Press Ganey Holdings, Inc. (NYSE: PGND) announced financial
results today for the third quarter and nine months ended September
30, 2015.
“We are pleased with our overall performance in the third
quarter and continue to see strength in our core patient experience
solutions and attractive opportunities to increase client adoption
of our integrated engagement, clinical and consulting solutions
over time,” said Patrick T. Ryan, Chief Executive Officer of Press
Ganey Holdings, Inc. “We believe our recent acquisition of
Healthcare Performance Improvement (HPI) further enhances our
growth opportunities based on HPI’s reputation for leading
comprehensive safety culture improvement at hundreds of hospitals
across the U.S.”
Third Quarter 2015 Results
- Revenue was $80.7 million compared to
$71.7 million for the same period in the prior year, an increase of
12.6%. Revenue growth consisted of 11.6% organic growth and 1.0%
acquired growth.
- Adjusted EBITDA was $30.9 million
compared to $26.5 million for the same period in the prior year, an
increase of 17%.
- Net Income was $7.4 million compared to
$4.8 million for the same period in the prior year. Adjusted net
income was $13.0 million compared to $9.8 million for the same
period in the prior year, an increase of 33%.
- Diluted net income per share was $0.14
compared to $0.11 for the same period in the prior year. Adjusted
diluted net income per share was $0.25 compared to $0.23 for the
same period in the prior year, an increase of 9%.
Year to Date 2015 Results
- Revenue for the nine months ended
September 30, 2015 was $233.1 million compared to $205.5 million
for the same period in the prior year, an increase of 13.4%.
Revenue growth consisted of 10.7% organic growth and 2.7% acquired
growth.
- Adjusted EBITDA was $87.4 million
compared to $75.6 million for the same period in the prior year, an
increase of 16%.
- Net loss was $(40.4) million compared
to net income of $10.5 million for the same period in the prior
year. Adjusted net income was $33.7 million compared to $26.5
million for the same period in the prior year, an increase of
27%.
- Diluted net loss per share was $(0.85)
compared to diluted net income per share of $0.24 for the same
period in the prior year. Adjusted diluted net income per share was
$0.71 compared to $0.61 for the same period in the prior year, an
increase of 16%.
As previously announced during the quarter, the Company
completed the acquisition of Healthcare Performance Improvement on
September 1, 2015. HPI is a leading patient safety and reliability
consulting and coaching firm. The Company also refinanced its
indebtedness by entering into a new $260 million credit facility,
which includes a $185 million term loan and a $75 million revolving
credit facility.
Conference Call Information
The Company will host a conference call on November 5, 2015 at 9
a.m. Eastern Time to discuss the third quarter 2015 results. To
participate in the Company's live conference call and webcast,
please dial 877-201-0168 (1-647-788-4901 for international
participants) using conference code number 47473693, or visit
investors.pressganey.com.
About Press Ganey
Press Ganey Holdings (NYSE: PGND) is a leading provider of
patient experience measurement, performance analytics and strategic
advisory solutions for health care organizations across the
continuum of care. Celebrating 30 years of experience, Press Ganey
is recognized as a pioneer and thought leader in patient experience
measurement and performance improvement solutions. Our mission is
to help health care organizations reduce patient suffering and
improve clinical quality, safety and the patient experience. As of
January 1, 2015, we served more than 22,000 health care
facilities.
Forward-Looking Statements
This document includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
which relate to future, not past, events and are subject to risks
and uncertainties. The forward-looking statements, which address
the Company's expected business and financial performance and
financial condition, among other matters, contain words such as:
“believe,” “could,” “opportunities,” “continue,” “expect,” “may,”
“will,” or “would” and other words and terms of similar
meaning.
Forward-looking statements by their nature address matters that
are, to different degrees, uncertain, such as statements about
expected income; earnings; revenues; and growth. Although the
Company believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no
assurance that the expectations will be attained or that any
deviation will not be material. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date on which they are made.
Factors that could cause actual results to differ materially
from these forward-looking statements, include, but are not limited
to, the following:
- Because our clients are concentrated in
the healthcare industry, our revenue and operating results may be
adversely affected by changes in regulations, a business downturn
or consolidation in the healthcare industry.
- If our clients do not continue to
purchase our products and solutions, or we are unable to attract
new clients, our business and operating results could be materially
and adversely affected.
- The loss of several of our large
clients or a significant reduction in business from such clients
would adversely affect our operating results.
- We may not maintain our current rate of
revenue growth.
- We may be unable to effectively execute
our growth strategy which could have an adverse effect on our
business and competitive position in the industry.
- We may not be able to develop new
products and solutions, or enhancements to our existing products
and solutions, or be able to achieve widespread acceptance of new
products or solutions.
- Technological developments could render
our products and solutions obsolete or uncompetitive.
- We may be unable to effectively
identify, complete or integrate the operations of future
acquisitions, joint ventures, collaborative arrangements or other
growth investments.
- We cannot assure you that we will be
able to manage our growth effectively, which could have a material
adverse effect on our business, financial condition, results of
operations and growth prospects.
- We operate in an increasingly
competitive market, which could adversely affect our revenue and
market share.
- If we fail to promote and maintain
awareness of our brand in a cost-effective manner, our business
might suffer.
- We may not be able to maintain our
certification to conduct CMS mandated surveys, and this could
adversely affect our business.
- We depend on our senior management, and
we may be materially harmed if we lose any member of our senior
management.
- Data security and integrity are
critically important to our business, and actual or attempted
breaches of security, unauthorized disclosure of information,
denial of service attacks or the perception that personal and/or
other sensitive or confidential information in our possession is
not secure, could result in a material loss of business,
substantial legal liability or significant harm to our
reputation.
- Our business and operating results
could be adversely affected if we experience business
interruptions, errors or failure in connection with our or
third-party information technology and communication systems and
other software and hardware products used in connection with our
business.
- We may be liable to our clients and may
lose clients if we are unable to collect and maintain client data
or if we lose client data.
- Protection of our intellectual property
may be difficult and costly, and our inability to protect our
intellectual property could reduce the value of our products and
solutions.
- The agreements governing our 2015
Credit Agreement impose significant operating and financial
restrictions on our company and our subsidiaries, which may prevent
us from capitalizing on business opportunities, and we have pledged
substantially all of our assets to secure indebtedness under our
2015 Credit Agreement.
- Our internal control over financial
reporting does not currently meet the standards required by
Section 404 of the Sarbanes-Oxley Act.
A further description of these uncertainties and other risks can
be found in the Company's Registration Statement on Form S-1 and
the accompanying prospectus filed with the Securities and Exchange
Commission on May 22, 2015. These or other uncertainties may cause
the Company’s actual future results to be materially different than
those expressed in any forward-looking statements. The Company
undertakes no obligation to update or revise any forward-looking
statements.
Non-GAAP Financial Measures
The Company defines Adjusted EBITDA as net income (loss) before
interest expense, net, income taxes, depreciation and amortization,
with further adjustments to add back (i) items that were terminated
in connection with the IPO, (ii) non-cash charges, (iii)
non-recurring items that are not indicative of the underlying
operating performance of the business and (iv) items that are
solely related to changes in our capital structure, and therefore
are not indicative of the underlying operating performance of the
business. The Company defines Adjusted Net Income as net income
adjusted for non-cash and other non-recurring items. Management
uses Adjusted EBITDA and Adjusted Net Income (i) to compare our
operating performance on a consistent basis, (ii) to calculate
incentive compensation for our employees, (iii) for planning
purposes, including the preparation of our internal annual
operating budget, (iv) to evaluate the performance and
effectiveness of our operational strategies and (v) to assess
compliance with various metrics associated with the agreements
governing our indebtedness. We also believe that Adjusted EBITDA
and Adjusted Net Income are useful to investors in assessing our
financial performance because these measures are similar to the
metrics used by investors and other interested parties when
comparing companies in our industry that have different capital
structures, debt levels and/or income tax rates. Accordingly, we
believe that Adjusted EBITDA and Adjusted Net Income provide useful
information to investors and others in understanding and evaluating
our operating performance in the same manner as our management.
Adjusted EBITDA and Adjusted Net Income are not determined in
accordance with U.S. generally accepted accounting principles, or
GAAP, and should not be considered in isolation or as an
alternative to net income, income from operations, net cash
provided by operating, investing or financing activities or other
financial statement data presented as indicators of financial
performance or liquidity, each as presented in accordance with
GAAP.
Press Ganey Holdings, Inc.
Condensed Consolidated Statements of
Operations
(Thousands of dollars, except per share
amounts)
(Unaudited)
Three Months Ended Nine
Months Ended September 30, September 30,
2015 2014 2015 2014
Revenue $ 80,730 $ 71,713 $ 233,079 $ 205,482
Operating
expenses: Cost of revenue 34,772 30,618 109,311 87,342 General
and administrative 22,720 17,918 120,123 52,306 Depreciation and
amortization 10,528 8,779 30,624 25,825 Loss (gain) on disposal of
property and equipment 1 504 (30) 1,595
Total operating expenses 68,021 57,819 260,028
167,068
Income (loss) from operations 12,709 13,894
(26,949) 38,414 Other income (expense): Interest expense, net
(1,567) (4,706) (9,921) (15,136) Extinguishment of debt (1,112) (8)
(1,750) (2,894) Management fee of related party —
(230) (553) (690) Total other income (expense), net
(2,679) (4,944) (12,224) (18,720)
Income (loss) before income taxes 10,030 8,950 (39,173)
19,694 Provision for income taxes 2,614 4,174
1,254 9,185
Net income (loss) $ 7,416 $ 4,776 $
(40,427) $ 10,509
Earnings (net loss) per share:
Basic $ 0.14 $ 0.11 $ (0.85) $ 0.24 Diluted $ 0.14 $ 0.11 $ (0.85)
$ 0.24
Weighted average shares of common stock
outstanding: Basic 52,620 43,313 47,616 43,313 Diluted 52,950
43,313 47,616 43,313
See Supplemental Financial Data below for
additional information.
Press Ganey Holdings, Inc.
Condensed Consolidated Balance
Sheets
(Thousands of dollars, except per share
amounts)
September 30, December 31, 2015
2014 (Unaudited) ASSETS Current assets: Cash $
23,793 $ 6,962 Accounts receivable, net of allowances of $749 and
$531 at September 30, 2015 and December 31, 2014, respectively
50,381 44,444 Other receivables 2,661 1,782 Prepaid expenses and
other assets 5,815 2,741 Income taxes receivable 5,445
2,916 Total current assets 88,095 58,845 Property and
equipment, net 61,503 59,610 Deferred financing fees, net 945 810
Intangible assets, net 366,890 375,391 Goodwill 410,517
402,934 Total assets $ 927,950 $ 897,590
LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities: Current portion of
long-term debt $ 9,250 $ 4,279 Current portion of capital lease
obligations 4,187 4,373 Accounts payable 7,206 13,232 Accrued
payroll and related liabilities 13,507 11,704 Accrued expenses and
other liabilities 1,755 1,581 Deferred income taxes 1,099 712
Deferred revenue 37,146 26,208 Total current
liabilities 74,150 62,089 Long-term debt, less current portion
173,418 402,888 Capital lease obligations, less current portion
6,373 6,779 Equity-based compensation liability — 19,423 Deferred
income taxes 119,505 125,767 Total liabilities
373,446 616,946 Commitments and contingencies — —
SHAREHOLDERS'
EQUITY Common stock, $0.01 par value; 350,000,000 and
44,800,000 shares authorized, and 52,661,538 and 43,313,200 shares
issued and outstanding as of September 30, 2015 and December 31,
2014, respectively 527 433 Additional paid-in capital 594,271
270,847 Retained earnings (accumulated deficit) (40,294)
9,364 Total shareholders' equity 554,504
280,644 Total liabilities and shareholders' equity $ 927,950 $
897,590
Press Ganey Holdings, Inc.
Condensed Consolidated Statement of
Cash Flows
(Thousands of dollars)
(Unaudited)
Nine Months Ended September 30, 2015
2014 Operating activities Net income (loss) $
(40,427) $ 10,509 Adjustments to reconcile net income (loss) to net
cash provided by operating activities: Depreciation and
amortization 30,624 25,825 Amortization of deferred financing costs
and debt discount 511 694 Equity-based compensation 81,466 7,565
Extinguishment of debt 1,750 2,894 Provision for doubtful accounts
421 329 Loss (gain) on disposal of property and equipment (30)
1,595 Deferred income taxes (5,875) (90) Changes in assets and
liabilities: Accounts receivable (5,020) (3,400) Other receivables
2 (280) Prepaid expenses and other assets (3,071) (2,034) Accounts
payable (2,363) (3,832) Accrued payroll and related liabilities
1,497 565 Accrued expenses and other liabilities 174 4 Deferred
revenue 9,185 1,675 Income taxes receivable (2,529)
(2,485) Net cash provided by operating activities 66,315 39,534
Investing activities Acquisitions of businesses, net of cash
acquired (11,721) (27,846) Purchases of property and equipment
(20,904) (12,178) Net cash used in investing
activities (32,625) (40,024)
Financing activities Proceeds
from the issuance of long-term debt 185,000 41,825 Payments on
long-term debt (408,456) (63,592) Deferred financing payments
(3,441) (508) Payments on capital lease obligations (3,505) (1,328)
Proceeds from sale of equity interests 100 250 Purchases of equity
interests (731) (3,543) Taxes paid for net settlements of
restricted stock vesting (11,763) — Distribution payments (8,500) —
Proceeds from the issuance of common stock in initial public
offering, net of fees 234,437 — Net cash used in
financing activities (16,859) (26,896) Net increase
(decrease) in cash 16,831 (27,386) Cash at beginning of period
6,962 32,635 Cash at end of period $ 23,793 $ 5,249
Press Ganey Holdings, Inc.
Supplemental Financial Data
(Thousands of dollars, except per share
amounts)
(Unaudited)
Reconciliation of Non-GAAP Items to
GAAP Net Income
Three Months Ended Nine Months Ended
September 30, September 30, 2015 2014
% Change 2015 2014 % Change
Adjusted revenue (1)
$ 80,730 $
72,013 12.1 %
$ 233,079 $
206,262 13.0 %
Adjusted operating expenses:
Cost of revenue (2) 32,992 29,832 10.6 % 96,175 84,806 13.4 %
General and administrative (3) 16,828 15,722 7.0 % 49,523 45,894
7.9 % Depreciation and amortization (4) 6,411 4,602 39.3 % 18,233
14,029 30.0 % Loss (gain) on disposal of property and equipment (5)
— — — % — — — % Total adjusted
operating expenses 56,231 50,156 12.1 %
163,931 144,729 13.3 %
Adjusted income from
operations 24,499 21,857 12.1 % 69,148 61,533
12.4 % Adjusted other income (expense): Interest expense, net
(1,567) (4,706) (66.7) % (9,921) (15,136) (34.5) % Extinguishment
of debt (6) — — — % — — — % Management fee of related party (7)
— — — % — — — % Total adjusted other
income (expense), net (1,567) (4,706) (66.7) %
(9,921) (15,136) (34.5) %
Adjusted income before income
taxes 22,932 17,151 33.7 %
59,227
46,397 27.7 % Provision for income taxes (8) 9,898
7,366 34.4 % 25,562 19,926 28.3 %
Adjusted
net income $ 13,034 $ 9,785 33.2 %
$ 33,665 $ 26,471 27.2 % Sum of
Non-GAAP adjustments in Footnotes 1-7 (12,902) (8,201) (98,400)
(26,702) Net tax impact of adjustments in Footnotes 1-7 (8)
7,284 3,192 24,308 10,740
GAAP net income
(loss) $ 7,416 $ 4,776 $
(40,427) $ 10,509 Adjusted earnings
per share: Basic $ 0.25 $ 0.23 9.6 % $ 0.71 $ 0.61 15.7 %
Diluted $ 0.25 $ 0.23 9.0 % $ 0.71 $ 0.61 15.7 %
Weighted
average shares of common stock outstanding: Basic 52,620 43,313
21.5 % 47,616 43,313 9.9 % Diluted 52,950 43,313 22.2 % 47,616
43,313 9.9 %
Adjusted percentages of revenue Cost of
revenue 40.9 % 41.4 % 41.3 % 41.1 % General and administrative 20.8
% 21.8 % 21.2 % 22.3 % Income from operations 30.3 % 30.4 % 29.7 %
29.8 % Net income 16.1 % 13.6 % 14.4 % 12.8 %
See footnotes on next page.
Press Ganey Holdings, Inc.
Supplemental Financial Data
(Thousands of dollars, except per share
amounts)
(Unaudited)
Reconciliation of Non-GAAP Items to
GAAP Net Income (continued)
Three Months Ended Nine Months Ended
September 30, September 30, Excluded items:
2015 2014 2015 2014
(1) Revenue credits provided to clients as a result of the
discontinuance of certain clinical solutions and software
applications. Other non-comparable items $ — $ 300 $ — $ 779
(2)
Equity-based compensation expense
associated with (i) the modification of existing equity awards and
forgiveness of loans associated with certain equity awards in
connection with the Company’s initial public offering (“IPO”) and
liquidating distribution of PG Holdco, LLC, and (ii) equity awards
at the time of the Company’s IPO and subsequent equity awards
granted to attract and retain employees; expense associated with
executive separation agreements and targeted employee headcount
reductions; and expenses related to the discontinuance of certain
clinical solutions and software applications.
Equity-based compensation, IPO related $ — $ — $ 10,124 $ —
Equity-based compensation, non-IPO related 1,075 726 2,307 2,090
Severance 705 — 705 — Other non-comparable items — 60
— 446 $ 1,780 $ 786 $ 13,136 $ 2,536
(3) Equity-based compensation charges (noted above), transaction
costs incurred in connection with completed and potential
acquisitions, and other non-comparable expenses which include costs
incurred in connection with the Company’s IPO and capital structure
and strategic corporate planning. Equity-based compensation, IPO
related $ — $ — $ 60,314 $ — Equity-based compensation, non-IPO
related 5,394 1,932 8,721 5,475 Acquisition expenses 116 264 319
332 Other non-comparable items 382 — 1,246
605 $ 5,892 $ 2,196 $ 70,600 $ 6,412 (4)
Amortization expense associated with acquired intangible assets
from business combinations. Amortization of intangibles $ 4,117 $
4,177 $ 12,391 $ 11,796 (5) Loss (gain) on disposal
of property and equipment $ 1 $ 504 $ (30) $ 1,595
(6) Write-off of unamortized deferred financing fees, loss on
original issuance discount and lender fees in connection with debt
refinancings. Extinguishment of debt $ 1,112 $ 8 $ 1,750 $ 2,894
(7) Fees paid to the Company’s majority owner under a
management agreement prior to the Company’s IPO. The management
agreement was terminated upon the closing of the IPO. Management
fee of related party $ — $ 230 $ 553 $ 690 (8)
Provision for income taxes based on the Company’s state and federal
effective tax rates, including usual non-deductible expenses.
Press Ganey Holdings, Inc.
Supplemental Financial Data
(Thousands of dollars, except per share
amounts)
(Unaudited)
Reconciliation of Net Income (Loss) to
EBITDA and Adjusted EBITDA (Non-GAAP)
Three Months Ended Nine Months Ended
September 30, September 30, 2015 2014
2015 2014 Net income (loss) $ 7,416 $
4,776 $ (40,427) $ 10,509 Interest expense, net 1,567 4,706 9,921
15,136 Provision for income taxes 2,614 4,174 1,254 9,185
Depreciation and amortization 10,528 8,779
30,624 25,825
EBITDA 22,125 22,435 1,372 60,655
Adjustments: Equity-based compensation (1) 6,469 2,658 81,466 7,565
Extinguishment of debt (2) 1,112 8 1,750 2,894 Management fee of
related party (3) — 230 553 690 Acquisition expenses (4) 116 264
319 332 Severance (5) 705 — 705 — Loss on disposal of property
& equipment 1 504 (30) 1,595 Other non-comparable items (6)
382 360 1,246 1,830
Adjusted
EBITDA $ 30,910 $ 26,459 $ 87,381 $ 75,561
Adjusted EBITDA Margin
38.3 % 36.9 37.5 % 36.8 %
(1) Equity-based compensation expense associated with (i) the
modification of existing equity awards and forgiveness of loans
associated with certain equity awards in connection with the
Company’s initial public offering (“IPO”) and liquidating
distribution of PG Holdco, LLC, and (ii) equity awards at the time
of the Company’s IPO and subsequent equity awards granted to
attract and retain employees.
(2) Write-off of unamortized deferred financing fees, loss on
original issuance discount and lender fees in connection with debt
refinancings.
(3) Fees paid to the Company’s majority owner under a management
agreement prior to the Company’s IPO. The management agreement was
terminated upon the closing of the IPO.
(4) Transaction costs incurred in connection with completed and
potential acquisitions.
(5) Expense associated with executive separation agreements and
targeted employee headcount reductions.
(6) Other non-comparable expenses related to the discontinuance
of certain clinical solutions and software applications, costs
incurred in connection with the Company's IPO and capital structure
and strategic corporate planning.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151104006736/en/
Investors:Press Ganey Holdings, Inc.Balaji Gandhi,
781-295-0390IR@pressganey.comorMedia:Aria
MarketingKristen Berry, 617-332-9999
x238kberry@ariamarketing.com
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