Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change
Healthcare”), a leading healthcare technology company, today
reported financial results for the fourth quarter and fiscal year
ended March 31, 2021.
“The fourth quarter performance demonstrates the execution of
our growth strategy, delivering on our financial objectives while
continuing to make investments to support our customers and
employees, and advance our capabilities,” said Neil de Crescenzo,
president and chief executive officer. “As we enter fiscal 2022, we
remain focused on delivering the next phase of growth by advancing
our technology-first approach to innovation and further integrating
our diverse capabilities to advance connectivity, enhance
efficiency, and drive better experiences and outcomes throughout
the healthcare industry.”
Fiscal 2021 Fourth Quarter Highlights:
Financial Summary
- Total revenue of $855.2 million, including solutions revenue of
$804.3 million
- Net loss of $13.1 million, resulting in net loss of $0.04 per
diluted share
- Adjusted net income of $134.0 million, resulting in adjusted
net income of $0.42 per diluted share
- Adjusted EBITDA of $272.0 million
Recent Business Highlights
- Announced in collaboration with AWS a new Data Science as a
Service (DSaaS) offering to drive improved outcomes and healthcare
economics for vulnerable health communities
- Awarded “Best in KLAS” for Provider Eligibility Enrollment
Services and for Payer IT Consulting Services
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.’s 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 Inc. does not consider
comparison of the current operating results to the reported results
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 months and year ended March 31, 2021. 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-K.
Financial Results for Fourth Quarter of Fiscal 2021
- Solutions revenue was $804.3 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 $10.1 million. Total revenue, which
includes postage revenue, was $855.2 million. For the fourth
quarter of fiscal 2020, the Joint Venture reported $786.6 million
of solutions revenue and $843.4 million of total revenue. Solutions
revenue for the current period reflects the $10.7 million net
favorable impact of acquisitions and divestitures including the
negative $6.9 million impact during the quarter from the
divestiture of the Capacity Management business which closed on
December 2, 2020.
- Net loss was $13.1 million, resulting in net loss of $0.04 per
diluted share. For the fourth quarter of fiscal 2020, the Joint
Venture reported net loss of $108.6 million or $0.34 per diluted
unit. Net loss for the current period was positively impacted by
new sales volumes, productivity improvements and cost
initiatives.
- Adjusted net income was $134.0 million, resulting in adjusted
net income of $0.42 per diluted share. For the fourth quarter of
fiscal 2020, the Joint Venture reported adjusted net income of
$133.2 million or $0.42 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 320 million units
in the prior year period.
- Adjusted EBITDA was $272.0 million for the current period. For
the fourth quarter of fiscal 2020, the Joint Venture reported
adjusted EBITDA of $264.4 million. The results in the current
quarter reflect continued productivity and synergy
realization.
Cash Flow and Balance Sheet Highlights
Net cash provided by operating activities was $586.2 million,
free cash flow was $339.8 million, and adjusted free cash flow was
$429.9 million, in each case, for the twelve months ended March 31,
2021. For the twelve months ended March 31, 2020, the Joint Venture
reported net cash provided by operating activities, free cash flow,
and adjusted free cash flow of $593.3 million, $334.7 million, and
$481.5 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 $12.8
million in the twelve months ended March 31, 2021, reducing free
cash flow for the period by that amount, and increased by $21.7
million for the Joint Venture for the twelve months ended March 31,
2020. Net cash flow from operating activities, free cash flow, and
adjusted free cash flow in the current period reflect working
capital improvements driven by strong collections.
The Company ended the quarter with approximately $113.1 million
of cash and cash equivalents, and approximately $4,762.1 million of
total debt. During the current period, the Company repaid $50.0
million on its Term Loan Facility.
Proposed Merger with OptumInsight
On January 5, 2021, OptumInsight, a diversified health services
company and part of UnitedHealth Group, and Change Healthcare
agreed to combine (the “Merger”). Under the terms of the merger
agreement, UnitedHealth Group, through a wholly-owned subsidiary,
will acquire all of the outstanding shares of Change Healthcare
common stock for $25.75 per share in cash. The Boards of Directors
of both UnitedHealth Group and Change Healthcare have unanimously
approved the terms of the Merger. At a special meeting held April
13, 2021, Change Healthcare stockholders voted to approve the
Merger. Of the approximately 222 million shares voted, 99.9% voted
in favor of the adoption of the merger agreement. The closing of
the Merger is subject to applicable regulatory approval and other
customary closing conditions.
Guidance
Due to the recently announced transaction with OptumInsight, we
will no longer be providing financial guidance.
Webcast Information
Change Healthcare will host a conference call on Thursday, May
27, 2021, at 8:00 a.m. ET. Due to the previously announced
transaction with OptumInsight, the Company will not be taking
questions during the conference call.
Investors and other interested parties are invited to listen to
the conference call via the Company's website at
https://ir.changehealthcare.com/. The webcast will be available for
on-demand listening at the aforementioned URL until May 27,
2022.
About Change Healthcare
Change Healthcare (Nasdaq: CHNG) is a leading 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 the Private Securities Litigation Reform Act of 1995
with respect to the financial condition, results of operations and
businesses of Change Healthcare. Some of these statements can be
identified by terms and phrases such as “anticipate,” “believe,”
“intend,” “estimate,” “expect,” “continue,” “could,” “should,”
“may,” “plan,” “project,” “predict” and similar expressions. Change
Healthcare cautions readers of this press release that such
“forward looking statements,” including without limitation, those
relating to the timing of the proposed merger and Change
Healthcare’s future business prospects, revenue, working capital,
liquidity, capital needs, interest costs and income, wherever they
occur in this press release or in other statements attributable to
Change Healthcare, are necessarily estimates reflecting the
judgment of Change Healthcare’s senior management and involve a
number of risks and uncertainties that could cause actual results
to differ materially from those suggested by the “forward looking
statements.”
Factors that could cause Change Healthcare’s actual results to
differ materially from those expressed or implied in such
forward-looking statements include, but are not limited to, the
inability to complete the proposed merger due to the failure to
satisfy conditions to completion of the proposed merger, including
that a governmental entity may prohibit, delay or refuse to grant
approval for the consummation of the transaction; risks related to
disruption of management’s attention from Change Healthcare’s
ongoing business operations due to the transaction; the effect of
the announcement of the proposed merger on Change Healthcare’s
relationships with its customers, operating results and business
generally; the risk that the proposed merger will not be
consummated in a timely manner; exceeding the expected costs of the
merger; the occurrence of any event, change or other circumstances
that could give rise to the termination of the merger agreement;
macroeconomic and industry trends and adverse developments in the
debt, consumer credit and financial services markets; uncertainty
and risks related to the impact of the COVID-19 pandemic on the
national and global economy, Change Healthcare’s business,
suppliers, customers, and employees; Change Healthcare’s ability to
retain or renew existing customers and attract new customers;
Change Healthcare’s ability to connect a large number of payers and
providers; Change Healthcare’s ability to provide competitive
services and prices while maintaining its margins; further
consolidation in end-customer markets; Change Healthcare’s ability
to effectively manage costs; Change Healthcare’s ability to
effectively develop and maintain relationships with channel
partners; Change Healthcare’s ability to timely develop new
services and the market’s willingness to adopt new services; Change
Healthcare’s ability to deliver services timely without
interruption; a decline in transaction volume in the U.S.
healthcare industry; Change Healthcare’s ability to maintain access
to its data sources; Change Healthcare’s ability to maintain the
security and integrity of its data; Change Healthcare’s reliance on
key management personnel; Change Healthcare’s ability to manage and
expand its operations and keep up with rapidly changing
technologies; the ability of outside service providers and key
vendors to fulfill their obligations to Change Healthcare; risks
related to international operations; Change Healthcare’s ability to
protect and enforce its intellectual property, trade secrets and
other forms of unpatented intellectual property; Change
Healthcare’s ability to defend its intellectual property from
infringement claims by third parties; government regulation and
changes in the regulatory environment; changes in local, state,
federal and international laws and regulations, including related
to taxation; economic and political instability in the U.S. and
international markets where Change Healthcare operates; litigation
or regulatory proceedings; losses against which Change Healthcare
does not insure; Change Healthcare’s ability to make acquisitions
and integrate the operations of acquired businesses; Change
Healthcare’s ability to make timely payments of principal and
interest on its indebtedness; Change Healthcare’s ability to
satisfy covenants in the agreements governing its indebtedness;
Change Healthcare’s ability to maintain liquidity; our adoption of
new, or amendments to existing, accounting standards, and other
risks. For a more detailed discussion of these factors, see the
information under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in Change Healthcare’s most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission (“SEC”)
on June 4, 2020, as such factors may be updated from time to time
in our periodic filings with the SEC, including in Change
Healthcare’s most recent Quarterly Report on Form 10-Q filed with
the SEC on February 4, 2021.
Change Healthcare’s forward-looking statements speak only as of
the date of this press release or as of the date they are made.
Change Healthcare disclaims any intent or obligation to update any
“forward looking statement” made in this press release to reflect
changed assumptions, the occurrence of unanticipated events or
changes to future operating results over time.
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 regards 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
(unaudited and amounts in
thousands, except share and per share amounts)
Three Months Ended March
31,
2021
2020
2020
Change Healthcare Inc.
Change Healthcare LLC
Revenue:
Solutions revenue
$
804,299
$
184,161
$
786,589
Postage revenue
50,861
12,631
56,791
Total revenue
855,160
196,792
843,380
Operating expenses:
Cost of operations (exclusive of
depreciation and amortization below)
357,506
71,435
346,977
Research and development
58,926
11,559
53,257
Sales, marketing, general and
administrative
187,606
37,389
175,725
Customer postage
50,861
12,631
56,791
Depreciation and amortization
154,495
30,838
89,852
Accretion and changes in estimate with
related parties, net
2,744
(31,349
)
4,627
Gain on sale of businesses
1,344
—
—
Tax receivable agreement charge
—
164,633
164,633
Goodwill impairment charge
—
561,164
—
Total operating expenses
813,482
858,300
891,862
Operating income (loss)
41,678
(661,508
)
(48,482
)
Non-operating (income) and
expense
Interest expense, net
59,508
16,248
64,084
Contingent consideration
—
—
(1,900
)
Loss on extinguishment of debt
1,289
—
561
Loss from Equity Method Investment in the
Joint Venture
—
276,216
—
(Gain) loss on forward purchase
contract
—
55,768
—
Other, net
(2,253
)
(169
)
(3,749
)
Total non-operating (income) and
expense
58,544
348,063
58,996
Income (loss) before income tax
provision (benefit)
(16,866
)
(1,009,571
)
(107,478
)
Income tax provision (benefit)
(3,776
)
(142,690
)
1,112
Net income (loss)
$
(13,090
)
$
(866,881
)
$
(108,590
)
Net income (loss) per common
share:
Basic and diluted
$
(0.04
)
$
(1.64
)
$
(0.34
)
Weighted average common shares
outstanding: (1)
Basic and diluted
321,393,600
186,342,936
319,789,840
(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
(unaudited and amounts in
thousands, except share and per share amounts)
Year Ended March 31,
2021
2020
2020
Change Healthcare Inc.
Change Healthcare LLC
Revenue:
Solutions revenue
$
2,893,889
$
184,161
$
3,074,894
Postage revenue
196,532
12,631
228,079
Total revenue
3,090,421
196,792
3,302,973
Operating expenses:
Cost of operations (exclusive of
depreciation and amortization below)
1,335,075
71,435
1,345,920
Research and development
227,036
11,559
205,035
Sales, marketing, general and
administrative
686,645
39,893
743,311
Customer postage
196,532
12,631
228,079
Depreciation and amortization
591,048
30,838
315,946
Accretion and changes in estimate with
related parties, net
13,158
15,823
14,966
Gain on sale of businesses
(59,143
)
—
—
Tax receivable agreement charge
—
164,633
164,633
Goodwill impairment charge
—
561,164
—
Total operating expenses
2,990,351
907,976
3,017,890
Operating income (loss)
100,070
(711,184
)
285,083
Non-operating (income) and
expense
Interest expense, net
245,241
16,652
283,745
Contingent consideration
(3,000
)
—
(91
)
Loss on extinguishment of debt
8,924
—
19,975
Loss from Equity Method Investment in the
Joint Venture
—
380,713
—
(Gain) loss on forward purchase
contract
—
(15,881
)
—
Other, net
(3,698
)
(1,817
)
(14,630
)
Total non-operating (income) and
expense
247,467
379,667
288,999
Income (loss) before income tax
provision (benefit)
(147,397
)
(1,090,851
)
(3,916
)
Income tax provision (benefit)
(35,187
)
(143,254
)
1,701
Net income (loss)
$
(112,210
)
$
(947,597
)
$
(5,617
)
Net income (loss) per common
share:
Basic and diluted
$
(0.35
)
$
(6.92
)
$
(0.02
)
Weighted average common shares
outstanding: (1)
Basic and diluted
320,771,789
136,996,624
302,412,870
(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)
March 31, 2021
March 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
113,101
$
410,405
Accounts receivable, net
732,614
740,105
Contract assets, net
132,856
132,704
Prepaid expenses and other current
assets
140,258
117,967
Total current assets
1,118,829
1,401,181
Property and equipment, net
174,370
206,196
Operating lease right-of-use assets,
net
93,412
—
Goodwill
4,108,792
3,795,325
Intangible assets, net
4,187,072
4,365,806
Investment in business purchase option
—
146,500
Other noncurrent assets, net
430,141
192,372
Total assets
$
10,112,616
$
10,107,380
Liabilities
Current liabilities:
Accounts payable
$
57,449
$
68,169
Accrued expenses
484,293
390,294
Deferred revenue
436,666
302,313
Due to related parties, net
10,766
20,234
Current portion of long-term debt
27,339
278,779
Current portion of operating lease
liabilities
30,608
—
Total current liabilities
1,047,121
1,059,789
Long-term debt, excluding current
portion
4,734,775
4,710,294
Long-term operating lease liabilities
75,396
—
Deferred income tax liabilities
605,291
615,904
Tax receivable agreement obligations to
related parties
103,151
177,826
Tax receivable agreement obligations
229,082
164,633
Other long-term liabilities
65,572
93,487
Total liabilities
6,860,388
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 306,796,076
and 303,428,142 shares issued and outstanding at March 31, 2021 and
2020, respectively
307
303
Preferred stock (par value, $.001),
900,000,000 shares authorized and no shares issued and outstanding
at both March 31, 2021 and 2020
—
—
Additional paid-in capital
4,283,391
4,222,580
Accumulated other comprehensive income
(loss)
11,221
(7,372
)
Accumulated deficit
(1,042,691
)
(930,064
)
Total stockholders' equity
3,252,228
3,285,447
Total liabilities and stockholders'
equity
$
10,112,616
$
10,107,380
Consolidated Statements of
Cash Flows
(unaudited and amounts in
thousands)
Year Ended March 31,
2021
2020
2020
Change Healthcare Inc.
Change Healthcare LLC
Cash flows from operating
activities:
Net income (loss)
$
(112,210
)
$
(947,597
)
$
(5,617
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
591,048
30,838
315,946
Amortization of capitalized software
developed for sale
1,326
—
14,415
Accretion and changes in estimate, net
11,644
15,823
14,966
Equity compensation
59,016
1,701
31,808
Deferred income tax expense (benefit)
(50,114
)
(143,822
)
(2,613
)
Amortization of debt discount and issuance
costs
32,532
2,235
18,807
Contingent consideration
(3,000
)
—
(91
)
Gain on sale of businesses
(59,143
)
—
—
Loss on extinguishment of debt
8,924
—
19,975
(Gain) loss on other investments
—
(15,881
)
—
Non-cash lease expense
29,114
—
—
Goodwill impairment charge
—
561,164
—
Loss from Equity Method Investment in the
Joint Venture
—
380,713
—
Tax receivable agreement charge
—
164,633
164,633
Other, net
11,257
(1,110
)
6,896
Changes in operating assets and
liabilities:
Accounts receivable, net
(6,064
)
(21,211
)
(1,267
)
Contract assets, net
158
—
21,390
Prepaid expenses and other assets
(87,540
)
(6,219
)
(29,375
)
Accounts payable
(21,407
)
7,532
(16,609
)
Accrued expenses and other liabilities
14,178
(195,207
)
10,929
Deferred revenue
166,477
11,304
32,648
Due to the Joint Venture, net
—
1,176
—
Due to related party, net
—
—
(3,532
)
Net cash provided by (used in)
operating activities
586,196
(153,928
)
593,309
Cash flows from investing
activities:
Capitalized expenditures
(246,381
)
(13,002
)
(258,576
)
Acquisitions, net of cash acquired
(439,483
)
330,667
(18,994
)
Proceeds from sale of businesses
115,733
—
—
Proceeds from sale of real estate
—
—
29,837
Investment in the Joint Venture
—
(610,784
)
—
Investment in debt and equity securities
of the Joint Venture
—
(278,875
)
—
Other, net
2,099
7,332
(2
)
Net cash provided by (used in)
investing activities
(568,032
)
(564,662
)
(247,735
)
Cash flows from financing
activities:
Payments on Revolving Facility
(250,000
)
—
—
Proceeds from Revolving Facility
—
250,000
250,000
Payments on Term Loan Facility
(315,000
)
—
(1,087,750
)
Proceeds from issuance of Senior Notes
325,000
—
—
Payments under tax receivable
agreements
(20,691
)
—
(27,227
)
Receipts (payments) on derivative
instruments
(29,538
)
(890
)
935
Employee tax withholding on vesting of
equity compensation awards
(4,108
)
—
—
Payments on deferred financing
obligations
(19,519
)
—
(6,593
)
Payment of senior amortizing notes
(15,636
)
(11,094
)
—
Payment of debt issued to Change
Healthcare Inc.
—
—
(7,332
)
Proceeds from exercise of equity
awards
17,514
—
—
Capital contribution from Members from
exercise of equity compensation awards
—
—
6,256
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
(6,800
)
(1,421
)
(3,024
)
Net cash provided by (used in)
financing activities
(318,778
)
1,125,570
14,240
Effect of exchange rate changes on cash
and cash equivalents
3,310
16
(1,021
)
Net increase (decrease) in cash and
cash equivalents
(297,304
)
406,996
358,793
Cash and cash equivalents at beginning of
period
410,405
3,409
48,894
Cash and cash equivalents at end of
period
$
113,101
$
410,405
$
407,687
Reconciliation of Net Income
(Loss) to Adjusted EBITDA
(unaudited and amounts in
thousands)
Three Months Ended March
31,
2021
2020
2020
Change Healthcare Inc.
(1)
Change Healthcare LLC
Net income (loss)
$
(13,090
)
$
(866,881
)
$
(108,590
)
Income tax provision (benefit)
(3,776
)
(142,690
)
1,112
Income (loss) before income tax provision
(benefit)
(16,866
)
(1,009,571
)
(107,478
)
Amortization of capitalized software
developed for sale
776
3,959
Depreciation and amortization
154,495
89,852
Interest expense, net
59,508
64,084
Equity compensation
24,158
6,893
Acquisition accounting adjustments
5,917
522
Acquisition and divestiture-related
costs
9,590
1,664
Integration and related costs
13,094
15,131
Strategic initiatives, duplicative and
transition costs
8,671
8,991
Severance costs
2,717
7,824
Accretion and changes in estimate, net
3,215
4,627
Management fees and related costs
—
2,647
Impairment of long-lived assets and
other
3,772
1,347
Tax receivable agreement charge
—
164,633
Gain on sale of business
1,344
—
Contingent consideration
—
(1,900
)
Loss on extinguishment of debt
1,289
560
Other non-routine, net
365
1,002
Adjusted EBITDA
$
272,045
$
264,358
(1)
Prior to the McKesson exit, Change Healthcare Inc. did not
utilize adjusted EBITDA as a key performance metric, therefore we
have not presented a reconciliation to adjusted EBITDA for the
three months ended March 31, 2020.
Reconciliation of Net Income
(Loss) to Adjusted Net Income (Loss)
(unaudited and amounts in
thousands, except share and per share amounts)
Three Months Ended March
31,
2021
2020
2020
Change Healthcare Inc.
(1)
Change Healthcare LLC
Net income (loss)
$
(13,090
)
$
(866,881
)
$
(108,590
)
Amortization expense resulting from
acquisition method adjustments
117,362
35,251
EBITDA adjustments
74,132
213,942
Tax effect of EBITDA adjustments and
amortization expense
(44,413
)
(7,417
)
Adjusted net income (loss)
$
133,991
$
133,186
Adjusted net income (loss) per diluted
share (2)
$
0.42
$
0.42
Year Ended March 31,
2021
2020
2020
Change Healthcare Inc.
(1)
Change Healthcare LLC
Net income (loss)
$
(112,210
)
$
(947,597
)
$
(5,617
)
Amortization expense resulting from
acquisition method adjustments
463,334
139,875
EBITDA adjustments
243,947
385,542
Tax effect of EBITDA adjustments and
amortization expense
(166,324
)
(52,168
)
Adjusted net income (loss)
$
428,747
$
467,632
Adjusted net income (loss) per diluted
share (2)
$
1.34
$
1.55
(1)
Prior to the McKesson exit, Change Healthcare Inc. did not
utilize adjusted net income (loss) as a key performance metric,
therefore we have not presented a reconciliation to adjusted net
income (loss) for the three months and year ended March 31,
2020.
(2)
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.
Segment Results
(unaudited and amounts in
thousands)
Three Months Ended March
31,
2021
2020
2020
Change Healthcare Inc.
(1)
Change Healthcare LLC
(2)
Segment revenue
Software and Analytics
$
416,265
N/A
$
418,658
Network Solutions
198,334
N/A
152,163
Technology-Enabled Services
227,311
N/A
242,444
Postage and Eliminations (3)
23,391
N/A
30,115
Purchase Accounting Adjustment (4)
(10,141
)
N/A
—
Net revenue
$
855,160
N/A
$
843,380
Segment adjusted EBITDA
Software and Analytics
$
144,025
N/A
$
150,341
Network Solutions
108,147
N/A
85,340
Technology-Enabled Services
19,873
N/A
28,677
Postage and Eliminations
—
N/A
—
Total adjusted EBITDA
$
272,045
N/A
$
264,358
Year Ended March 31,
2021
2020
2020
Change Healthcare Inc.
(1)
Change Healthcare LLC
(2)
Segment revenue
Software and Analytics
$
1,534,926
N/A
$
1,612,800
Network Solutions
717,843
N/A
588,748
Technology-Enabled Services
869,349
N/A
978,684
Postage and Eliminations (3)
96,533
N/A
122,741
Purchase Accounting Adjustment (4)
(128,230
)
N/A
—
Net revenue
$
3,090,421
N/A
$
3,302,973
Segment adjusted EBITDA
Software and Analytics
$
526,129
N/A
$
565,628
Network Solutions
377,005
N/A
331,659
Technology-Enabled Services
31,031
N/A
98,446
Postage and Eliminations
—
N/A
—
Total adjusted EBITDA
$
934,165
N/A
$
995,733
(1)
Prior to the McKesson exit, Change Healthcare Inc. did not have
revenues from customers and did not utilize adjusted EBITDA as a
key performance metric.
(2)
The prior year results of Change Healthcare LLC have been
retrospectively adjusted to be consistent with the Company’s
current segment structure and cost allocation methodology.
(3)
Revenue for Postage and Eliminations
includes postage revenue of $50.9 million for Change Healthcare
Inc. for the three months ended March 31, 2021 and $56.8 million
for Change Healthcare LLC for the three months ended March 31,
2020. Revenue for Postage and Eliminations includes postage revenue
of $196.5 million for Change Healthcare Inc. for the year ended
March 31, 2021 and $228.1 million for Change Healthcare LLC for the
year ended March 31, 2020.
(4)
Amount reflects the impact to deferred
revenue resulting from the McKesson exit which reduced revenue
recognized during the three months and year ended March 31,
2021.
Reconciliation of Cash
Provided by (Used in) Operating Activities to Free Cash Flow and
Adjusted Free Cash Flow
(unaudited and amounts in
thousands)
Year Ended March 31,
2021
2020
2020
Change Healthcare Inc.
(1)
Change Healthcare LLC
Cash provided by (used in) operating
activities (2)
$
586,196
$
(153,928
)
$
593,309
Capital expenditures
(246,381
)
(13,002
)
(258,576
)
Free cash flow
339,815
(166,930
)
334,733
Adjustments to free cash flow
(3):
Integration and related costs
40,675
82,108
Strategic initiatives, duplicative and
transition costs
21,841
23,325
Severance costs
13,184
22,113
Integration and strategic capital
expenditures
14,379
19,254
Adjusted free cash flow
$
429,894
$
481,533
(1)
Prior to the McKesson exit, Change Healthcare Inc. did not
utilize adjusted free cash flow as a key performance metric,
therefore we have not presented a reconciliation to adjusted free
cash flow for the year ended March 31, 2020.
(2)
Includes cash used by pass-thru funds of $12.8 million for
Change Healthcare Inc. for the year ended March 31, 2021 and cash
provided by pass-thru funds of $21.7 million for Change Healthcare
LLC for the year ended March 31, 2020.
(3)
All operating costs and integration and strategic capital
expenditures are presented on an as-incurred basis.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210526005947/en/
Evan Smith, CFA Investor Relations 404-338-2225
Evan.Smith@changehealthcare.com
Katherine Wojtecki External Communications 630-624-9142
Katherine.Wojtecki@changehealthcare.com
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