8-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 3, 2021

 

 

Change Healthcare Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   001-38961   82-2152098

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

424 Church Street, Suite 1400

Nashville, Tennessee 37219

(Address of Principal Executive Offices) (Zip Code)

(615) 932-3000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.001 per share   CHNG   The Nasdaq Stock Market LLC
6.00% Tangible Equity Units   CHNGU   The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02

Results of Operations and Financial Condition.

On November 3, 2021, Change Healthcare Inc. issued a press release announcing financial results for the second fiscal quarter of fiscal year 2022 ended September 30, 2021. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Pursuant to General Instruction B.2 of Current Report on Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including the press release attached hereto as Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, such information shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

Item 7.01

Regulation FD Disclosure.

As previously announced, Change Healthcare Inc. will host a conference call on Thursday, November 4, 2021 at 8:00 a.m. ET. The presentation to be discussed during the call is available via the Company’s website at https://ir.changehealthcare.com/.

The information contained in this Item 7.01 to the Company’s Current Report on Form 8-K is being furnished and shall not be deemed filed for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, regardless of any general incorporation language in any such filing.

 

Item 9.01

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
No.

  

Description

99.1    Press Release of Change Healthcare Inc. dated November 3, 2021.
104    Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

CHANGE HEALTHCARE INC.
By:  

/s/ Loretta A. Cecil

Name:   Loretta A. Cecil
Title:   Executive Vice President, General Counsel

Date: November 3, 2021

EX-99.1

Exhibit 99.1

Change Healthcare Inc. Reports Second Quarter Fiscal 2022 Financial Results

Nashville, Tenn., Nov. 3, 2021 – Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change Healthcare”), a leading healthcare technology company, today reported financial results for the second quarter of fiscal year 2022 ended September 30, 2021.

“Our results this quarter continue to demonstrate solid execution of our growth strategy and the underlying strength and momentum in our business,” said Neil de Crescenzo, president and chief executive officer. “We continue to create value for our payer, provider and consumer customers by delivering innovative and transformative solutions. Along with our customers, we remained focused on lowering cost, enhancing access, and improving outcomes for the benefit of everyone in the healthcare system.”

Fiscal 2022 Second Quarter Highlights:

Financial Summary

 

   

Total revenue of $826.8 million, including solutions revenue of $774.2 million

 

   

Net loss of $36.4 million, resulting in net loss of $0.11 per diluted share

 

   

Adjusted net income of $114.3 million, resulting in adjusted net income of $0.35 per diluted share

 

   

Adjusted EBITDA of $246.5 million

Recent Business Highlights

 

   

Introduced Change Healthcare Stratus Imaging PACS, our new, comprehensive cloud-native solution, which is now in production with standalone radiology groups, with contracts to deploy in hospital-affiliated practices in 2022.

 

   

Added 118 new products to our Change Healthcare Marketplace in the second quarter, which now offers 198 products representing API, software, and hardware products from all parts of our portfolio.

 

   

Continued to establish new data solutions partnerships with major academic medical research centers, bringing the total to more than 75 partnerships developed to improve health equity through our Data Science as a Service offering and other solutions.

 

   

Continued momentum with our electronic prior authorization offering, which uses AI and predictive analytics to automate the prior authorization process and drive transparency between healthcare constituents to help the industry deliver the right care, in the right place, at the right time in a transparent manner.

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 resulting in fair value adjustments to various assets and liabilities, including deferred revenue, goodwill, and intangible assets.

Financial Results for Second Quarter of Fiscal 2022

 

   

Solutions revenue was $774.2 million, compared to $705.9 million for second quarter of fiscal 2021. Solutions revenue includes the impact of fair value adjustments to deferred revenue resulting from the McKesson exit, which reduced revenue recognized by $3.3 million and $38.9 million in the second quarter of fiscal 2022 and 2021, respectively. Total revenue, which includes postage revenue, was $826.8 million compared to $755.9 million in the same period of the prior year. Solutions revenue for the current period reflects the negative $6.0 million impact during the quarter from the Capacity Management divestiture which closed in fiscal year 2021. Solutions revenue in the current period was positively impacted by volume recovery and incremental revenue from COVID-19 vaccines and new sales.

 

1


   

Net loss was $36.4 million, resulting in net loss of $0.11 per diluted share, compared with net loss of $42.6 million and $0.13 per diluted share, respectively, for the second quarter of fiscal 2021.

 

   

Adjusted net income was $114.3 million, resulting in adjusted net income of $0.35 per diluted share, compared with adjusted net income of $103.5 million and $0.32 per diluted share, respectively, for the second quarter of fiscal 2021. Net loss per diluted share and adjusted net income per diluted share for the current period is based on 324 million shares compared to 321 million shares in the prior year period.

 

   

Adjusted EBITDA was $246.5 million, compared with $231.8 million for the second quarter of fiscal 2021. The results in the current quarter reflect the aforementioned revenue growth, partially offset by investments to support business initiatives.

Cash Flow and Balance Sheet Highlights

Net cash provided by operating activities was $261.4 million and free cash flow was $134.5 million, in each case, for the six months ended September 30, 2021. For the six months ended September 30, 2020, net cash provided by operating activities and free cash flow was $296.6 million and $170.1 million, respectively.

Net cash provided by operating activities and free cash flow each are 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 increased by $4.4 million in the six months ended September 30, 2021, increasing free cash flow for the period by that amount, and decreased by $1.4 million for the six months ended September 30, 2020.

The Company ended the quarter with approximately $80.4 million of cash and cash equivalents, and approximately $4,662.4 million of total debt. During the second quarter, the Company repaid $100.0 million on its Term Loan Facility, and repaid an additional $60.0 million subsequent to the end of the quarter.

Update on 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.

As previously disclosed, on March 24, 2021, the Company and UnitedHealth Group each received a request for additional information and documentary materials (collectively, the “Second Request”) from the Department of Justice (“DOJ”) in connection with the DOJ’s review of the Merger, and on August 7, 2021, the parties entered into a timing agreement (the “Timing Agreement”) with the DOJ pursuant to which they agreed not to consummate the Merger before 120 days following the date on which both parties certified substantial compliance with the Second Request.

 

2


Both the Company and UnitedHealth Group have now certified substantial compliance with the Second Request. On November 1, 2021, the Company and UnitedHealth Group entered into an amendment to the Timing Agreement with the DOJ pursuant to which they agreed not to consummate the Merger before 12:01 a.m. Eastern Time on February 22, 2022 (subject to extension in certain limited circumstances relating to the potential unavailability of certain requested data), unless they have received written notice from the DOJ prior to such date that the DOJ has closed its investigation. The parties have been working cooperatively with the DOJ and will continue to do so.

Guidance

Due to the proposed transaction with OptumInsight, we will no longer be providing financial guidance.

Webcast Information

Change Healthcare will host a conference call on Thursday, November 4, 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 November 4, 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

Contacts

David Elliott

Corporate Development

205-907-5540

daelliott@changehealthcare.com

Katherine Wojtecki

External Communications

630-624-9142

Katherine.Wojtecki@changehealthcare.com

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,”

 

3


“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 (including the rise of COVID-19 variant strains such as the Delta variant) 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 ability to retain and recruit key management personnel and other talent (including while the proposed merger is pending and in light of Change Healthcare’s recently imposed COVID-19 vaccine mandate); 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 May 27, 2021 as such factors may be updated from time to time in our periodic filings with the SEC.

 

4


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.

 

5


Consolidated Statements of Operations

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

 

     Three Months Ended September 30,  
     2021     2020  

Revenue:

    

Solutions revenue

   $ 774,214     $ 705,913  

Postage revenue

     52,550       50,023  
  

 

 

   

 

 

 

Total revenue

     826,764       755,936  

Operating expenses:

    

Cost of operations (exclusive of depreciation and amortization below)

     346,632       326,653  

Research and development

     67,070       54,052  

Sales, marketing, general and administrative

     183,041       171,606  

Customer postage

     52,550       50,023  

Depreciation and amortization

     163,469       146,869  

Accretion and changes in estimate with related parties, net

     2,870       3,564  

Gain on sale of businesses

     —         (176
  

 

 

   

 

 

 

Total operating expenses

     815,632       752,591  
  

 

 

   

 

 

 

Operating income (loss)

     11,132       3,345  

Non-operating (income) and expense

    

Interest expense, net

     59,466       61,627  

Loss on extinguishment of debt

     2,232       1,489  

Other, net

     2,587       (3,761
  

 

 

   

 

 

 

Total non-operating (income) and expense

     64,285       59,355  
  

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (53,153     (56,010

Income tax provision (benefit)

     (16,749     (13,388
  

 

 

   

 

 

 

Net income (loss)

   $ (36,404   $ (42,622
  

 

 

   

 

 

 

Net income (loss) per common share:

    

Basic and diluted

   $ (0.11   $ (0.13

Weighted average common shares outstanding:

    

Basic and diluted

     324,060,460       320,638,116  

 

6


Consolidated Statements of Operations

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

 

     Six Months Ended September 30,  
     2021     2020  

Revenue:

    

Solutions revenue

   $ 1,590,862     $ 1,354,325  

Postage revenue

     103,758       95,795  
  

 

 

   

 

 

 

Total revenue

     1,694,620       1,450,120  

Operating expenses:

    

Cost of operations (exclusive of depreciation and amortization below)

     698,695       645,195  

Research and development

     138,310       109,787  

Sales, marketing, general and administrative

     360,997       337,080  

Customer postage

     103,758       95,795  

Depreciation and amortization

     331,681       285,409  

Accretion and changes in estimate with related parties, net

     5,907       9,459  

Gain on sale of businesses

     —         (28,270
  

 

 

   

 

 

 

Total operating expenses

     1,639,348       1,454,455  
  

 

 

   

 

 

 

Operating income (loss)

     55,272       (4,335

Non-operating (income) and expense

    

Interest expense, net

     118,852       124,294  

Loss on extinguishment of debt

     2,232       1,489  

Other, net

     (605     (1,953
  

 

 

   

 

 

 

Total non-operating (income) and expense

     120,479       123,830  
  

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (65,207     (128,165

Income tax provision (benefit)

     (25,198     (26,849
  

 

 

   

 

 

 

Net income (loss)

   $ (40,009   $ (101,316
  

 

 

   

 

 

 

Net income (loss) per common share:

    

Basic and diluted

   $ (0.12   $ (0.32

Weighted average common shares outstanding:

    

Basic and diluted

     323,309,280       320,347,128  

 

7


Consolidated Balance Sheets

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

 

     September 30, 2021     March 31, 2021  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 80,414     $ 113,101  

Accounts receivable, net

     704,595       732,614  

Contract assets, net

     128,010       132,856  

Prepaid expenses and other current assets

     149,176       140,258  
  

 

 

   

 

 

 

Total current assets

     1,062,195       1,118,829  

Property and equipment, net

     150,579       174,370  

Operating lease right-of-use assets, net

     80,562       93,412  

Goodwill

     4,110,823       4,108,792  

Intangible assets, net

     3,942,164       4,187,072  

Other noncurrent assets, net

     503,405       430,141  
  

 

 

   

 

 

 

Total assets

   $ 9,849,728     $  10,112,616  
  

 

 

   

 

 

 

Liabilities

    

Current liabilities:

    

Accounts payable

   $ 64,756     $ 57,449  

Accrued expenses

     463,510       484,293  

Deferred revenue

     377,270       436,666  

Due to related parties, net

     11,392       10,766  

Current portion of long-term debt

     19,152       27,339  

Current portion of operating lease liabilities

     28,948       30,608  
  

 

 

   

 

 

 

Total current liabilities

     965,028       1,047,121  

Long-term debt, excluding current portion

     4,643,245       4,734,775  

Long-term operating lease liabilities

     62,001       75,396  

Deferred income tax liabilities

     578,584       605,291  

Tax receivable agreement obligations to related parties

     97,606       103,151  

Tax receivable agreement obligations

     196,687       229,082  

Other long-term liabilities

     62,411       65,572  
  

 

 

   

 

 

 

Total liabilities

     6,605,562       6,860,388  

Commitments and contingencies

    

Stockholders’ Equity

    

Common Stock (par value, $0.001), 9,000,000,000 and 9,000,000,000 shares authorized and 311,311,208 and 306,796,076 shares issued and outstanding at September 30, 2021 and March 31, 2021, respectively

     311       307  

Preferred stock (par value, $0.001), 900,000,000 shares authorized and no shares issued and outstanding at both September 30, 2021 and March 31, 2021

     —         —    

Additional paid-in capital

     4,313,759       4,283,391  

Accumulated other comprehensive income (loss)

     12,796       11,221  

Accumulated deficit

     (1,082,700     (1,042,691
  

 

 

   

 

 

 

Total stockholders’ equity

     3,244,166       3,252,228  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 9,849,728     $ 10,112,616  
  

 

 

   

 

 

 

 

8


Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)

 

     Six Months Ended September 30,  
     2021     2020  

Cash flows from operating activities:

    

Net income (loss)

   $ (40,009   $ (101,316

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

    

Depreciation and amortization

     331,681       285,409

Amortization of capitalized software developed for sale

     1,576       89

Accretion and changes in estimate, net

     9,087       11,188

Equity compensation

     49,911       23,914

Deferred income tax expense (benefit)

     (26,560     (28,590

Amortization of debt discount and issuance costs

     15,820       16,551

Loss on extinguishment of debt

     2,232       1,489

Non-cash lease expense

     13,958       14,629

Gain on sale of businesses

     —         (28,270

Other, net

     7,405       4,530

Changes in operating assets and liabilities:

    

Accounts receivable, net

     27,860       114,052

Contract assets, net

     4,154       (3,786

Prepaid expenses and other assets

     (37,833     (48,382

Accounts payable

     7,644       (28,666

Accrued expenses and other liabilities

     (43,743     27,687

Deferred revenue

     (61,832     36,029
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     261,351       296,557
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capitalized expenditures

     (126,828     (126,432

Acquisitions, net of cash acquired

     —         (439,483

Proceeds from sale of businesses

     —         54,369

Other, net

     (1,000     1,100
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (127,828     (510,446
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Payments on Term Loan Facility

     (100,000     (50,000

Payments under tax receivable agreements

     (21,537     (20,691

Receipts (payments) on derivative instruments

     (14,810     (14,810

Employee tax withholding on vesting of equity compensation awards

     (18,681     (3,131

Payments on deferred financing obligations

     (8,981     (6,547

Payment of senior amortizing notes

     (8,048     (7,680

Proceeds from exercise of equity awards

     5,985       2,584

Payments on Revolving Facility

     —         (250,000

Proceeds from issuance of Senior Notes

     —         325,000

Other, net

     (253     (6,454
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (166,325     (31,729
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     115       2,690
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (32,687     (242,928
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     113,101     410,405
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 80,414     $ 167,477
  

 

 

   

 

 

 

 

9


Reconciliation of Net Income (Loss) to Adjusted EBITDA

(unaudited and amounts in thousands)

 

     Three Months Ended September 30,  
     2021     2020  

Net income (loss)

   $ (36,404   $ (42,622

Income tax provision (benefit)

     (16,749     (13,388
  

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (53,153     (56,010

Amortization of capitalized software developed for sale

     859       12  

Depreciation and amortization

     163,469       146,869  

Interest expense, net

     59,466       61,627  

Equity compensation

     23,745       14,331  

Acquisition accounting adjustments

     (1,653     34,686  

Acquisition and divestiture-related costs

     13,765       2,337  

Integration and related costs

     5,933       7,536  

Strategic initiatives, duplicative and transition costs

     14,644       3,765  

Severance costs

     7,303       3,172  

Accretion and changes in estimate, net

     4,355       5,293  

Impairment of long-lived assets and other

     81       7,447  

Loss on extinguishment of debt

     2,232       1,489  

Gain on sale of business

     —         (176

Contingent consideration

     —         (550

Other non-routine, net

     5,416       13  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 246,462       231,841  
  

 

 

   

 

 

 

 

10


Reconciliation of Net Income (Loss) to Adjusted EBITDA

(unaudited and amounts in thousands)

 

     Six Months Ended September 30,  
     2021     2020  

Net income (loss)

   $ (40,009   $ (101,316

Income tax provision (benefit)

     (25,198     (26,849
  

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (65,207     (128,165

Amortization of capitalized software developed for sale

     1,576       89  

Depreciation and amortization

     331,681       285,409  

Interest expense, net

     118,852       124,294  

Equity compensation

     49,911       23,914  

Acquisition accounting adjustments

     (2,212     83,225  

Acquisition and divestiture-related costs

     20,159       7,458  

Integration and related costs

     17,301       17,894  

Strategic initiatives, duplicative and transition costs

     24,572       8,845  

Severance costs

     12,023       7,876  

Accretion and changes in estimate, net

     9,087       11,188  

Impairment of long-lived assets and other

     1,692       13,760  

Loss on extinguishment of debt

     2,232       1,489  

Gain on sale of business

     —         (28,270

Contingent consideration

     —         (3,000

Other non-routine, net

     7,523       2,690  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 529,190       428,696  
  

 

 

   

 

 

 

 

11


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

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

 

     Three Months Ended September 30,  
     2021     2020  

Net income (loss)

   $ (36,404   $ (42,622

Amortization expense resulting from acquisition method adjustments

     124,465       115,873  

EBITDA adjustments

     75,821       79,343  

Tax effect of EBITDA adjustments and amortization expense

     (49,590     (49,107
  

 

 

   

 

 

 

Adjusted net income (loss)

   $ 114,292       103,487  
  

 

 

   

 

 

 

Adjusted net income (loss) per diluted share

   $ 0.35       0.32  
  

 

 

   

 

 

 

 

     Six Months Ended September 30,  
     2021     2020  

Net income (loss)

   $ (40,009   $ (101,316

Amortization expense resulting from acquisition method adjustments

     248,779       228,898  

EBITDA adjustments

     142,288       147,069  

Tax effect of EBITDA adjustments and amortization expense

     (103,811     (89,966
  

 

 

   

 

 

 

Adjusted net income (loss)

   $ 247,247       184,685  
  

 

 

   

 

 

 

Adjusted net income (loss) per diluted share

   $ 0.76       0.58  
  

 

 

   

 

 

 

 

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Segment Results

(unaudited and amounts in thousands)

 

     Three Months Ended September 30,  
     2021     2020  

Segment revenue

    

Software and Analytics

   $ 363,423       354,860  

Network Solutions

     215,600       184,095  

Technology-Enabled Services

     231,928       231,817  

Postage and Eliminations (1)

     19,091       24,073  

Purchase Accounting Adjustment (2)

     (3,278     (38,909
  

 

 

   

 

 

 

Net revenue

   $ 826,764       755,936  
  

 

 

   

 

 

 

Segment adjusted EBITDA

    

Software and Analytics

   $ 112,318       117,393  

Network Solutions

     112,986       94,508  

Technology-Enabled Services

     21,158       19,940  

Postage and Eliminations

     —         —    
  

 

 

   

 

 

 

Total adjusted EBITDA

   $ 246,462       231,841  
  

 

 

   

 

 

 

 

     Six Months Ended September 30,  
     2021     2020  

Segment revenue

    

Software and Analytics

   $ 783,740       746,449  

Network Solutions

     425,061       326,921  

Technology-Enabled Services

     457,450       419,523  

Postage and Eliminations (1)

     36,109       51,136  

Purchase Accounting Adjustment (2)

     (7,740     (93,909
  

 

 

   

 

 

 

Net revenue

   $ 1,694,620       1,450,120  
  

 

 

   

 

 

 

Segment adjusted EBITDA

    

Software and Analytics

   $ 272,683       261,325  

Network Solutions

     222,474       165,011  

Technology-Enabled Services

     34,033       2,360  

Postage and Eliminations

     —         —    
  

 

 

   

 

 

 

Total adjusted EBITDA

   $ 529,190       428,696  
  

 

 

   

 

 

 

 

(1)

Revenue for Postage and Eliminations includes postage revenue of $52.6 million for the three months ended September 30, 2021 and $50.0 million for the three months ended September 30, 2020. Revenue for Postage and Eliminations includes postage revenue of $103.8 million for the six months ended September 30, 2021 and $95.8 million for the six months ended September 30, 2020.

(2)

Amount reflects the impact to deferred revenue resulting from the McKesson exit which reduced revenue recognized during the three months ended September 30, 2021 and September 30, 2020.

 

13


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

(unaudited and amounts in thousands)

 

     Six Months Ended September 30,  
     2021     2020  

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

   $ 261,351     $ 296,557  

Capital expenditures

     (126,828     (126,432
  

 

 

   

 

 

 

Free cash flow

     134,523       170,125  

Adjustments to free cash flow (2):

    

Integration and related costs

     17,301       17,894  

Strategic initiatives, duplicative and transition costs

     24,572       8,845  

Severance costs

     12,023       7,876  

Integration and strategic capital expenditures

     13,483       5,938  
  

 

 

   

 

 

 

Adjusted free cash flow

   $ 201,902     $ 210,678  
  

 

 

   

 

 

 

 

(1)

Includes cash provided by pass-thru funds of $4.4 million for the six months ended September 30, 2021 and cash used by pass-thru funds of $1.4 million for the six months ended September 30, 2020.

(2)

All operating costs and integration and strategic capital expenditures are presented on an as-incurred basis.

 

14