Change Healthcare Inc. Reports Third Quarter Fiscal 2020 Financial Results

February 12, 2020 at 4:15 PM EST

NASHVILLE, Tenn.--(BUSINESS WIRE)--Feb. 12, 2020-- Change Healthcare Inc. (Nasdaq: CHNG), a leading independent healthcare technology company, today reported financial results for Change Healthcare LLC (“Change Healthcare”) for the third quarter of fiscal year 2020 ended December 31, 2019.

“The team delivered another quarter of strong financial and operational results, highlighting the momentum and success we are seeing in the market,” said Neil de Crescenzo, president and chief executive officer. “Positive trends in the market for innovation and operational efficiency are continuing to drive demand for existing and new solutions, which are leveraging our investments in artificial intelligence, API’s and native cloud-based initiatives. We believe we are well-positioned to drive growth throughout the remainder of Fiscal 2020 and beyond supported by a healthy pipeline, and we look forward to partnering with our customers to reduce cost, increase quality, and enhance their ability to drive consumer engagement."

Adoption of the New Revenue Recognition Standard - ASC 606

Change Healthcare adopted the new revenue recognition accounting standard Accounting Standards Codification ("ASC") 606 effective April 1, 2019 on a modified retrospective basis. Financial results for reporting periods during fiscal year 2020 are presented in compliance with the new revenue recognition standard. Historical financial results for reporting periods prior to fiscal year 2020 are presented in conformity with the prior revenue recognition standard, ASC 605. This press release includes additional information to reconcile the impacts of the adoption of the new revenue recognition standard on Change Healthcare’s financial results for the quarter and nine months ended December 31, 2019. This includes the presentation of financial results during fiscal year 2020 under ASC 605 for comparison to the prior-year period.

Fiscal 2020 Third Quarter Highlights for Change Healthcare LLC:

Financial Summary - ASC 606 (standard adopted effective April 1, 2019)

  • Total revenue of $808.2 million, including solutions revenue of $752.5 million
  • Net income of $31.2 million, resulting in net income of $0.10 per diluted unit(1)
  • Adjusted net income of $106.3 million, resulting in adjusted net income of $0.33 per diluted unit(1)
  • Adjusted EBITDA of $232.6 million

Financial Summary - ASC 605 (standard before April 1, 2019)

  • Total revenue of $832.2 million, including solutions revenue of $776.5 million
  • Net income of $49.0 million, resulting in net income of $0.15 per diluted unit(1)
  • Adjusted net income of $124.1 million, resulting in adjusted net income of $0.39 per diluted unit(1)
  • Adjusted EBITDA of $250.3 million

(1)

Common units of Change Healthcare LLC are equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson.

 

Financial Results - ASC 606 (standard adopted effective April 1, 2019)

  • Solutions revenue was $752.5 million. Third-quarter results were impacted by the adoption of the new accounting standard, ASC 606, which resulted in the recognition of certain revenue in the first quarter of the fiscal year that would have been recognized in the subsequent periods under the prior accounting rules. The third-quarter results reflect an unfavorable revenue impact of $24.0 million as compared with ASC 605.
  • Net income was $31.2 million, resulting in net income of $0.10 per diluted unit. Net income under the new accounting standard was impacted favorably by an extended recognition period for commissions and certain implementation costs, decreasing expenses in the period by $6.3 million, partially offsetting the revenue impact of ASC 606 noted above.
  • Adjusted net income was $106.3 million, resulting in adjusted net income of $0.33 per diluted unit.
  • Adjusted EBITDA was $232.6 million. Adjusted EBITDA as a percent of Solutions revenue for the third quarter of fiscal 2020 was 30.9%.

Financial Results - ASC 605 (standard before April 1, 2019)

  • Solutions revenue was $776.5 million, compared to $763.1 million for the third quarter of fiscal 2019. Total revenue for the current period, which includes Postage revenue, was $832.2 million, compared to $821.9 million in the same period of the prior fiscal year. Growth in both the Software & Analytics and Network Solutions businesses was partially offset by the impact of planned contract eliminations in our Technology-Enabled Services business, and the impact of our optimization initiatives in our Connected Analytics business. As part of our stated strategy, we are repositioning certain of our Revenue Cycle Management (“RCM”) service solutions to better address end-market dynamics, enhance efficiency and to improve the long-term growth potential of these solutions.
  • Net income was $49.0 million, resulting in net income of $0.15 per diluted unit, compared with net income of $13.0 million or $0.05 per diluted unit, respectively, for the third quarter of fiscal 2019. During the third quarter of fiscal 2020, the favorable impact of productivity improvements and growth across our Software & Analytics and Network Solutions businesses was partially offset by planned contract eliminations in our Technology-Enabled Service business.
  • Adjusted net income was $124.1 million, resulting in adjusted net income of $0.39 per diluted unit, compared with adjusted net income of $96.4 million or $0.38 per diluted unit, respectively, for the third quarter of fiscal 2019. Net income per unit and Adjusted net income per unit for the current period is based on 322 million units compared to 253 million units in the prior year increasing as a result of the initial public offering completed on July 1, 2019.
  • Adjusted EBITDA was $250.3 million, compared with $234.1 million for the third quarter of fiscal 2019. Adjusted EBITDA as a percent of Solutions revenue for the third quarter of fiscal 2020 was 32.2%, compared with 30.7% for the third quarter of fiscal 2019. The improved performance was the result of a favorable impact of mix, productivity improvements and growth across our segments.

Cash Flow and Balance Sheet Highlights for Change Healthcare LLC:

Net cash provided by operating activities was $401.0 million for the nine months ended December 31, 2019, an increase of 61.1% from $248.8 million for the nine months ended December 31, 2018. Free cash flow was $213.8 million for the nine months ended December 31, 2019, an increase of 265.0% from $58.6 million for the nine months ended December 31, 2018. Adjusted free cash flow was $324.9 million, an increase of $74.7 million year over year.

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 were $1.8 million for the nine months ended December 31, 2019 and $37.1 million for the nine months ended December 31, 2018. 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 lower receivable balances and reduced integration capital expenditures.

Change Healthcare LLC ended the quarter with approximately $74.5 million of cash, cash equivalents, and restricted cash and approximately $4,828.0 million of total debt. During the quarter, Change Healthcare LLC repaid $150.0 million in term loan facility obligations.

As of December 31, 2019, no amounts had been drawn under the revolving credit facility.

Recent Business Highlights

  • Launched Provider-Payer Data Exchange Solution, the industry’s first nationwide solution to enable providers to submit documents and data, such as claims attachments, electronically to all payers in both the Medical and Workers’ Compensation market segments.
  • Unveiled API & Services Connection™, a marketplace for open, standards-based application programming interface (API) products powered by the AWS Marketplace. Through this marketplace, any healthcare organization can leverage the same capabilities that power the company's industry-leading healthcare financial, clinical, and engagement solutions.
  • Announced four leading providers as development partners to build and implement our cloud-native Enterprise Imaging Network on the Google Cloud Platform. Built from the ground up to exploit the flexible nature of cloud services and delivery, the network will enhance and optimize medical imaging data—enabling providers to improve clinical, financial, and operational outcomes.
  • Integrated Change Healthcare’s InterQual Connect™ Medical Review Service and InterQual AutoReview™ into Cerner Corporation’s Acute Case Management (ACM) solution and electronic health record (EHR). Through the enhanced workflow from these capabilities, Cerner clients can help their case managers more easily and efficiently prioritize patients' needs.

Full Year Fiscal 2020 Outlook and 2021 Guidance - ASC 606

For full-year fiscal 2020, Change Healthcare continues to expect Solutions revenue growth of 1% to 2% excluding the revenue from the sale of our extended care business in fiscal year 2019 and including the impact of planned contract exits; Adjusted EBITDA growth of 6% to 8% and Adjusted net income growth of 9% to 11%. Free cash flow is expected to be in the range of $250 million to $300 million.

For fiscal year 2021, the company continues to expect Solutions revenue growth of 4% to 6% and Adjusted EBITDA growth of 6% to 8%.

Fourth Quarter Fiscal 2020 Guidance - ASC 606

Change Healthcare expects fourth-quarter fiscal 2020 Solutions revenue in the range of $775 million to $785 million, Adjusted EBITDA in the range of $260 million to $270 million, and Adjusted net income in the range of $115 million to $125 million.

Per our prior guidance, full-year revenue was not previously expected to differ materially between the two accounting standards but based on the incremental ASC 606 impact in the third quarter, we now anticipate the full-year impact to be an approximately $6 million decrease in revenue for the year. The impact from extended recognition periods for commission expense as a result of the adoption of ASC 606 is expected to be favorable by about $4 million pre-tax for the fourth quarter of fiscal 2020.

A reconciliation of the forward-looking fourth-quarter and full-year fiscal 2020 and 2021 Adjusted EBITDA outlook to net income 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 LLC 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”).

Conference Call and Webcast Information

Change Healthcare will host a conference call on February 13, 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: 2298629; 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 third-quarter fiscal 2021 earnings call, at the aforementioned URL. In addition, a digital audio playback will be available until 11:00 a.m. Eastern Time on Thursday, February 20, 2020, by dialing 1-(855) 859-2056 or 1-(404) 537-3406 and referencing confirmation 2298629.

About Change Healthcare

Change Healthcare (Nasdaq: CHNG) is a leading independent healthcare technology company that provides data and analytics-driven solutions to improve clinical, financial and patient engagement outcomes in the U.S. healthcare system. We are a key catalyst of a value-based healthcare system, accelerating the journey toward improved lives and healthier communities. 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 press release 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 our guidance 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 factors disclosed in the Registration Statement on Form S-1 (No. 333-230345) 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.

 

 

 

 

 

 

 

 

 

Change Healthcare Inc.

Statements of Operations (unaudited and amounts in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenue

$

 

$

 

$

 

$

 

Operating expenses

 

 

 

 

 

 

 

 

General and administrative

 

1,115

 

 

126

 

 

2,504

 

 

188

 

Accretion Expense

 

(1,191

)

 

 

 

47,172

 

 

 

Total operating expenses

 

(76

)

 

126

 

 

49,676

 

 

188

 

Operating income (loss)

 

76

 

 

(126

)

 

(49,676

)

 

(188

)

Non-operating (income) expense

 

 

 

 

 

 

 

 

Loss from Equity Method Investment in the Joint Venture

 

8,764

 

 

17,468

 

 

104,497

 

 

65,805

 

(Gain) Loss on Sale of Interests in the Joint Venture

 

 

 

 

 

 

 

(661

)

Management fee income

 

(771

)

 

(126

)

 

(1,648

)

 

(188

)

Interest expense

 

602

 

 

 

 

1,246

 

 

 

Interest income

 

(601

)

 

 

 

(1,245

)

 

 

Amortization of debt discount and issuance costs

 

191

 

 

 

 

403

 

 

 

Unrealized (gain) loss on forward purchase contract

 

(74,084

)

 

 

 

(71,649

)

 

 

Total non-operating (income) expense

 

(65,899

)

 

17,342

 

 

31,604

 

 

64,956

 

Income (loss) before income tax provision (benefit)

 

65,975

 

 

(17,468

)

 

(81,280

)

 

(65,144

)

Income tax provision (benefit)

 

15,240

 

 

(5,080

)

 

(564

)

 

(16,664

)

Net income (loss)

$

50,735

 

$

(12,388

)

$

(80,716

)

$

(48,480

)

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

$

0.35

 

$

(0.16

)

$

(0.67

)

$

(0.64

)

Diluted

$

0.35

 

$

(0.16

)

$

(0.67

)

$

(0.64

)

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

143,392,295

 

 

75,465,310

 

 

120,657,859

 

 

75,525,645

 

Diluted

 

146,201,860

 

 

75,465,310

 

 

120,657,859

 

 

75,525,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change Healthcare Inc.

Balance Sheets (unaudited and amounts in thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

December 31,

 

March 31,

 

 

2019

 

2019

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash

 

$

3,409

 

 

$

3,409

 

Prepaid expenses

 

 

1,544

 

 

 

 

Due from the Joint Venture

 

 

3,429

 

 

 

373

 

Due from McKesson

 

 

213

 

 

 

 

Investment in Joint Venture tangible equity units, current

 

 

15,362

 

 

 

 

Income taxes receivable

 

 

1,359

 

 

 

1,781

 

Total current assets

 

 

25,316

 

 

 

5,563

 

Dividend receivable

 

 

68,344

 

 

 

81,264

 

Investment in the Joint Venture

 

 

1,796,512

 

 

 

1,211,996

 

Investment in Joint Venture tangible equity units

 

 

329,581

 

 

 

 

Total assets

 

$

2,219,753

 

 

$

1,298,823

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

259

 

 

$

176

 

Due to the Joint Venture

 

 

9,806

 

 

 

6,167

 

Current portion of long-term debt

 

 

15,362

 

 

 

 

Total current liabilities

 

 

25,427

 

 

 

6,343

 

Long-term debt

 

 

23,656

 

 

 

 

Due to McKesson

 

 

47,172

 

 

 

 

Deferred income tax liabilities

 

 

172,055

 

 

 

159,993

 

Other liabilities

 

 

1,312

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common Stock (par value, $.001), 9,000,000,000 and 252,800,000 shares authorized and 125,027,648 and 75,474,654 shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively

 

 

124

 

 

 

75

 

Class X common stock (par value, $.001), 1 and 1 share authorized and no shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively

 

 

 

 

 

 

Preferred stock (par value, $.001), 900,000,000 and 0 shares authorized and no shares issued and outstanding at December 31, 2019 and March 31, 2019, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

2,016,608

 

 

 

1,153,509

 

Accumulated other comprehensive income (loss)

 

 

(3,418

)

 

 

(3,256

)

Retained earnings (deficit)

 

 

(63,183

)

 

 

(17,841

)

Total stockholders' equity

 

 

1,950,131

 

 

 

1,132,487

 

Total liabilities and stockholders' equity

 

$

2,219,753

 

 

$

1,298,823

 

 

 

 

 

 

 

Change Healthcare Inc.

Statements of Cash Flows (unaudited and amounts in thousands)

 

 

 

 

 

 

 

Nine Months Ended

 

 

December 31,

 

 

2019

 

 

2018

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

$

(80,716

)

 

$

(48,480

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Loss from Equity Method Investment in the Joint Venture

 

104,497

 

 

 

65,805

 

Deferred income tax expense (benefit)

 

(564

)

 

 

(16,664

)

(Gain) Loss on Sale of Interests in the Joint Venture

 

 

 

 

(661

)

(Gain) loss on forward purchase contracts

 

(71,649

)

 

 

 

Amortization of debt discount and issuance costs

 

403

 

 

 

 

Other

 

1,526

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Prepaid expenses

 

(1,544

)

 

 

 

Due from the Joint Venture

 

(3,056

)

 

 

(188

)

Due from McKesson

 

(213

)

 

 

 

Income taxes receivable

 

422

 

 

 

13,292

 

Accounts payable and accrued expenses

 

83

 

 

 

189

 

Due to McKesson

 

47,172

 

 

 

 

Due to the Joint Venture

 

3,639

 

 

 

(9,662

)

Net cash provided by (used in) operating activities

 

 

 

 

3,631

 

Cash flows from investing activities:

 

 

 

 

 

Proceeds from sale of interests in Joint Venture

 

 

 

 

6,502

 

Investment in debt and equity securities of the Joint Venture

 

(278,875

)

 

 

 

Proceeds from investments in debt securities of the Joint Venture

 

7,332

 

 

 

 

Investment in the Joint Venture

 

(610,784

)

 

 

 

Net cash provided by (used in) investing activities

 

(882,327

)

 

 

6,502

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from initial public offering, net of issuance costs

 

608,679

 

 

 

 

Proceeds from issuance of equity component of tangible equity units, net of issuance costs

 

232,929

 

 

 

 

Proceeds from issuance of debt component of tangible equity units

 

47,367

 

 

 

 

Payment of loan costs

 

(1,421

)

 

 

 

Repayment of senior amortizing notes

 

(7,332

)

 

 

 

Proceeds from exercise of equity awards

 

2,105

 

 

 

 

Payments to acquire common stock

 

 

 

 

(6,502

)

Net cash provided by (used in) financing activities

 

882,327

 

 

 

(6,502

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

 

 

3,631

 

Cash, cash equivalents and restricted cash at beginning of period

 

3,409

 

 

 

 

Cash, cash equivalents and restricted cash at end of period

$

3,409

 

 

$

3,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change Healthcare LLC

Consolidated Statements of Operations (unaudited and amounts in thousands, except unit and per unit amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

 

2018

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Solutions revenue

 

$

752,533

 

 

$

763,149

 

 

$

2,288,305

 

 

$

2,264,684

 

Postage revenue

 

 

55,693

 

 

 

58,788

 

 

 

171,288

 

 

 

180,706

 

Total revenue

 

 

808,226

 

 

 

821,937

 

 

 

2,459,593

 

 

 

2,445,390

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations (exclusive of depreciation and amortization below)

 

 

339,413

 

 

 

339,485

 

 

 

998,943

 

 

 

1,007,328

 

Research and development

 

 

50,618

 

 

 

49,882

 

 

151,778

 

159,604

 

Sales, marketing, general and administrative

 

 

185,661

 

 

 

206,558

 

 

567,586

 

620,612

 

Customer postage

 

 

55,693

 

 

 

58,788

 

 

 

171,288

 

 

 

180,706

 

Depreciation and amortization

 

 

77,330

 

 

 

70,318

 

 

226,094

 

208,103

 

Accretion and changes in estimate with related parties, net

 

 

3,245

 

 

 

3,534

 

 

 

10,339

 

 

 

13,290

 

Gain on Sale of Business

 

 

 

 

 

(43

)

 

 

 

 

 

(111,435

)

Total operating expenses

 

 

711,960

 

 

 

728,522

 

 

 

2,126,028

 

 

 

2,078,208

 

Operating income (loss)

 

 

96,266

 

 

 

93,415

 

 

 

333,565

 

 

 

367,182

 

Non-operating (income) and expense

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

66,353

 

 

 

82,614

 

 

219,661

 

241,840

 

Loss on extinguishment of debt

 

 

2,514

 

 

 

 

 

19,414

 

 

Contingent consideration

 

 

900

 

 

 

(1,100

)

 

1,809

 

(900

)

Other, net

 

 

(2,718

)

 

 

(4,385

)

 

(10,881

)

(13,762

)

Total non-operating (income) and expense

 

 

67,049

 

 

 

77,129

 

 

 

230,003

 

 

 

227,178

 

Income (loss) before income tax provision (benefit)

 

 

29,217

 

 

 

16,286

 

 

 

103,562

 

 

 

140,004

 

Income tax provision (benefit)

 

 

(1,974

)

 

 

3,277

 

589

 

1,049

 

Net income (loss)

 

$

31,191

 

 

$

13,009

 

 

$

102,973

 

 

$

138,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common unit:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

$

0.05

 

 

 

0.35

 

 

$

0.55

 

Diluted

 

$

0.10

 

 

$

0.05

 

 

 

0.34

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

319,387,487

 

 

 

251,460,502

 

 

 

296,653,051

 

 

 

251,520,837

 

Diluted

 

 

322,197,051

 

 

 

253,318,833

 

 

 

300,058,108

 

 

 

253,366,866

 

(1)

Common units of Change Healthcare LLC are equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson.

 

Change Healthcare LLC

Consolidated Balance Sheets (unaudited and amounts in thousands)

 

 

 

 

 

 

 

 

 

December 31,

 

March 31,

 

 

2019

 

2019

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,183

 

$

47,718

 

Restricted cash

 

 

314

 

 

1,176

 

Accounts receivable, net of allowance for doubtful accounts

 

 

724,908

 

 

759,502

 

Contract assets

 

 

130,824

 

 

 

Prepaid expenses and other current assets

 

 

155,276

 

 

172,067

 

Total current assets

 

 

1,085,505

 

 

980,463

 

Property and equipment, net

 

 

153,036

 

 

197,263

 

Goodwill

 

 

3,298,151

 

 

3,284,266

 

Intangible assets, net

 

 

1,225,424

 

 

1,320,161

 

Other noncurrent assets, net

 

 

528,545

 

 

421,985

 

Total assets

 

$

6,290,661

 

$

6,204,138

 

Liabilities and members' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Drafts and accounts payable

 

$

49,478

 

$

98,550

 

Accrued expenses

 

 

354,034

 

 

316,179

 

Deferred revenues

 

 

402,854

 

 

437,636

 

Due to related parties, net

 

 

22,817

 

 

34,629

 

Current portion of long-term debt

 

 

28,812

 

 

2,789

 

Total current liabilities

 

 

857,995

 

 

889,783

 

Long-term debt, excluding current portion

 

 

4,799,178

 

 

5,787,150

 

Deferred income tax liabilities

 

 

106,008

 

 

106,099

 

Tax receivable agreement obligations to related parties

 

 

203,121

 

 

212,698

 

Other long-term liabilities

 

 

112,019

 

 

113,194

 

Commitments and contingencies

 

 

 

 

 

 

Members' equity (deficit)

 

 

212,340

 

 

(904,786

)

Total liabilities and members' equity

 

$

6,290,661

 

$

6,204,138

 

 

 

 

 

 

Change Healthcare LLC

Consolidated Statements of Cash Flows (unaudited and amounts in thousands)

 

 

 

 

 

 

Nine Months Ended

 

December 31,

 

2019

2018

Cash flows from operating activities:

 

 

 

 

Net income (loss)

$

102,973

 

$

138,955

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

Depreciation and amortization

 

226,094

 

 

208,103

 

Amortization of capitalized software developed for sale

 

10,456

 

 

10,880

 

Accretion and changes in estimate, net

 

10,339

 

 

13,290

 

Equity compensation

 

24,914

 

 

16,378

 

Deferred income tax expense (benefit)

 

(189

)

 

(17

)

Amortization of debt discount and issuance costs

 

14,406

 

 

15,786

 

Contingent consideration

 

1,809

 

 

(900

)

Gain on Sale of the Extended Care Business

 

 

 

(111,435

)

Loss on extinguishment of debt

 

19,414

 

 

 

Other

 

3,374

 

 

1,943

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

14,719

 

 

(97,259

)

Contract assets

 

19,525

 

 

 

Prepaid expenses and other

 

(23,224

)

 

(10,302

)

Accounts payable

 

(32,031

)

 

5,190

 

Accrued expenses and other liabilities

 

13,994

 

 

78,344

 

Deferred Revenue

 

(1,213

)

 

(25,493

)

Due to related party, net

 

(4,404

)

 

5,367

 

Net cash provided by (used in) operating activities

 

400,956

 

 

248,830

 

Cash flows from investing activities:

 

 

 

 

Capitalized expenditures

 

(187,177

)

 

(190,264

)

Proceeds from Sale of the Extended Care Business

 

 

 

159,871

 

Proceeds from sale of real estate

 

29,813

 

 

 

Investments in businesses

 

(19,010

)

 

(2,985

)

Net cash provided by (used in) investing activities

 

(176,374

)

 

(33,378

)

Cash flows from financing activities:

 

 

 

 

Payments of third party initial public offering and loan costs

 

(8,555

)

 

 

Payments under tax receivable agreements with related parties

 

(27,227

)

 

(25,096

)

Payments on Term Loan Facility

 

(1,052,750

)

 

(140,250

)

Receipts (payments) on derivative instruments

 

2,403

 

 

3,321

 

Payments of deferred financing obligations

 

(2,441

)

 

(3,432

)

Capital contribution from Members from exercise of equity awards

 

2,338

 

 

205

 

Repurchase of equity awards

 

 

 

(7,425

)

Proceeds from Change Healthcare Inc. initial public offering

 

608,679

 

 

 

Proceeds from debt issued to Change Healthcare Inc.

 

47,367

 

 

 

Proceeds from forward purchase contract with Change Healthcare Inc.

 

232,929

 

 

 

Advances to and refunds from Members

 

5,084

 

 

2,636

 

Payment of debt issued to Change Healthcare Inc.

 

(7,332

)

 

 

Other

 

 

 

(2,548

)

Net cash provided by (used in) financing activities

 

(199,505

)

 

(172,589

)

Effect of exchange rate changes on cash and cash equivalents

 

526

 

 

(1,368

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

25,603

 

 

41,495

 

Cash, cash equivalents and restricted cash at beginning of period

 

48,894

 

 

50,011

 

Cash, cash equivalents and restricted cash at end of period

$

74,497

 

$

91,506

 

 

Change Healthcare LLC

Reconciliation of Net Income (Loss) to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

 

Nine Months Ended December 31,

Unaudited and amounts in thousands

 

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

 

 

As
Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As
Reported
(ASC 605)

 

 

 

As
Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As
Reported
(ASC 605)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

31,191

 

 

$

17,769

 

 

$

48,960

 

 

$

13,009

 

 

 

$

102,973

 

 

$

(23,101

)

 

$

79,872

 

 

$

138,955

 

Net interest expense

 

 

66,353

 

 

 

 

 

 

66,353

 

 

 

82,614

 

 

 

 

219,661

 

 

 

 

 

 

219,661

 

 

 

241,840

 

Income tax provision (benefit)

 

 

(1,974

)

 

 

(70

)

 

 

(2,044

)

 

 

3,277

 

 

 

 

589

 

 

 

(2,353

)

 

 

(1,764

)

 

 

1,049

 

Depreciation and amortization

 

 

77,330

 

 

 

 

 

 

77,330

 

 

 

70,318

 

 

 

 

226,094

 

 

 

 

 

 

226,094

 

 

 

208,103

 

Amortization of capitalized software developed for sale

 

 

3,755

 

 

 

 

 

 

3,755

 

 

 

3,760

 

 

 

 

10,456

 

 

 

 

 

 

10,456

 

 

 

10,880

 

EBITDA

 

 

176,655

 

 

 

17,699

 

 

 

194,354

 

 

 

172,978

 

 

 

 

559,773

 

 

 

(25,454

)

 

 

534,319

 

 

 

600,827

 

Adjustments to EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity compensation

 

 

9,707

 

 

 

 

 

 

9,707

 

 

 

8,109

 

 

 

 

24,914

 

 

 

 

 

 

24,914

 

 

 

16,378

 

Acquisition accounting adjustments

 

 

440

 

 

 

 

 

 

440

 

 

 

651

 

 

 

 

1,367

 

 

 

 

 

 

1,367

 

 

 

3,191

 

Acquisition and divestiture-related costs

 

 

1,481

 

 

 

 

 

 

1,481

 

 

 

4,010

 

 

 

 

2,554

 

 

 

 

 

 

2,554

 

 

 

11,517

 

Integration and related costs

 

 

21,470

 

 

 

 

 

 

21,470

 

 

 

30,266

 

 

 

 

66,976

 

 

 

 

 

 

66,976

 

 

 

79,805

 

Strategic initiatives, duplicative & transition costs

 

 

4,645

 

 

 

 

 

 

4,645

 

 

 

2,789

 

 

 

 

14,334

 

 

 

 

 

 

14,334

 

 

 

19,014

 

Severance costs

 

 

4,191

 

 

 

 

 

 

4,191

 

 

 

3,952

 

 

 

 

14,290

 

 

 

 

 

 

14,290

 

 

 

14,327

 

Costs related to recently issued accounting standards

 

 

 

 

 

 

 

 

 

 

 

1,730

 

 

 

 

 

 

 

 

 

 

 

 

 

7,243

 

Accretion and changes in estimate with related parties, net

 

 

3,245

 

 

 

 

 

 

3,245

 

 

 

3,534

 

 

 

 

10,339

 

 

 

 

 

 

10,339

 

 

 

13,290

 

Management fees and related costs

 

 

2,648

 

 

 

 

 

 

2,648

 

 

 

2,599

 

 

 

 

7,708

 

 

 

 

 

 

7,708

 

 

 

7,883

 

Impairment of long-lived assetsand other

 

 

(435

)

 

 

 

 

 

(435

)

 

 

382

 

 

 

 

(1,275

)

 

 

 

 

 

(1,275

)

 

 

3,742

 

Gain on sale of business

 

 

 

 

 

 

 

 

 

 

 

(43

)

 

 

 

 

 

 

 

 

 

 

 

 

(111,435

)

Contingent consideration

 

 

900

 

 

 

 

 

 

900

 

 

 

(1,100

)

 

 

 

1,809

 

 

 

 

 

 

1,809

 

 

 

(900

)

Loss on Extinguishment of Debt

 

 

2,514

 

 

 

 

 

 

2,514

 

 

 

 

 

 

 

19,414

 

 

 

 

 

 

19,414

 

 

 

 

Other non-routine, net

 

 

5,166

 

 

 

 

 

 

5,166

 

 

 

4,219

 

 

 

 

9,174

 

 

 

 

 

 

9,174

 

 

 

12,936

 

EBITDA Adjustments

 

 

55,972

 

 

 

 

 

 

55,972

 

 

 

61,098

 

 

 

 

171,604

 

 

 

 

 

 

171,604

 

 

 

76,991

 

Adjusted EBITDA

 

$

232,627

 

 

$

17,699

 

 

$

250,326

 

 

$

234,076

 

 

 

$

731,377

 

 

$

(25,454

)

 

$

705,923

 

 

$

677,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change Healthcare LLC

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Nine Months Ended December 31,

Unaudited and amounts in thousands

 

2019

 

2018

 

2019

 

2018

 

 

As
Reported

 

Impacts
from
Adoption

 

Without
Adoption
(ASC 605)

 

As
Reported
(ASC 605)

 

As
Reported

 

Impacts
from
Adoption

 

Without
Adoption
(ASC 605)

 

As
Reported
(ASC 605)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

31,191

 

$

17,769

$

48,960

 

$

13,009

 

$

102,973

 

$

(23,101

)

$

79,872

 

$

138,955

 

Amortization expense resulting from acquisition method adjustments

 

34,922

 

 

 

34,922

 

 

35,568

 

 

104,624

 

 

 

 

104,624

 

 

110,276

 

EBITDA Adjustments

 

55,972

 

 

 

55,972

 

 

61,098

 

 

171,604

 

 

 

 

171,604

 

 

76,991

 

Tax effect of EBITDA Adjustments and amortization expense

 

(15,760

)

 

 

(15,760

)

 

(13,315

)

 

(44,751

)

 

 

 

(44,751

)

 

(42,075

)

Adjusted Net Income

$

106,325

 

$

17,769

$

124,094

 

$

96,360

 

$

334,450

 

$

(23,101

)

$

311,349

 

$

284,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) per diluted unit

$

0.33

 

 

 

$

0.39

 

$

0.38

 

$

1.11

 

 

 

$

1.04

 

$

1.12

 

(1)

Common units of Change Healthcare LLC are equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson.

 

Change Healthcare LLC

Segment Results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Nine Months Ended December 31,

Unaudited and amounts in thousands

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

As
Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As
Reported
(ASC 605)

 

 

As
Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As
Reported
(ASC 605)

Segment revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software and Analytics

 

$

387,331

 

 

$

18,535

 

 

$

405,866

 

 

$

385,434

 

 

$

1,194,142

 

 

$

(9,941

)

 

$

1,184,201

 

 

$

1,159,898

 

Network Solutions

 

 

150,697

 

 

 

 

 

 

150,697

 

 

 

143,507

 

 

 

436,585

 

 

 

 

 

 

436,585

 

 

 

416,432

 

Technology-Enabled Services

 

 

241,465

 

 

 

5,467

 

 

 

246,932

 

 

 

256,552

 

 

 

736,240

 

 

 

2,357

 

 

 

738,597

 

 

 

761,382

 

Corporate and Eliminations

 

 

28,733

 

 

 

 

 

 

28,733

 

 

 

36,444

 

 

 

92,626

 

 

 

 

 

 

92,626

 

 

 

107,678

 

Net revenue

 

$

808,226

 

 

$

24,002

 

 

$

832,228

 

 

$

821,937

 

 

$

2,459,593

 

 

$

(7,584

)

 

$

2,452,009

 

 

$

2,445,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software and Analytics

 

$

149,199

 

 

$

14,127

 

 

$

163,326

 

 

$

150,426

 

 

$

490,300

 

 

$

(22,862

)

 

$

467,438

 

 

$

432,859

 

Network Solutions

 

 

92,694

 

 

 

(474

)

 

 

92,220

 

 

 

88,072

 

 

 

264,165

 

 

 

(1,405

)

 

 

262,760

 

 

 

253,921

 

Technology-Enabled Services

 

 

36,691

 

 

 

4,435

 

 

 

41,126

 

 

 

44,482

 

 

 

127,976

 

 

 

(229

)

 

 

127,747

 

 

 

133,258

 

Corporate and Eliminations

 

 

(45,957

)

 

 

(389

)

 

 

(46,346

)

 

 

(48,904

)

 

 

(151,064

)

 

 

(958

)

 

 

(152,024

)

 

 

(142,220

)

Total Adjusted EBITDA

 

$

232,627

 

 

$

17,699

 

 

$

250,326

 

 

$

234,076

 

 

$

731,377

 

 

$

(25,454

)

 

$

705,921

 

 

$

677,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) – Revenue for the Corporate and Eliminations segment includes postage revenue of $55,693 and $58,788 for the three months ended December 31, 2019 and 2018, respectively, and $171,288 and $180,706 for the nine months ended December 31, 2019 and 2018, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change Healthcare LLC

Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

Unaudited and amounts in thousands

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

Cash provided by (used in) operating activities (1)

 

$

400,956

 

 

$

248,830

 

Capital expenditures

 

 

(187,177

)

 

 

(190,264

)

Free Cash Flow

 

 

213,779

 

 

 

58,566

 

Adjustments to Free Cash Flow (2):

 

 

 

 

 

 

Integration and related costs

 

 

66,976

 

 

 

79,805

 

Strategic initiatives, duplicative and transition costs

 

 

14,334

 

 

 

19,014

 

Severance costs

 

 

14,290

 

 

 

14,327

 

Costs related to recently issued accounting standards

 

 

 

 

 

7,243

 

Integration capital expenditures

 

 

15,532

 

 

 

71,260

 

Adjusted Free Cash Flow

 

$

324,911

 

 

$

250,215

 

 

 

 

 

 

 

 

(1) Includes cash provided by pass-thru funds of $1.8 million and $37.1 million for the nine months ended December 31, 2019 and 2018, respectively.

(2) All operating costs and integration capital expenditures in the table are presented on an as-incurred basis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change Healthcare LLC

Consolidated Statements of Operations (unaudited and amounts in thousands, except unit and per unit amounts)

Reconciliation of the Impacts from the Adoption of the New Revenue Recognition Standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Nine Months Ended December 31,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

As
Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As
Reported
(ASC 605)

 

 

 

As
Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As
Reported
(ASC 605)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Solutions revenue

 

$

752,533

 

 

$

24,002

 

 

$

776,535

 

 

$

763,149

 

 

 

$

2,288,305

 

 

$

(7,583

)

 

$

2,280,722

 

 

$

2,264,684

 

Postage revenue

 

 

55,693

 

 

 

 

 

 

55,693

 

 

 

58,788

 

 

 

 

171,288

 

 

 

 

 

 

171,288

 

 

 

180,706

 

Total revenue

 

 

808,226

 

 

 

24,002

 

 

 

832,228

 

 

 

821,937

 

 

 

 

2,459,593

 

 

 

(7,583

)

 

 

2,452,010

 

 

 

2,445,390

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of operations (exclusive of depreciation and amortization below)

 

 

339,413

 

 

 

1,239

 

 

 

340,652

 

 

 

339,485

 

 

 

 

998,943

 

 

 

3,042

 

 

 

1,001,985

 

 

 

1,007,328

 

Research and development

 

 

50,618

 

 

 

 

 

 

50,618

 

 

 

49,882

 

 

 

 

151,778

 

 

 

 

 

 

151,778

 

 

 

159,604

 

Sales, marketing, general and administrative

 

 

185,661

 

 

 

5,064

 

 

 

190,725

 

 

 

206,558

 

 

 

 

567,586

 

 

 

14,829

 

 

 

582,415

 

 

 

620,612

 

Customer postage

 

 

55,693

 

 

 

 

 

 

55,693

 

 

 

58,788

 

 

 

 

171,288

 

 

 

 

 

 

171,288

 

 

 

180,706

 

Depreciation and amortization

 

 

77,330

 

 

 

 

 

 

77,330

 

 

 

70,318

 

 

 

 

226,094

 

 

 

 

 

 

226,094

 

 

 

208,103

 

Accretion and changes in estimate with related parties, net

 

 

3,245

 

 

 

 

 

 

3,245

 

 

 

3,534

 

 

 

 

10,339

 

 

 

 

 

 

10,339

 

 

 

13,290

 

Gain on Sale of Business

 

 

 

 

 

 

 

 

 

 

 

(43

)

 

 

 

 

 

 

 

 

 

 

 

 

(111,435

)

Total operating expenses

 

 

711,960

 

 

 

6,303

 

 

 

718,263

 

 

 

728,522

 

 

 

 

2,126,028

 

 

 

17,871

 

 

 

2,143,899

 

 

 

2,078,208

 

Operating income (loss)

 

 

96,266

 

 

 

17,699

 

 

 

113,965

 

 

 

93,415

 

 

 

 

333,565

 

 

 

(25,454

)

 

 

308,111

 

 

 

367,182

 

Non-operating (income) and expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

66,353

 

 

 

 

 

 

66,353

 

 

 

82,614

 

 

 

 

219,661

 

 

 

 

 

 

219,661

 

 

 

241,840

 

Loss on extinguishment of debt

 

 

2,514

 

 

 

 

 

 

2,514

 

 

 

 

 

 

 

19,414

 

 

 

 

 

 

19,414

 

 

 

 

Contingent consideration

 

 

900

 

 

 

 

 

 

900

 

 

 

(1,100

)

 

 

 

1,809

 

 

 

 

 

 

1,809

 

 

 

(900

)

Other, net

 

 

(2,718

)

 

 

 

 

 

(2,718

)

 

 

(4,385

)

 

 

 

(10,881

)

 

 

 

 

 

(10,881

)

 

 

(13,762

)

Total non-operating (income) and expense

 

 

67,049

 

 

 

 

 

 

67,049

 

 

 

77,129

 

 

 

 

230,003

 

 

 

 

 

 

230,003

 

 

 

227,178

 

Income (loss) before income tax provision (benefit)

 

 

29,217

 

 

 

17,699

 

 

 

46,916

 

 

 

16,286

 

 

 

 

103,562

 

 

 

(25,454

)

 

 

78,108

 

 

 

140,004

 

Income tax provision (benefit)

 

 

(1,974

)

 

 

(70

)

 

 

(2,044

)

 

 

3,277

 

 

 

 

589

 

 

 

(2,353

)

 

 

(1,764

)

 

 

1,049

 

Net income (loss)

 

$

31,191

 

 

$

17,769

 

 

$

48,960

 

 

$

13,009

 

 

 

$

102,973

 

 

$

(23,101

)

 

$

79,872

 

 

$

138,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common unit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.10

 

 

$

0.05

 

 

$

0.15

 

 

$

0.05

 

 

 

$

0.35

 

 

$

(0.08

)

 

$

0.27

 

 

$

0.55

 

Diluted

 

$

0.10

 

 

$

0.05

 

 

$

0.15

 

 

$

0.05

 

 

 

$

0.34

 

 

$

(0.08

)

 

$

0.27

 

 

$

0.55

 

(1)

Common units of Change Healthcare LLC are equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson.

 

 

 

 

 

 

 

 

 

 

 

 

 

Change Healthcare LLC

Consolidated Balance Sheets (unaudited and amounts in thousands)

Reconciliation of the Impacts from the Adoption of the New Revenue Recognition Standard

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

March 31, 2019

 

 

 

As Reported

 

 

Impacts
from
Adoption

 

 

Without
Adoption
(ASC 605)

 

 

As Reported
(ASC 605)

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 $

74,183

 

 $

 

 

 $

74,183

 

 $

47,718

 

Restricted cash

 

 

314

 

 

 

 

 

314

 

 

1,176

 

Accounts receivable, net of allowance for doubtful accounts

 

 

724,908

 

 

22,589

 

 

 

747,497

 

 

759,502

 

Contract assets

 

 

130,824

 

 

(130,824

)

 

 

 

 

 

Prepaid expenses and other current assets

 

 

155,276

 

 

20,318

 

 

 

175,594

 

 

172,067

 

Total current assets

 

 

1,085,505

 

 

(87,917

)

 

 

997,588

 

 

980,463

 

Property and equipment, net

 

 

153,036

 

 

 

 

 

153,036

 

 

197,263

 

Goodwill

 

 

3,298,151

 

 

 

 

 

3,298,151

 

 

3,284,266

 

Intangible assets, net

 

 

1,225,424

 

 

 

 

 

1,225,424

 

 

1,320,161

 

Other noncurrent assets, net

 

 

528,545

 

 

(47,370

)

 

 

481,175

 

 

421,985

 

Total assets

 

$

6,290,661

 

$

(135,287

)

 

$

6,155,374

 

$

6,204,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and members' deficit

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Drafts and accounts payable

 

$

49,478

 

$

 

$

49,478

 

$

98,550

 

Accrued expenses

 

 

354,034

 

 

 

 

 

354,034

 

 

316,179

 

Deferred revenues

 

 

402,854

 

 

47,649

 

 

 

450,503

 

 

437,636

 

Due to related parties, net

 

 

22,817

 

 

 

 

 

22,817

 

 

34,629

 

Current portion of long-term debt

 

 

28,812

 

 

 

 

 

28,812

 

 

2,789

 

Total current liabilities

 

 

857,995

 

 

47,649

 

 

 

905,644

 

 

889,783

 

Long-term debt, excluding current portion

 

 

4,799,178

 

 

 

 

 

4,799,178

 

 

5,787,150

 

Deferred income tax liabilities

 

 

106,008

 

 

 

 

 

106,008

 

 

106,099

 

Tax receivable agreement obligations to related parties

 

 

203,121

 

 

 

 

 

203,121

 

 

212,698

 

Other long-term liabilities

 

 

112,019

 

 

199

 

 

 

112,218

 

 

113,194

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Members' deficit

 

 

212,340

 

 

(183,135

)

 

 

29,205

 

 

(904,786

)

Total liabilities and members' deficit

 

$

6,290,661

 

$

(135,287

)

 

$

6,155,374

 

$

6,204,138

 

Source: Change Healthcare Inc.

Evan Smith, CFA
Investor Relations
404-338-2225
Evan.Smith@changehealthcare.com

Kerry Kelly
External Communications
339-236-2756
Kerry.Kelly@changehealthcare.com