Change Healthcare (CHNG) 7 Aug 212022 Q1 Earnings call transcript

Good morning, and welcome to Change Healthcare's earnings call for the first quarter of fiscal 2022, which ended on June 30, 2021. I'm joined today by Neil de Crescenzo, Change Healthcare's President and CEO; and Fredrik Eliasson, Change Healthcare's Executive Vice President and Chief Financial Officer.

First, Neil will provide a business update, and then Fredrik will review the financial results for the quarter, followed by closing remarks from Neil.

Given the pending transaction with OptumInsight, we will not be taking any questions or providing financial guidance.

Before we begin, I would like to remind you that the comments included in today's conference call include forward-looking statements. materially reasons, results more which the SEC differ comments by detail may company's several for are filings. results from suggested the the in Actual discussed in to Change assumes law, or by required forward-looking statements as no Except obligation update any information. Healthcare where that will we to note financial refer our business. also non-GAAP measures appropriate, Please to evaluate slides our and the appendix for measures GAAP to release Reconciliations presentation. financial measures the earnings supplemental accompanying non-GAAP financial are this included in to release everyone the that supplemental copies of I and want earnings call on the accompanying our available our to Investor conference this remind www.changehealthcare.com. slides of section website are at Relations turn I'll that, to the With Neil. call over Neil?

Thank you, Good everyone. morning, Evan.

off Care new we that Google and having also sales result the recently introductions system year business are been and We our the increased initiatives, continue start to success Health health Solutions a as am of our implementations. as with innovation and new recognized care for for continued Year. a product enterprise collaboration, Industry the activity proud to selected strong the Partner across of the I be Cloud's

let our Now our success with provide stakeholders, care to for financial providers, all and including platform for increased health continued deliver value advancing insights and payers, me the quarter highlights partners you into some consumers.

of First, review quarter. a quick the

Fredrik remainder investments on customers health platform year our continuing revenue introductions market executing in our utilization through performance confident review teams $XXX we forward progressing UHG the ability EBITDA to the respectively. as new regulatory their million DOJ am in integration. new more In of improved our to work the and with positive will while We transformation look on were We the information coordination pending strong performance the a in performance provide moment. Change transaction. and on concluding and Healthcare, momentum with initiatives. requested the significant as the for efforts in to reflects and I care pleased necessary adjusted This test as color to successful Solutions across remain continuing with regards in to make the product a and business developing deliver $XXX financial provide the strong transaction million, continued move segment. with well our initiatives to expanding plans diligently the by UHG, and business of

growth focus transaction both me for to as acquisitions health I improved saw let we update signing we from closed One both an our solutions would volumes our see last Within of businesses. resulting medical year, like growth our new increased continue network the provide payments across segments. contracts care and pharmacy solutions payment double-digit dollar Now is our are to underlying on our business, including growth BXB our we by expectations. multimillion area and API-related Furthermore, both Network opportunities exceeding in the volumes evidenced businesses. our data wins, continued in eRx and in on which utilization, success business solutions segment, and our PDX

Last solutions receive RCM bill workflow This pharmacies. solution regular introduced data as pharmacies as and test shots. and network and capabilities as pharmacy easily enables includes suite prescriptions solutions pharmacy flu they process to management engagement their for for easily year, claims comprehensive MedRx software solutions. consumer and Our and for within COVID-XX well billing the we reimbursement as

savings prescriptions, patients. patients loyalty. educational solution, continue of medication and deliver which from messaging Rx is helping Assist initial to and critical our which see Rx Furthermore, have to significant drives pharmacies and brand adherence Assist dynamic a opportunities needs platform As this co-pay are expected, long-term and we solution. prescription additional increased assistance addresses seeing and we will both messaging for volumes real-time

our expand in and demand capabilities which and We pharmacy continue support business our growth. innovate further will to

Change marketplace management, solutions The payers interoperability During payment cycle providing transactions products, data advanced Marketplace, medical network, the Marketplace month. quarter and approximately We first solutions now patient million in and physician XX now API and solutions access workflows. Change spanning to help power Healthcare transactions XX support, medical and million and the over are comply API to processing rule. the revenue processed network Healthcare per with XXX API offers we quarter, interoperability also the CMS

Moving to our Analytics and Software segment.

of payers insights, and We unique Healthcare's opportunities leverage the workflow across solutions capabilities. models are seeing advantage ROI high Change providers as our segment take AI that and

multimillion a signed customer's contract annual this of incumbent this confidence including Imaging, the vendors largest Enterprise excess in largest the several the For during quarter, in one of in the revenue, winning including the industry, customer's versus contracts, example, in $XX in vendor. dollar history, we company's million

increase and for capabilities payment optimize of coordination opportunities, software in and platform was one-stop value team. in Let sales color solution results trends me untapped the base our that to dollar notable score -- for And customer drive enormous of being the our customer regional number close large beyond our targets which revenue; several annual quality reimbursement; coding by risk Gap solutions, View, record the its that prospectively risk win largest cross-selling in that supporting of financial provide our the higher reimbursements for gap the our With some care helps and market. want payers others. current including: above client this on a payers for medical retrieval, adjustment expanded and decision value risk new deals service's enterprise a solutions, to NLP into retrieval offering which our created quality accuracy, chart demonstrates strength ratings. of exists The won Risk one risk and opportunity benefits our well revenue Advisor, a scores, plus abstraction review, planned helps and country, incremental Dx health a noted clinical appropriate and we million our used contract analytics understand risk-adjusted service that solution,

segment. optimize well as have RCM as to moving our as business, we us provide Services Services our optimal before, management In access Now stated solutions. approach payment reimbursement our Technology-Enabled and enables patient improve to experience,

continue As average a and physician with bookings size both rates hospital-based groups. deal positive to ongoing result, continued independent with win and grow our expand practice success and pipeline and trends we in

We expand existing as relationships continue looking breadth customers to customer to as Healthcare's well Change leverage sign new capabilities.

customers us to improving In as for followed as business who value addition, our well for have our significantly profitability as investors RCM to focused on greater remain well, transforming know our add value drive investors. our we

to continue as reduce streamline our value This improve operational to the payments waste, we on and test and platform, the detail, relationship continued in and largest transaction with customer continue costs. the that helping payment Change innovation we focus providing health enabling closing, continue or further to fiscal digital services experiences In first providing track we secure our insights our Through the central As of to progress improve ongoing initiative, journey. by we on by with Fredrik through greater a which communications $XX initiative us including provides role in CPS profitability care. customers technology million confident outcomes We and to year. throughout greater sequentially drive through our patient financial unique and them leveraging our transformation enhance strategic, solidified and insights to and to discuss In connectivity, to enhance our quality payers of transformation remain will accelerate best-in-class and administrative our innovation, management, enabled and reduce and objectives. better in a our country. at consumer Healthcare's multimillion-dollar and will to integrated are excellence, execute business, commitment with efficiency, and rollout of the one our contract this scale play solution experiences continuing innovative expect remain engagement

our let turn Fredrik? Fredrik, Now who performance. review will over call to me financial the

morning, good Thank you, Neil, everyone. and

of The X. continued results business and underlying to support improve first and demonstrate quarter with our strength Starting performance. the platform Slide the future across operating growth investment our

adjustment adjustment exit $XXX deferred year, associated revenue included part same million the first including to of quarter, fair Solutions McKesson period value the prior with value a $X $XX million, in million compared the million the fiscal a For the as of adjustment. was $XXX revenue fair which of

in continue both all our activity business X positive momentum in across bookings segments. to and pipeline see We

first cost was XXX adjusted of EBITDA with outlined quarter the quarter with period the first of of a to I Solutions There $XX when share $X.X revenue recovery to XXXX. net quarter and net $X.XX net and Adjusted across million fiscal continued the net the as revenue the loss the million diluted our deferred revenue period income in net Net $X.XX the related was XXX fiscal million, per $X.XX million current period, of quarter a for related of million, the XXXX. year. for structure. acquisitions prior for favorable of revenue increased revenue and Adjusted impact adjusted per reflects million resulting the quarter of million income compared $XX the prior $XXX the of and the Adjusted fiscal of compared per of of fiscal shares $X.XX year. fiscal we divestitures reflects period share divestitures income 'XX the Solutions was fiscal million the share a as new volume the in year. to for fiscal diluted share for solid period or start all $XXX diluted per same The million in by impact same well the segments. of acquisitions in compared volume the from diluted compared X same net net sales were items the shares impacted positively foundation each of diluted loss to Net was optimization $X resulting $XXX quarter EBITDA in diluted in or loss first XX.X%, year. as compared prior prior to

Software take our on detail at year-over-year. X, the let's revenue. a with in Now segments The starting more increased of Analytics segment X.X% by Slide performance look

and the in divestitures, our of segment adjusting the for $XX revenue prior over year. million increased However, Software Analytics the capacity management Connected Analytics impact XX.X%

XX.X% Network $XX from Our Solutions acquisitions. which includes year-over-year, million revenue in increased revenue

customers of in and include utilization, acquisitions, Key in our return to data growth businesses. of the grew double-digit solutions new impact quarter. Network the Excluding health continued and payment drivers revenue XX.X% from BXB growth implementation the normal

our business revenue In service API-driven RCM of result increased business prior includes volume volume. strong, XX.X% COVID-XX with and and growth Technology-Enabled increased to as year-over-year as as our across sales. Services year Services from implementations Underlying be new benefited also vaccine-related a new from also primarily revenue We recovery portfolio. continues increasing overall segment, well The volumes levels.

positive size. deal continue and win Our remain long-term turnaround rates trends in on and efforts RCM we to track, both RCM see

EBITDA. adjusted to Turning

the Software Analytics impact year-over-year, XX.X% increased divestitures. the including of

investment divestitures. of increased impact Results effectively cost to our acquisition the drive quarter, by the growth support and primarily growth revenue the and Services, continued optimization launches of our continue of adjusted expansion We eRx new product in manage the Technology-Enabled Solutions primarily driven to and quarter was adjusted initiatives underlying the the underway. productivity significant number cost Network driven EBITDA In include our we by to PDX. to and growth in and offset across structure. also continued of Network have XX.X% EBITDA market

make progress to implementation Services continue our announced last transformation program our we solid of addition, transformation and enhanced the year. accelerated RCM we on and In

As this to while efficiencies. innovation us fixed we customer will productivity quarter, driving initiative allow increasing and creation last indicated cost value continue

million $XX Free million balance was cash the period to the of prior year. the and compared on in X. for fiscal on sheet Slide Moving cash flow $XXX quarter our to flow same

year As had of previously disclosed. of tax impact the a includes payroll quarter the million which payments, approximately deferring prior and $XX we positive reminder, interest

relative the the In period to capital health care addition, as year utilization reflects normalized current prior rebounded. working more

with of strong, end $XX liquidity cash billion. additional Our obligations. in $XXX cash to equivalents an quarter under ratio of Total $XXX ending cash repaid the revolver the capacity. in facility at the end. debt, million long-term $X.X was undrawn company quarter the of and quarter, Net remained leverage net loan of quarter and Subsequent million million X.X was at end

transaction, impact providing contraction provide to pending year-over-year in some M&A the financial As I release, wanted not and remainder TES. fiscal guidance. of expected cadence due for the press the the disclosed on With in said, activity contract large noted the will we that COVID, from be color previously 'XX, to the given

anticipated is QX the of year quarter adjusted and years, the in terms previous be revenue in EBITDA. both to As for trough

multiyear certain a of QX. S&A, revenue timing contracts in under As reminder, impact in delivery the annual positively

over the contract In impacted second Network, anniversary some the quarter of QX to for remainder a contraction, addition, impacted of the revenue of 'XX the impact sale and In QX by and we of and we will And implementations benefiting in test we which Overall, improvement transformation the QX benefited expect our will from are the year. remainder be large will the management results. fiscal year, year, prior trends which business new the capacity strong QX, by in in continue of trail-off of still year. be vaccine-related TES, the anticipating sequential we in this underlying from initiative.

back turn closing Now over to for with comments. that, me his it let Neil

clinical, Thank Change closing, remains delivering on solutions and providers, you, Healthcare In care focused and and and health channel financial outcomes. consumers developing care care transformative our Fredrik. for to improve payers, innovative partners

financial their I transactions to second, to for The to optimize to will deliver first, care; will innovative, forward is our on we objectives stakeholders: value-based care. goal dedication superior the and drive X to performance the customers organization. health of employees commitment, solutions and testament our efficiency customers stated is of ability strength we value-added have key deliver As solutions to our will for across increased journey the our and previously, and financial continue decision-making third, a in experiences; on our our consumer thinking that for deliver we accuracy deliver

partner We in improve our to everyone care will with customers lower creating for and costs, value health access help system. them to continue the enhance outcomes,