Form 8-K
false 0001756497 0001756497 2022-08-03 2022-08-03

 

 

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): August 3, 2022

 

 

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

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 August 3, 2022, Change Healthcare Inc. issued a press release announcing financial results for the first fiscal quarter of fiscal year 2023 ended June 30, 2022. 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 9.01

Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
No.

  

Description

99.1    Press Release of Change Healthcare Inc. dated August 3, 2022.
104    Cover Page Tagging Data File (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: August 3, 2022

EX-99.1

Exhibit 99.1

Change Healthcare Inc. Reports First Quarter Fiscal 2023 Financial Results

 

   

Revenue growth driven by continued momentum in core business and investment in expanded capabilities

 

   

Total revenue of $884M, including solutions revenue of $831M; solutions revenue growth of 1.8% driven by increased volume and new sales

Nashville, Tenn., Aug. 3, 2022 – Change Healthcare Inc. (Nasdaq: CHNG) (the “Company” or “Change Healthcare”), a leading healthcare technology company, today reported financial results for the first quarter of fiscal year 2023 ended June 30, 2022.

“Our first quarter growth, despite headwinds from lower COVID-related activities and customer attrition related to the extended merger process, demonstrates the underlying momentum in the business,” said Neil de Crescenzo, president and chief executive officer. “We believe our sales pipeline and continued investments in innovation establish a strong foundation for growth as we move through fiscal 2023.”

Fiscal 2023 First Quarter Highlights:

Recent Business Highlights

 

   

Released InterQual® 2022, which includes new criteria for emergent trends, restructured and interactive criteria to streamline workflows, and artificial intelligence (AI) to drive proactive insights and efficiency.

 

   

Launched Patient Engagement suite, which combines Luma Health’s Patient Success Platform solution with Change Healthcare’s revenue cycle management solutions to give patients and providers a cohesive experience that spans the entire healthcare journey.

Financial Results for First Quarter of Fiscal 2023

 

     Q1 2023   Q1 2022

Total Revenue1

   $884.5 million   $867.9 million

Solutions Revenue1

   $831.3 million   $816.6 million

Net Income (Loss)

   $(23.2) million   $(3.6) million

Diluted EPS2

   $(0.07)   $(0.01)

Adjusted EBITDA

   $280.2 million   $282.7 million

Adjusted Net Income

   $123.8 million   $133.0 million

Adjusted Diluted EPS2

   $0.38   $0.41

 

1.

Total Revenue and Solutions Revenue for first quarter of fiscal 2022 included the impact of fair value adjustments to deferred revenue resulting from the McKesson exit, which reduced revenue recognized by $4.5 million.

2.

Diluted EPS and Adjusted Diluted EPS for the current period are based on 327 million shares compared to 323 million shares in the first quarter of fiscal 2022.

 

1


Solutions revenue in the first quarter grew 1.8% compared to the first quarter of fiscal 2022, driven by volume growth and new sales. Adjusted EBITDA declined 0.9% over the same period, impacted by investments to support business initiatives, wage inflation and negative mix, partially offset by the aforementioned revenue growth.

Cash Flow and Balance Sheet Highlights

Net cash provided by operating activities was $83.3 million and free cash flow was $3.8 million, in each case, for the three months ended June 30, 2022. For the three months ended June 30, 2021, net cash provided by operating activities and free cash flow were $110.1 million and $44.1 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 decreased by $7.1 million in the three months ended June 30, 2022, decreasing free cash flow for the period by that amount, and increased by $7.3 million for the three months ended June 30, 2021.

The Company ended the quarter with approximately $94.0 million of cash and cash equivalents, and approximately $4,491.3 million of total debt. During the first quarter, the Company repaid $100.0 million of its Senior Notes, and repaid an additional $50 million subsequent to the end of the quarter.

Segments

During the first quarter of fiscal year 2023, the Company made certain changes in the way it manages its business and how it views operating results. Specifically, the Company made the following changes:

 

   

Established the Enterprise Imaging business as a standalone reportable segment under its own general manager, reporting directly to the Company’s chief executive officer. This business was previously presented within the Software & Analytics reportable segment.

 

   

Shifted responsibility for certain products from one reportable segment to another to better align the Company’s portfolio of service offerings, which will impact the Technology-Enabled Services, Network Solutions, and Software & Analytics reportable segments.

The Company now reports its financial results in four reportable segments: Software and Analytics, Network Solutions, Enterprise Imaging and Technology-Enabled Services. Segment information for historical periods has been retrospectively restated in the accompanying materials to reflect the new organizational structure.

Guidance

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

 

2


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, and Change Healthcare stockholders voted to approve the Merger on April 13, 2021. The closing of the Merger is subject to applicable regulatory approval and other customary closing conditions.

On February 24, 2022, the Department of Justice (“DOJ”) and certain other parties commenced litigation to block the Merger, and the Company continues to support UnitedHealth Group in working toward closing the Merger. Trial for that action commenced on August 1, 2022.

On April 4, 2022, the parties to the merger agreement entered into a waiver pursuant to which, among other things, Change Healthcare and UnitedHealth Group each waived its right to terminate the merger agreement until the earlier of (i)the tenth business day following a final order issued by the U.S. District Court for the District of Columbia with respect to the complaint filed by the DOJ that prohibits the consummation of the Merger and (ii) December 31, 2022. OptumInsight will pay a $650 million fee to Change Healthcare in the event the Merger is unable to be completed because of the decision issued by the U.S. District Court for the District of Columbia upon completion of the trial that commenced on August 1, 2022.

Additionally, the Company will be permitted to declare and pay a one-time special dividend of up to $2.00 in cash per each issued and outstanding share of its common stock, with a record date and payment date to be determined in the sole discretion of the Company’s Board of Directors (or a committee thereof). The Company expects to pay the dividend at or about the time of closing the Merger.

On April 22, 2022, UnitedHealth Group, as seller, entered into an equity purchase agreement and related agreements relating to the sale of the Company’s claims editing business to an affiliate of investment funds of TPG Capital for a base purchase price in cash equal to $2.2 billion (subject to customary adjustments). Consummation of the transaction is contingent on a number of conditions, including the consummation of the Merger.

Webcast Information

Change Healthcare will host a conference call on Thursday, August 4, 2022, 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 August 4, 2023.

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.

 

3


CHNG-IR
Contacts

David Elliott

Enterprise Strategy & Investor Relations

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,” “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 the conditions to the 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 operations, 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 and Omicron variants) on the national and global economy, Change Healthcare’s business, suppliers, customers, and employees; Change Healthcare’s ability to retain and recruit key management personnel and other talent (including while the proposed merger is pending); 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 Change Healthcare’s end-customer markets; Change Healthcare’s ability to effectively manage its costs; Change Healthcare’s ability to effectively develop and maintain relationships with its channel partners; Change Healthcare’s ability to timely develop new services and improve existing solutions; 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,

 

4


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; the economic impact of escalating global tensions, including the conflict between Russia and Ukraine, and the adoption or expansion of economic sanctions or trade restrictions; 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; the potential dilutive effect of future issuance of shares of Change Healthcare’s common stock; the impact of anti-takeover provisions in Change Healthcare’s organizational documents and under Delaware law, which may discourage or delay acquisition attempts, 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 26, 2022 as such factors may be updated from time to time in our periodic filings with the SEC.

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 June 30,  
     2022     2021  

Revenue:

    

Solutions revenue

   $ 831,343     $ 816,648  

Postage revenue

     53,126       51,208  
  

 

 

   

 

 

 

Total revenue

     884,469       867,856  

Operating expenses:

    

Cost of operations (exclusive of depreciation and amortization below)

     357,096       352,063  

Research and development

     74,197       71,240  

Sales, marketing, general and administrative

     197,886       177,955  

Customer postage

     53,126       51,208  

Depreciation and amortization

     171,722       168,211  

Accretion and changes in estimate with related parties, net

     3,189       3,037  
  

 

 

   

 

 

 

Total operating expenses

     857,216       823,714  
  

 

 

   

 

 

 

Operating income (loss)

     27,253       44,142  

Non-operating (income) and expense

    

Interest expense, net

     56,870       59,386  

Loss on extinguishment of debt

     390       —    

Other, net

     2,472       (3,189
  

 

 

   

 

 

 

Total non-operating (income) and expense

     59,732       56,197  
  

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (32,479     (12,055

Income tax provision (benefit)

     (9,311     (8,450
  

 

 

   

 

 

 

Net income (loss)

   $ (23,168   $ (3,605
  

 

 

   

 

 

 

Net income (loss) per common share:

    

Basic and diluted

   $ (0.07   $ (0.01

Weighted average common shares outstanding:

    

Basic and diluted

     326,562,482       322,546,171  

 

6


Consolidated Balance Sheets

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

 

     June 30, 2022     March 31, 2022  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 94,009   $ 252,298

Accounts receivable, net

     717,684     720,122

Contract assets, net

     130,351     162,828

Prepaid expenses and other current assets

     204,357     177,659
  

 

 

   

 

 

 

Total current assets

     1,146,401     1,312,907

Property and equipment, net

     126,781     141,340

Operating lease right-of-use assets, net

     61,423     65,680

Goodwill

     4,101,659     4,112,904

Intangible assets, net

     3,587,019     3,699,603

Other noncurrent assets, net

     613,698     600,061
  

 

 

   

 

 

 

Total assets

   $ 9,636,981   $ 9,932,495
  

 

 

   

 

 

 

Liabilities

    

Current liabilities:

    

Accounts payable

   $ 85,208   $ 104,273

Accrued expenses

     383,368     461,506

Deferred revenue

     409,952     469,098

Due to related parties, net

     29,560     13,057

Current portion of long-term debt

     4,708     10,006

Current portion of operating lease liabilities

     20,009     21,726
  

 

 

   

 

 

 

Total current liabilities

     932,805     1,079,666

Long-term debt, excluding current portion

     4,486,565     4,580,087

Long-term operating lease liabilities

     48,580     52,286

Deferred income tax liabilities

     555,616     563,606

Tax receivable agreement obligations to related parties

     79,503     104,863

Tax receivable agreement obligations

     174,445     202,762

Other long-term liabilities

     68,581       73,118
  

 

 

   

 

 

 

Total liabilities

     6,346,095       6,656,388

Commitments and contingencies

    

Stockholders’ Equity

    

Common Stock (par value, $0.001), 9,000,000,000 and 9,000,000,000 shares authorized and 313,131,714 and 306,796,076 shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively

     327     313

Preferred stock (par value, $0.001), 900,000,000 shares authorized and no shares issued and outstanding at both June 30, 2022 and March 31, 2022

     —         —    

Additional paid-in capital

     4,384,631       4,340,759

Accumulated other comprehensive income (loss)

     29,177     35,116

Accumulated deficit

     (1,123,249     (1,100,081
  

 

 

   

 

 

 

Total stockholders’ equity

     3,290,886       3,276,107
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 9,636,981   $ 9,932,495
  

 

 

   

 

 

 

 

7


Consolidated Statements of Cash Flows

(unaudited and amounts in thousands)

 

     Three Months Ended June 30,  
     2022     2021  

Cash flows from operating activities:

    

Net income (loss)

   $ (23,168   $ (3,605

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

    

Depreciation and amortization

     171,722     168,211

Amortization of capitalized software developed for sale

     1,302     717

Accretion and changes in estimate, net

     4,800     4,732

Equity compensation

     49,961     26,166

Deferred income tax expense (benefit)

     (10,411     (8,989

Amortization of debt discount and issuance costs

     7,770     7,910

Loss on extinguishment of debt

     390     —    

Non-cash lease expense

     5,681     7,007

Other, net

     3,916     249

Changes in operating assets and liabilities:

    

Accounts receivable, net

     1,991     (11,773

Contract assets, net

     30,028     (3,090

Prepaid expenses and other assets

     (20,811     (25,029

Accounts payable

     (2,481     34,722

Accrued expenses and other liabilities

     (75,394     (53,649

Deferred revenue

     (61,981     (33,472
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     83,315     110,107
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Capitalized expenditures

     (79,535     (66,006

Other, net

     —         (1,000
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (79,535     (67,006
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Payments on Senior Notes

     (100,000     —    

Payments under tax receivable agreements

     (48,462     (21,537

Receipts (payments) on derivative instruments

     (410     (7,364

Employee tax withholding on vesting of equity compensation awards

     (6,407     (13,015

Payments on deferred financing obligations

     (2,331     (6,796

Payment of senior amortizing notes

     (4,254     (3,965

Proceeds from exercise of equity awards

     1,274     5,225

Other, net

     (58     (116
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (160,648     (47,568
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (1,421     470
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (158,289     (3,997
  

 

 

   

 

 

 

Cash and cash equivalents at beginning of period

     252,298     113,101
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 94,009   $ 109,104
  

 

 

   

 

 

 

 

8


Reconciliation of Net Income (Loss) to Adjusted EBITDA

(unaudited and amounts in thousands)

 

     Three Months Ended June 30,  
     2022     2021  

Net income (loss)

   $ (23,168   $ (3,605

Income tax provision (benefit)

     (9,311     (8,450
  

 

 

   

 

 

 

Income (loss) before income tax provision (benefit)

     (32,479     (12,055

Amortization of capitalized software developed for sale

     1,302       717  

Depreciation and amortization

     171,722       168,211  

Interest expense, net

     56,870       59,386  

Equity compensation

     49,961       26,166  

Acquisition accounting adjustments

     (4,613     (559

Acquisition and divestiture-related costs

     17,944       6,394  

Integration and related costs

     1,428       11,368  

Strategic initiatives, duplicative and transition costs

     5,629       9,928  

Severance costs

     2,482       4,720  

Accretion and changes in estimate, net

     4,800       4,732  

Impairment of long-lived assets and other

     1,161       1,612  

Loss on extinguishment of debt

     390       —    

Other non-routine, net

     3,583       2,108  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 280,180     $ 282,728  
  

 

 

   

 

 

 

 

9


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

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

 

     Three Months Ended June 30,  
     2022     2021  

Net income (loss)

   $ (23,168   $ (3,605

Amortization expense resulting from acquisition method adjustments

     113,194       124,314  

EBITDA adjustments

     82,765       66,469  

Tax effect of EBITDA adjustments and amortization expense

     (49,012     (54,222
  

 

 

   

 

 

 

Adjusted net income (loss)

   $ 123,779     $ 132,956  
  

 

 

   

 

 

 

Adjusted net income (loss) per diluted share

   $ 0.38     $ 0.41  
  

 

 

   

 

 

 

 

10


Segment Results

(unaudited and amounts in thousands)

 

     Three Months Ended June 30,     $     %  
     2022      2021     Change     Change  

Segment revenue

         

Software and Analytics

   $ 344,927      $ 337,823     $ 7,104       2.1

Network Solutions

     223,283        218,264       5,019       2.3

Enterprise Imaging

     83,085        82,396       689       0.8

Technology-Enabled Services

     213,169        216,776       (3,607     (1.7 )% 

Postage and Eliminations (1)

     20,005        17,058       2,947       17.3

Purchase Accounting Adjustment (2)

     —          (4,461     4,461       (100.0 )% 
  

 

 

    

 

 

   

 

 

   

Net Revenue

   $ 884,469      $ 867,856     $ 16,613       1.9
  

 

 

    

 

 

   

 

 

   

Segment adjusted EBITDA

         

Software and Analytics

   $ 144,973      $ 137,028     $ 7,945       5.8

Network Solutions

     111,433        113,617       (2,184     (1.9 )% 

Enterprise Imaging

     18,648        19,960       (1,312     (6.6 )% 

Technology-Enabled Services

     5,126        12,123       (6,997     (57.7 )% 
  

 

 

    

 

 

   

 

 

   

Adjusted EBITDA

   $ 280,180      $ 282,728     $ (2,548     (0.9 )% 
  

 

 

    

 

 

   

 

 

   

 

(1)

Revenue for Postage and Eliminations includes postage revenue of $53.1 million for the three months ended June 30, 2022 and $51.2 million for the three months ended June 30, 2021.

(2)

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

 

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

(unaudited and amounts in thousands)

 

     Three Months Ended June 30,  
     2022     2021  

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

   $ 83,315     $ 110,107  

Capital expenditures

     (79,535     (66,006
  

 

 

   

 

 

 

Free cash flow

     3,780       44,101  

Adjustments to free cash flow (2):

    

Integration and related costs

     1,428       11,368  

Strategic initiatives, duplicative and transition costs

     5,629       9,928  

Severance costs

     2,482       4,720  

Integration and strategic capital expenditures

     845       6,395  
  

 

 

   

 

 

 

Adjusted free cash flow

   $ 14,164     $ 76,512  
  

 

 

   

 

 

 

 

(1)

Includes cash used by pass-thru funds of $7.1 million for the three months ended June 30, 2022 and cash provided by pass-thru funds of $7.3 million for the three months ended June 30, 2021.

(2)

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

 

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