basic and Diluted |
|
|
320,638,116 |
|
|
|
142,223,836 |
|
|
|
318,219,028 |
|
|
(1) |
Prior to the McKesson exit, common units of Change Healthcare LLC were equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson. |
|
Consolidated Statements of Operations Year to Date (unaudited and amounts in thousands, except share and per share amounts) |
|||||||||||||
|
|
|||||||||||||
|
|
|
Six Months Ended September 30, |
|||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
|||||||
|
|
|
Change Healthcare Inc. |
|
Change |
|||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
||||
|
Solutions revenue |
|
$ |
1,354,325 |
|
|
$ |
— |
|
|
$ |
1,535,773 |
|
|
|
Postage revenue |
|
|
95,795 |
|
|
|
— |
|
|
|
115,594 |
|
|
|
Total revenue |
|
|
1,450,120 |
|
|
|
— |
|
|
|
1,651,367 |
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
|
Cost of operations (exclusive of depreciation and amortization below) |
|
|
645,195 |
|
|
|
— |
|
|
|
658,181 |
|
|
|
Research and development |
|
|
109,787 |
|
|
|
— |
|
|
|
101,122 |
|
|
|
Sales, marketing, general and administrative |
|
|
337,080 |
|
|
|
1,389 |
|
|
|
383,312 |
|
|
|
Customer postage |
|
|
95,795 |
|
|
|
— |
|
|
|
115,594 |
|
|
|
Depreciation and amortization |
|
|
285,409 |
|
|
|
— |
|
|
|
148,764 |
|
|
|
Accretion and changes in estimate with related parties, net |
|
|
9,459 |
|
|
|
48,363 |
|
|
|
7,094 |
|
|
|
Gain on sale of businesses |
|
|
(28,270 |
) |
|
|
— |
|
|
|
— |
|
|
|
Total operating expenses |
|
|
1,454,455 |
|
|
|
49,752 |
|
|
|
1,414,067 |
|
|
|
Operating income (loss) |
|
|
(4,335 |
) |
|
|
(49,752 |
) |
|
|
237,300 |
|
|
|
Non-operating (income) and expense |
|
|
|
|
|
|
|
|
|
||||
|
Interest expense, net |
|
|
124,294 |
|
|
|
— |
|
|
|
153,307 |
|
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
— |
|
|
|
909 |
|
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
— |
|
|
|
16,900 |
|
|
|
Loss from Equity Method Investment in the Joint Venture |
|
|
— |
|
|
|
95,732 |
|
|
|
— |
|
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
2,435 |
|
|
|
— |
|
|
|
Other, net |
|
|
1,047 |
|
|
|
(664 |
) |
|
|
(8,164 |
) |
|
|
Total non-operating (income) and expense |
|
|
123,830 |
|
|
|
97,503 |
|
|
|
162,952 |
|
|
|
Income (loss) before income tax provision (benefit) |
|
|
(128,165 |
) |
|
|
(147,255 |
) |
|
|
74,348 |
|
|
|
Income tax provision (benefit) |
|
|
(26,849 |
) |
|
|
(15,804 |
) |
|
|
2,563 |
|
|
|
Net income (loss) |
|
$ |
(101,316 |
) |
|
$ |
(131,451 |
) |
|
$ |
71,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
(0.32 |
) |
|
$ |
(1.20 |
) |
|
$ |
0.25 |
|
|
|
Diluted |
|
$ |
(0.32 |
) |
|
$ |
(1.20 |
) |
|
$ |
0.25 |
|
|
|
Weighted average common shares outstanding: (1) |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
|
320,347,128 |
|
|
|
109,111,853 |
|
|
|
285,107,046 |
|
|
|
Diluted |
|
|
320,347,128 |
|
|
|
109,111,853 |
|
|
|
288,809,850 |
|
|
|
(1) |
Prior to the McKesson exit, common units of Change Healthcare LLC were equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson. |
|
Consolidated Balance Sheets (unaudited and amounts in thousands, except share and per share amounts) |
||||||||
|
|
||||||||
|
|
|
September 30, 2020 |
|
March 31, 2020 |
||||
|
Assets |
|
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
167,477 |
|
|
$ |
410,405 |
|
|
Accounts receivable, net |
|
|
626,991 |
|
|
|
740,105 |
|
|
Contract assets, net |
|
|
135,388 |
|
|
|
132,704 |
|
|
Prepaid expenses and other current assets |
|
|
125,996 |
|
|
|
117,967 |
|
|
Total current assets |
|
|
1,055,852 |
|
|
|
1,401,181 |
|
|
Property and equipment, net |
|
|
193,904 |
|
|
|
206,196 |
|
|
Operating lease right-of-use assets, net |
|
|
106,790 |
|
|
|
— |
|
|
Goodwill |
|
|
4,126,481 |
|
|
|
3,795,325 |
|
|
Intangible assets, net |
|
|
4,418,079 |
|
|
|
4,365,806 |
|
|
Investment in business purchase option |
|
|
— |
|
|
|
146,500 |
|
|
Other noncurrent assets, net |
|
|
309,107 |
|
|
|
192,372 |
|
|
Total assets |
|
$ |
10,210,213 |
|
|
$ |
10,107,380 |
|
|
Liabilities |
|
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
|
||
|
Accounts payable |
|
$ |
47,351 |
|
|
$ |
68,169 |
|
|
Accrued expenses |
|
|
452,974 |
|
|
|
390,294 |
|
|
Deferred revenue |
|
|
319,115 |
|
|
|
302,313 |
|
|
Due to related parties, net |
|
|
11,606 |
|
|
|
20,234 |
|
|
Current portion of long-term debt |
|
|
30,488 |
|
|
|
278,779 |
|
|
Current portion of operating lease liabilities |
|
|
32,060 |
|
|
|
— |
|
|
Total current liabilities |
|
|
893,594 |
|
|
|
1,059,789 |
|
|
Long-term debt, excluding current portion |
|
|
4,983,737 |
|
|
|
4,710,294 |
|
|
Long-term operating lease liabilities |
|
|
88,239 |
|
|
|
— |
|
|
Deferred income tax liabilities |
|
|
627,919 |
|
|
|
615,904 |
|
|
Tax receivable agreement obligations to related parties |
|
|
98,658 |
|
|
|
177,826 |
|
|
Tax receivable agreement obligations |
|
|
232,009 |
|
|
|
164,633 |
|
|
Other long-term liabilities |
|
|
76,807 |
|
|
|
93,487 |
|
|
Total liabilities |
|
|
7,000,963 |
|
|
|
6,821,933 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
||
|
Stockholders’ Equity |
|
|
|
|
|
|
||
|
Common Stock (par value, $.001), 9,000,000,000 and 9,000,000,000 shares authorized and 304,426,569 and 303,428,142 shares issued and outstanding at September 30, 2020 and March 31, 2020, respectively |
|
|
304 |
|
|
|
303 |
|
|
Preferred stock (par value, $.001), 900,000,000 and 900,000,000 shares authorized and no shares issued and outstanding at September 30, 2020 and March 31, 2020, respectively |
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
|
4,242,721 |
|
|
|
4,222,580 |
|
|
Accumulated other comprehensive income (loss) |
|
|
(1,978 |
) |
|
|
(7,372 |
) |
|
Accumulated deficit |
|
|
(1,031,797 |
) |
|
|
(930,064 |
) |
|
Total stockholders’ equity |
|
|
3,209,250 |
|
|
|
3,285,447 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
10,210,213 |
|
|
$ |
10,107,380 |
|
|
Consolidated Statements of Cash Flows (unaudited and amounts in thousands) |
||||||||||||
|
|
||||||||||||
|
|
|
Six Months Ended September 30, |
||||||||||
|
|
|
2020 |
|
2019 |
|
2019 |
||||||
|
|
|
Change Healthcare Inc. |
|
Change |
||||||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
|
Net income (loss) |
|
$ |
(101,316 |
) |
|
$ |
(131,451 |
) |
|
$ |
71,785 |
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|||
|
Loss from Equity Method Investment in the Joint Venture |
|
|
— |
|
|
|
95,732 |
|
|
|
— |
|
|
Depreciation and amortization |
|
|
285,409 |
|
|
|
— |
|
|
|
148,764 |
|
|
Amortization of capitalized software developed for sale |
|
|
89 |
|
|
|
— |
|
|
|
6,698 |
|
|
Accretion and changes in estimate, net |
|
|
11,188 |
|
|
|
— |
|
|
|
7,094 |
|
|
Equity compensation |
|
|
23,914 |
|
|
|
— |
|
|
|
15,207 |
|
|
Deferred income tax expense (benefit) |
|
|
(28,590 |
) |
|
|
(15,806 |
) |
|
|
1,473 |
|
|
Amortization of debt discount and issuance costs |
|
|
16,551 |
|
|
|
212 |
|
|
|
9,941 |
|
|
Contingent consideration |
|
|
(3,000 |
) |
|
|
— |
|
|
|
909 |
|
|
Gain on sale of businesses |
|
|
(28,270 |
) |
|
|
— |
|
|
|
— |
|
|
Loss on extinguishment of debt |
|
|
1,489 |
|
|
|
— |
|
|
|
16,900 |
|
|
(Gain) loss on forward purchase contract |
|
|
— |
|
|
|
2,435 |
|
|
|
— |
|
|
Non-cash lease expense |
|
|
14,629 |
|
|
|
— |
|
|
|
— |
|
|
Other, net |
|
|
7,530 |
|
|
|
— |
|
|
|
(111 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
|
Accounts receivable, net |
|
|
114,052 |
|
|
|
— |
|
|
|
54,240 |
|
|
Contract assets, net |
|
|
(3,786 |
) |
|
|
— |
|
|
|
12,688 |
|
|
Prepaid expenses and other assets |
|
|
(48,382 |
) |
|
|
(2,136 |
) |
|
|
(8,583 |
) |
|
Accounts payable |
|
|
(28,666 |
) |
|
|
— |
|
|
|
(15,209 |
) |
|
Accrued expenses and other liabilities |
|
|
27,687 |
|
|
|
48,640 |
|
|
|
(16,311 |
) |
|
Deferred revenue |
|
|
36,029 |
|
|
|
— |
|
|
|
(69,471 |
) |
|
Due to the Joint Venture, net |
|
|
— |
|
|
|
2,374 |
|
|
|
— |
|
|
Due to related party, net |
|
|
— |
|
|
|
— |
|
|
|
(12,150 |
) |
|
Net cash provided by (used in) operating activities |
|
|
296,557 |
|
|
|
— |
|
|
|
223,864 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
|
Capitalized expenditures |
|
|
(126,432 |
) |
|
|
— |
|
|
|
(129,847 |
) |
|
Acquisitions, net of cash acquired |
|
|
(439,483 |
) |
|
|
— |
|
|
|
— |
|
|
Proceeds from sale of businesses |
|
|
54,369 |
|
|
|
— |
|
|
|
— |
|
|
Investments in businesses |
|
|
— |
|
|
|
— |
|
|
|
(18,946 |
) |
|
Investment in the Joint Venture |
|
|
— |
|
|
|
(609,818 |
) |
|
|
— |
|
|
Investment in debt and equity securities of the Joint Venture |
|
|
— |
|
|
|
(278,875 |
) |
|
|
— |
|
|
Other, net |
|
|
1,100 |
|
|
|
3,621 |
|
|
|
— |
|
|
Net cash provided by (used in) investing activities |
|
|
(510,446 |
) |
|
|
(885,072 |
) |
|
|
(148,793 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
|
Payments on Revolving Facility |
|
|
(250,000 |
) |
|
|
— |
|
|
|
— |
|
|
Payments on Term Loan Facility |
|
|
(50,000 |
) |
|
|
— |
|
|
|
(902,750 |
) |
|
Proceeds from issuance of Senior Notes |
|
|
325,000 |
|
|
|
— |
|
|
|
— |
|
|
Payments under tax receivable agreements with related parties |
|
|
(20,691 |
) |
|
|
— |
|
|
|
(27,227 |
) |
|
Receipts (payments) on derivative instruments |
|
|
(14,810 |
) |
|
|
— |
|
|
|
3,109 |
|
|
Employee tax withholding on vesting of equity compensation awards |
|
|
(3,131 |
) |
|
|
— |
|
|
|
— |
|
|
Payments on deferred financing obligations |
|
|
(6,547 |
) |
|
|
— |
|
|
|
— |
|
|
Payment of senior amortizing notes |
|
|
(7,680 |
) |
|
|
(3,621 |
) |
|
|
— |
|
|
Payment of debt issued to Change Healthcare Inc. |
|
|
— |
|
|
|
— |
|
|
|
(3,621 |
) |
|
Proceeds from exercise of equity awards |
|
|
2,584 |
|
|
|
1,139 |
|
|
|
— |
|
|
Capital contribution from Members from exercise of equity compensation awards |
|
|
— |
|
|
|
— |
|
|
|
1,139 |
|
|
Proceeds from initial public offering, net of issuance costs |
|
|
— |
|
|
|
608,679 |
|
|
|
— |
|
|
Proceeds from Change Healthcare Inc. initial public offering |
|
|
— |
|
|
|
— |
|
|
|
608,679 |
|
|
Proceeds from issuance of debt component of tangible equity units |
|
|
— |
|
|
|
47,367 |
|
|
|
— |
|
|
Proceeds from debt issued to Change Healthcare Inc. |
|
|
— |
|
|
|
— |
|
|
|
47,367 |
|
|
Proceeds from issuance of equity component of tangible equity units, net of issuance costs |
|
|
— |
|
|
|
232,929 |
|
|
|
— |
|
|
Proceeds from forward purchase contract with Change Healthcare Inc. |
|
|
— |
|
|
|
— |
|
|
|
232,929 |
|
|
Other, net |
|
|
(6,454 |
) |
|
|
(1,421 |
) |
|
|
(10,897 |
) |
|
Net cash provided by (used in) financing activities |
|
|
(31,729 |
) |
|
|
885,072 |
|
|
|
(51,272 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
2,690 |
|
|
|
— |
|
|
|
299 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(242,928 |
) |
|
|
— |
|
|
|
24,098 |
|
|
Cash and cash equivalents at beginning of period |
|
|
410,405 |
|
|
|
3,409 |
|
|
|
48,894 |
|
|
Cash and cash equivalents at end of period |
|
$ |
167,477 |
|
|
$ |
3,409 |
|
|
$ |
72,992 |
|
Contacts
Evan Smith, CFA
Investor Relations
404-338-2225
Evan.Smith@changehealthcare.com
Katherine Wojtecki
External Communications
630-624-9142
Katherine.Wojtecki@changehealthcare.com