Change Healthcare (CHNG) 26 May 222022 Q4 Earnings call transcript

Good morning. Thank you for standing by and welcome to the Change Healthcare's Earnings Call for the Fourth Quarter of Fiscal Year 2022. [Operator Instructions] I would now like to hand the conference over to your host today, David Elliott, Change Healthcare Inc. Vice President, Enterprise Strategy and Investor Relations. Please go ahead.

operator. you, Thank welcome fourth and March Healthcare's call earnings XXXX. Good of to fiscal the quarter on XXXX for morning Change which XX, ended I'm President and Healthcare's Financial Officer. Crescenzo, Fredrik Neil Change Chief joined CEO; Eliasson, Vice and and Change Executive Healthcare's today by President de

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

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

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

for Good joining David. morning, thank you, everyone us. you Thank and

through our we progress take a the to to power recap Healthcare's the system Change the year moment towards in accelerating made which solutions. First, of of healthcare transformation I of U.S. would like considerable mission a

in advocate and Stratus customers segments, to deepening health among year year. dual-eligibility and created hundreds Change our digital pending innovative, shown clients creativity from and our uncertainty team incredible new other developed especially our continued bookings have by like for Benefits a partners. solution. our companies UnitedHealth as deliver continue Estimator In they continue Cost deliver API, resulted investment while to on with our of the returns and customers Imaging and exceeding COVID-XX and We Care the commitment, and We relationships our introduce existing of of Group targets superior members relationships, for the cross-sell expanding Healthcare which merger our our resilience, PACS, solutions new and agility impacts customer Coordination fast-growing to team pandemic,

FY has quarter. momentum, As that we a strong heading Consistent year with I'm significant XXXX closed into fiscal this with momentum result, our another pleased business to 'XX. stronger our been report never out with

and underlying the demonstrate business our to continue and results disciplined Our momentum execution growth strength the of our of strategy.

Solutions represents of and revenue, $XXX Change growth in adjusted year-over-year million, growth EBITDA $XXX the solutions free quarter. record and X.X%. flow Healthcare respectively, cash revenue and revenue for $XXX and This X.X% fourth adjusted of million, were EBITDA million

which, and momentum, in continue more to bookings provide deliver performance strong initiatives. product business to Healthcare. ability in April details of XX. the an existing new continued customers continuing reflects Change their performance February significant new on to Healthcare, will extended across litigation new our performance Our introductions expanding make transaction while pending block agreement the remain investments Fredrik XXXX. Change confident with We business innovating the on UnitedHealth commenced XX, things, agreement our and UnitedHealth other financial to X Justice Department with the December to shortly. on Group, Group With merger among regards We executed merger to

of UnitedHealth to to begin merger healthcare closing. is our extension the the million of the court's part to X. the Change combination in completed this merger shareholders at the due per fee $XXX the Group merger. Change time be will merger in week legal to the firm of cash We event to detail at $X its of Healthcare the a completed, the our now Optum two As on Healthcare in agreement pay will the reflects August Change benefits for In of extension, trial a this of is to Healthcare belief pay scheduled special about and or a to of decision. dividend event The the merger to meritless becoming the benefits U.S. part contesting be UnitedHealth commitment able challenge will and unable share Group

across an let provide our Now segment. with starting and me our update success on Software segments, Analytics our

including as to closed a see high-growth, capabilities. plan a high-ROI with segment our of this two new technology-enabled with members. payers, we opportunities our continue AI of X clients, and major claims deals and advantage take models Blues the multimillion-dollar across solutions over benefits workflow million providers In accuracy, net health large and partners data, realize plan payment extend and We

also We for Coordination signed solutions. of Benefits plan different a our Blues

this Benefits $XX delivers year of customers coverage primary recovery average. capability product, per savings key both Our per which through solution of most identifying cost our member on commercial incremental for Medicare both commercial is payers by a Coordination over overpayment competitors realized lack. savings and commercial innovative for avoidance and Through plans

with competitor from optimizing of with RCM clinical announced partnership in The outcomes. more a dollars Our they and improve health lower all adjustment year offering be and adjustment close several end-to-end In costs. replaced technology business, we Change care to client solutions partner risk Health QX, patient unify in solutions Healthcare, to a risk market outcomes customers full-service a of continue contract help codevelop a In to journeys, quality an to Healthcare value as the rapidly our closed strong the five adjustment in financial. to gaps Luma to further evidence million we annually. as operational incumbent risk worth Change

case of solution. on right with average, we XX% already they Engine experience. develop improve patient analytics leverage These management. medical patient. serve persistent complete to new into this approach InterQual that more this beds. data patients. all providers while populates, We of technology In point predictions partnership X,XXX streamlining to go-live aspects tackling across with financial of equip managers review to improving care InterQual keeping unified is journey. AutoReview customer use integrated This between services for intelligence predictive apply connected care touch solutions in on the With both Health's improve and each medical can guidance partnership clinicians a analytics By had embeds necessity will AutoReview to care another intentional, a engagement proactively health connect for revenue challenge will provide major of every total patient staff, QX, leverage alongside decision our Engagement strategic hospitals We automation real-time, with cycle artificial support will we real-time as to and Healthcare's seamlessly and to this experience Our the continue utilization ways into InterQual data and patient-first innovative predictive payers. a data-driven trust to data our XX for for their interoperability-focused AutoReview, KLAS-recognized level communication EHR which patient insights and clinical create patients, they clinical and outcomes and with to at patients providers the increase and Healthcare evidence-based patients. to EHR review proven the Luma Change needed provide solutions, reviews

contracts the bookings also In We of key clients. with a strongest Enterprise payers, we including Imaging, deals multimillion-dollar with large quarter blues closed had Change new public, taking plan. InterQual number Healthcare new including several strategic a closing since

Our multiple wins, available development platform. Enterprise the is our our of large, have new a contract several Imaging and continues cloud-native, it clear over Stratus XXX that of road on platform. is expand AI-driven we Imaging After quarters map market to embracing now vision APIs

our for We expect FY in 'XX. business strong Imaging Enterprise growth

Network We've a in on volumes eligibility moving last relationships the tailwinds. record customers, ERAs, by transactions. of double-digit existing with saw being medical core quarter across growth our of medical seen our customer We month eligibility, our expansion and a XX% across driven year-over-year and year-over-year growth in volume new transaction Now network January COVID-related networks this claims for segment. to

solutions API execution our in the innovative we high-growth, a connectivity the We API XXX% transactions X and contract API-related and incredible our our continue XX% to XX consultative of QX to our client tech medical versus analysis in provide RCM an year. payments, Change This see of achieving billion API milestone, previous Cost In companies January, broad capabilities grew In closed our on multimillion-dollar network experience, alone, months. diligence Estimator Healthcare and approach, We approximately last from deep QX strategic we largest celebrated marketplace. approximately technical data like world. priorities the transaction to solid API. Care volume in of performed because our APIs, of payer the QX one and our choosing our

also generation our our includes customers easily. our engage an QX. prospects the in discover extended sales The We marketplace our quickly team Marketplace products and launched that now Change enables next user product and Healthcare and richer experience catalog of and to with

AppExchange. of products As Azure, software in App of and multiple Marketplace the Change AWS, Salesforce from had QX, a total the APIs, online the available Epic Orchard our XXX Healthcare hardware storefronts, on we of including across end and portfolio and

solutions care volume with our Our fueling of are transaction underlying to our leadership growth. the growth beyond Network industry, businesses, health and in providing micro solutions service-based payments data and API-based the along continued segment

momentum In by our more in businesses of evidenced as access Technology-Enabled experienced face quarter. continued The across patient proposition Technology-Enabled value efforts Services, fourth and our in clients desks has and labor more conditions. moving even our tight provider- the become business segment. their go-to-market strategic have to deals payer-facing market as relevant Services the larger Now both

won a services, well in Coast In ability for customers and Healthcare as a staff to and schedule chose As we expertise, contracts with These system This recently quickly physician of strong East placed customer trust a a deploy practices hospital our large demonstrated as their performance deal with vendor because Coast as an anesthesiology increases Healthcare visits. Change an based scheduling our secured examples, anesthesia the incumbent displacing health on primary large competitor. large drive we in trained system. client Change for care RCM Florida-based highly multimillion-dollar references. group, East

Services Technology-Enabled we performance stronger consistently for the increasing margins customers. businesses in expand our underlying and through continue prior quarters, in driving efficiency AI, As our and automation the to

our increasing in conversational clearance financial Behavioral As in Science our developed and AI modules new our team. business new an example, through are we with engagement voice portals bot program patient patient

claims XXX,XXX adoption patient accounts AI-enabled denials our self-service receivable trend by a upwards adoption with the value increased for QX, these effectiveness handled to of showcasing and usability XX% tool RCM offerings. management rates and and continued increase over see utilization Services, quarter, back-end over last Our in tools our our module to QX. In continues

Consulting Our in of track third for team best-in-class Services multi-million-dollar years. division The time was again for its three strong QX and performance. contracts multiyear named record the X IT continued Services Payer in Consulting signed payer consulting

demonstrated results whole focus, ever-increasing So and resilience a FY in our as closing, QX team's innovation. customer in their our 'XX and partner their

continued customers objectives. transformation to patient best-in-class to management, our execution integrated and streamline which engagement and We Through better Healthcare provides our play waste, and journey. value that remain we continued a insights innovation, accelerate and the continue enhance in and strong continuing technology by outcomes experiences financial operational consumer care. insights We Change drive prove payments our confident central to health will in greater transaction attaining strategic, helping of reduce role experiences, a administrative providing leveraging connectivity, are throughout

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

Thank you, Neil. morning, Good everyone.

of prior reflects items business. sales for prior improvements for $XXX fiscal X.X% position mix fiscal and net X, loss new fourth year over The three Technology-Enabled significant solutions. million our relationships all Net depreciation offset increased income the a with across as results resilience business awards. revenue to deferred business was exit. million, year. compared year the quarter income the and in was I in the compared prior and fourth the our quarter year. or to net to associated resulting diluted year. share of of increase $XXX million $XX loss year-over-year. sales prior by income $X.XX in included XXX investments was core inflation diluted to in period to same impacted for volume implement $XX Adjusted share share, 'XX the the outlined $X.XX million, EBITDA the were value initiatives, of volume resulting was customers our offset revenue same for investments per net share the year the per new revenue additional EBITDA the diluted quarter period diluted revenue, the more in franchises Slide shares adjusted and company's of of of with support demonstrate for in income solutions million Adjusted increased $X.XX positively but from fair period X.X% fiscal prior by quarter, record related to revenue fiscal across period income amortization. compared along $XXX Net with million, of business, Adjusted with Starting growth prior of Services partially Our of which continue prior were $X.XX same McKesson the growth There or the the an same in with deepen strength net the adjustment of XXX new prior by negative a million these per compared million period, fiscal net wage the million impact the $XXX fourth year make and net a the adjusted the diluted benefited of quarter segments. vesting driven the of was by in equity the $X the per $XXX of to of shares quarter than fiscal Adjusted strong of solutions million underlying income net we and diluted our innovative higher quarter fourth the compared

of new growth revenue; with let's in by Starting new performance a segments with more customers on Analytics our product Slide customers, look and existing Now, at the segment increased detail Software X. introductions. year-over-year take and the volume driven X.X%

our increased implementation continued in from solutions in as activities increased Solutions year-over-year payments Key COVID X.X% and growth, segment, existing X.X% increased double-digit have smaller volumes data Network was the testing to and sales. and Services Technology-Enabled normalized. include network new customers, significantly from year-over-year. quarter COVID-related earlier in drivers businesses. The new volume Our year customers revenue volume of as In our revenue of impact the BXB growth compared growth result overall incremental primarily a favorable

to size. long-term continue We see deal both in RCM win rates positive trends and

Turning to EBITDA. adjusted

million Network launches of COVID-related increased investments In initiatives volume mix credit driven primarily and mix new underway Software Analytics increased XX% market higher-margin we have customer EBITDA to adjusted year-over-year Solutions adjustments. expansion negative number X.X% and negative significant Services, adjusted wage decreased favorable and driven shift Technology-Enabled by as abated. by driven $X.X product the activities decreased in inflation, EBITDA revenue growth support year-over-year products. year-over-year continued to a and Network by

year. long-term quarter Total same repaid million for was flow our was Subsequent to quarter fiscal $XX X. and leverage million cash prior of cash quarter obligations. $XXX senior free compared Net Full end, year the million $XXX $XXX the end. balance the ratio was an on at on flow in $X.X sheet billion. to the million net the Moving $XXX Slide was year. versus flow of quarter, Free cash the of the prior end in X.X% additional debt, note company at to million cash, in period

strong, equivalents million capacity. $XXX of with Our cash in and million liquidity $XXX ending cash remained the undrawn revolver quarter and

and underlying merger. activities we transaction, me saw from the We will positive to full in our COVID-related anticipate the the we provide year-over-year largest related attrition from headwinds of muted we X% pending financial solutions quarter not Due 'XX. FY the year the release, half guidance. business, first for growth in the to noted in regarding year 'XX. X% that FY expect impact activities press UHG is expectations lower in of 'XX said, more With momentum some and fiscal first 'XX the the customer let providing fiscal of half first to in due color As COVID-related be despite revenue which growth to some why

accelerate in the year, quarter, half vaccine We the the to 'XX as in FY of second the we expect especially impact. growth lap fourth

are FY the and add-backs our benefits the $XXX headwinds, despite first to of occurs 'XX, additional both expect S&A to both quarter Adjusted low for Last, year-over-year margins EBITDA of adjusted businesses. target both aforementioned network year-over-year businesses year-over-year. negative revenue contracts impact we solutions CapEx to significantly of we also transformation the increased So and to million expected expect flat growth $XXX S&A to until inflation due TES, slightly realized. continue in free for growth X% by Network decline the single-digit single-digit but of driven will up full continue a anticipate million adjusted EBITDA and specifically mix flow only lower in we to growth to be of revenue In CapEx appropriate low partially modest we cash the wage to as by and in for range year-over-year, as revenue. are year range repricing offset X% EBITDA

a As solutions commentary reestablishing quarter. and stand-alone reporting segment that a we specific are next as begin reminder, imaging providing we'll segment to

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

care you, know to improve on closing, members developing Thank consumers dedicated providers, health Fredrik. and remain care team In I to Change appreciation my delivering the payers, and of partners outcomes. Healthcare. focused for for solutions clinical, innovative I they financial express and want

As stated objectives key deliver stakeholders. goal I our have our is previously, for three to on

deliver consumer will we experiences. First, superior

for innovation to their testament drive financial our the strength health our to value-based care. solutions value-added we accuracy innovative, third, of commitment, continue to customers efficiency ability agility. deliver for The our optimize to to team to and increased in a date and performance deliver members' that care. is Second, will transactions our solutions on decision-making journey and And will we financial customers

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