Press Ganey Holdings, Inc. (NYSE: PGND) announced financial
results today for the fourth quarter and year ended December 31,
2015.
“We are pleased with our overall performance in the fourth
quarter and full year 2015. Our results reflect continued strength
in our core patient experience solutions complemented by a
continued increase in our clients’ adoption of our integrated
engagement, clinical and consulting solutions. We will continue to
invest in innovation across our existing suite of solutions and
adjacent markets in order to maximize value for our clients,” said
Patrick T. Ryan, Chief Executive Officer of Press Ganey Holdings,
Inc.
Fourth Quarter 2015 Results
- Revenue was $85.6 million compared to
$76.1 million for the same period in the prior year, an increase of
12.5%. Revenue growth consisted of 9.9% organic growth and 2.6%
acquired growth.
- Adjusted EBITDA was $30.1 million
compared to $27.0 million for the same period in the prior year, an
increase of 11.5%.
- Net Income was $3.8 million compared to
$5.1 million for the same period in the prior year. Adjusted net
income was $12.8 million compared to $9.8 million for the same
period in the prior year, an increase of 30.3%.
- Diluted net income per share was $0.07
compared to $0.12 for the same period in the prior year. Adjusted
diluted net income per share was $0.24 compared to $0.23 for the
same period in the prior year, an increase of 6.6%.
2015 Results
- Revenue for 2015 was $318.7 million
compared to $281.6 million in 2014, an increase of 13.2%. Revenue
growth consisted of 10.5% organic growth and 2.7% acquired
growth.
- Adjusted EBITDA for 2015 was $117.5
million compared to $102.6 million in 2014, an increase of
14.6%.
- Net loss was $(36.6) million in 2015
compared to net income of $15.6 million in 2014. Adjusted net
income in 2015 was $46.4 million compared to $36.3 million in 2014,
an increase of 28.0%.
- Diluted net loss per share in 2015 was
$(0.75) compared to diluted net income per share of $0.36 in 2014.
Adjusted diluted net income per share in 2015 was $0.95 compared to
$0.84 in 2014, an increase of 13.4%.
2016 Guidance
The Company expects the following financial results for fiscal
year 2016:
- Revenue of approximately $352
million,
- Adjusted EBITDA of approximately $134.9
million,
- Depreciation and amortization expense
of approximately $47 million,
- Equity-based compensation of
approximately $24 million, and
- Capital expenditures of approximately
$23.5 million.
These expectations include the impact of the acquisition
completed in 2015 but do not reflect the impact of any potential
acquisitions in 2016. These expectations also incorporate the full
year impact of incremental public company expenses, as the Company
completed its initial public offering in May 2015.
Conference Call Information
The Company will host a conference call on March 1, 2016 at 9
a.m. Eastern Time to discuss the fourth quarter and full year 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 3115013, 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, 2016, we served more than 26,000 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 filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and its 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)
Three Months Ended Year Ended
December 31, December 31, 2015 2014
2015 2014 (Unaudited) (Unaudited) (Unaudited)
Revenue $ 85,615 $ 76,130 $ 318,694 $ 281,612
Operating
expenses: Cost of revenue 39,924 34,465 149,235 121,807 General
and administrative 23,438 18,126 143,561 70,432 Depreciation and
amortization 10,600 9,277 41,224 35,102 Loss on disposal of
property and equipment 337 124
307 1,719 Total operating expenses
74,299 61,992 334,327
229,060
Income (loss) from operations 11,316 14,138
(15,633 ) 52,552 Other income (expense): Interest expense, net
(1,242 ) (4,696 ) (11,163 ) (19,832 ) Extinguishment of debt — —
(1,750 ) (2,894 ) Management fee of related party —
(357 ) (553 ) (1,047 ) Total other income
(expense), net (1,242 ) (5,053 ) (13,466 )
(23,773 )
Income (loss) before income taxes 10,074
9,085 (29,099 ) 28,779 Provision for income taxes 6,274
4,011 7,528 13,196
Net income (loss) $ 3,800 $ 5,074 $ (36,627 )
$ 15,583
Earnings (net loss) per share: Basic
$ 0.07 $ 0.12 $ (0.75 ) $ 0.36 Diluted $ 0.07 $ 0.12 $ (0.75 ) $
0.36
Weighted average shares of common stock
outstanding: Basic 52,723 43,313 48,891 43,313 Diluted 52,965
43,313 48,891 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)
December 31, December 31, 2015 2014
(Unaudited)
ASSETS Current assets: Cash $ 35,235 $ 6,962
Accounts receivable, net of allowances of
$774 and $531 at December 31, 2015
and December 31, 2014, respectively
53,568 44,444 Other receivables 2,993 1,782 Prepaid expenses and
other assets 4,603 2,741
Income taxes receivable
4,603 2,916 Total current assets 101,002
58,845 Property and equipment, net 60,262 59,610 Deferred financing
fees, net 897 810 Intangible assets, net 362,465 375,391 Goodwill
411,203 402,934 Total assets $ 935,829
$ 897,590
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Current portion of long-term debt $ 9,250 $ 4,279
Current portion of capital lease obligations 4,626 4,373 Accounts
payable 9,420 13,232 Accrued payroll and related liabilities 15,830
11,704 Accrued expenses and other liabilities 1,969 1,581 Deferred
revenue 31,555 26,208 Total current
liabilities 72,650 61,377 Long-term debt, less current portion
171,226 402,888 Capital lease obligations, less current portion
4,165 6,779 Equity-based compensation liability — 19,423 Deferred
income taxes 125,179 126,479 Total liabilities
373,220 616,946 Commitments and contingencies — —
SHAREHOLDERS'
EQUITY Common stock, $0.01 par value; 350,000,000 and
44,800,000 shares authorized,
and 52,770,722 and 43,313,200 shares
issued and outstanding as of
December 31, 2015 and December 31, 2014,
respectively
528 433 Additional paid-in capital 598,575 270,847 Retained
earnings (accumulated deficit) (36,494 ) 9,364 Total
shareholders' equity 562,609 280,644 Total
liabilities and shareholders' equity $ 935,829 $ 897,590
Press Ganey Holdings, Inc.
Condensed Consolidated Statement of
Cash Flows
(Thousands of dollars)
Year Ended December 31, 2015
2014 (Unaudited)
Operating activities Net income
(loss) $ (36,627 ) $ 15,583 Adjustments to reconcile net income
(loss) to net cash provided by operating activities: Depreciation
and amortization 41,224 35,102 Amortization of deferred financing
costs and debt discount 682 879 Equity-based compensation 86,745
8,034 Extinguishment of debt 1,750 2,894 Provision for doubtful
accounts 521 289 Loss on disposal of property and equipment 307
1,719 Deferred income taxes (1,300 ) (4,807 ) Changes in assets and
liabilities: Accounts receivable (8,317 ) (2,420 ) Other
receivables (329 ) (623 ) Prepaid expenses and other assets (1,859
) 1,319 Accounts payable (225 ) (3 ) Accrued payroll and related
liabilities 3,774 678 Accrued expenses and other liabilities 388
342 Deferred revenue 3,594 (5,183 ) Income taxes receivable
(1,687 ) 965 Net cash provided by operating
activities 88,641 54,768
Investing activities Acquisitions
of businesses, net of cash acquired (12,146 ) (28,177 ) Purchases
of property and equipment (26,197 ) (19,414 ) Net
cash used in investing activities (38,343 ) (47,591 )
Financing
activities Proceeds from the issuance of long-term debt 185,000
41,825 Payments on long-term debt (410,769 ) (67,662 ) Deferred
financing payments (3,441 ) (508 ) Payments on capital lease
obligations (5,385 ) (3,297 ) Proceeds from sale of equity
interests 100 500 Purchases of equity interests (731 ) (3,708 )
Taxes paid for net settlements of restricted stock vesting (12,736
) — 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
(22,025 ) (32,850 ) Net increase (decrease) in cash 28,273
(25,673 ) Cash at beginning of period 6,962
32,635 Cash at end of period $ 35,235 $ 6,962
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 Year Ended December
31, December 31, 2015 2014
% Change 2015 2014 %
Change Adjusted revenue (1)
$
85,615 $ 76,294 12.2 %
$ 318,694
$ 282,555 12.8 %
Adjusted operating
expenses: Cost of revenue (2) 38,411 33,886 13.4 % 134,587
118,691 13.4 % General and administrative (3) 17,100 15,410 11.0 %
66,622 61,305 8.7 % Depreciation and amortization (4) 6,375 5,113
24.7 % 24,608 19,119 28.7 % Loss on disposal of property and
equipment (5) — — — % —
— — % Total adjusted operating expenses 61,886
54,409 13.7 % 225,817
199,115 13.4 %
Adjusted income from operations
23,729 21,885 8.4 % 92,877 83,440 11.3 % Adjusted
other income (expense): Interest expense, net (1,242 ) (4,696 )
(73.6 ) % (11,163 ) (19,832 ) (43.7 ) % Extinguishment of debt (6)
— — — % — — — % Management fee of related party (7) —
— — % — — — % Total
adjusted other income (expense), net (1,242 ) (4,696
) (73.6 ) % (11,163 ) (19,832 ) (43.7 ) %
Adjusted
income before income taxes 22,487 17,189 30.8 %
81,714 63,608 28.5 % Provision for income taxes (8)
9,705 7,382 31.5 % 35,268
27,317 29.1 %
Adjusted net income $
12,782 $ 9,807 30.3 %
$ 46,446
$ 36,291 28.0 % Sum of Non-GAAP adjustments in
Footnotes 1-7 (12,413 ) (8,104 ) (110,813 ) (34,829 ) Net tax
impact of adjustments in Footnotes 1-7 (8) 3,431
3,371 27,740 14,121
GAAP net income (loss) $ 3,800 $
5,074 $ (36,627 ) $
15,583 Adjusted earnings per share:
Basic $ 0.24 $ 0.23 7.1 % $ 0.95 $ 0.84 13.4 % Diluted $ 0.24 $
0.23 6.6 % $ 0.95 $ 0.84 13.4 %
Weighted average shares
of common stock outstanding: Basic 52,723 43,313 21.7 % 48,891
43,313 12.9 % Diluted 52,965 43,313 22.3 % 48,891 43,313 12.9 %
Adjusted percentages of revenue Cost of revenue 44.9
% 44.4 % 42.2 % 42.0 % General and administrative 20.0 % 20.2 %
20.9 % 21.7 % Income from operations 27.7 % 28.7 % 29.1 % 29.5 %
Net income 14.9 % 12.9 % 14.6 % 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 Year Ended
December 31, December 31, 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 $ — $ 164 $ — $ 943 (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 912 416 3,218 2,506 Severance 601 — 1,306 — Other
non-comparable items — 163 — 610 $
1,513 $ 579 $ 14,648 $ 3,116 (3 ) Equity-based
compensation charges (noted above), expense associated with
executive separation agreements and targeted employee headcount
reductions, 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 4,367 53 13,089 5,528 Severance 789
1,084 789 1,084 Acquisition expenses 626 131 945 462 Other
non-comparable items 556 1,448 1,802
2,053 $ 6,338 $ 2,716 $ 76,939 $ 9,127 (4 )
Amortization expense associated with acquired intangible assets
from business combinations. Amortization of intangibles $ 4,225 $
4,164 $ 16,616 $ 15,983 (5 ) Loss on disposal of
property and equipment $ 337 $ 124 $ 307 $ 1,719 (6 )
Write-off of unamortized deferred financing fees, loss on original
issuance discount and lender fees in connection with debt
refinancings. Extinguishment of debt $ — $ — $ 1,750 $ 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 $ — $ 357 $ 553 $ 1,047 (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 Year Ended
December 31, December 31, 2015 2014
2015 2014 Net income (loss) $
3,800 $ 5,074 $ (36,627 ) $ 15,583 Interest expense, net 1,242
4,696 11,163 19,832 Provision for income taxes 6,274 4,011 7,528
13,196 Depreciation and amortization 10,600 9,277
41,224 35,102
EBITDA 21,916 23,058
23,288 83,713 Adjustments: Equity-based compensation (1) 5,279 469
86,745 8,034 Extinguishment of debt (2) — — 1,750 2,894 Management
fee of related party (3) — 357 553 1,047 Acquisition expenses (4)
626 131 945 462 Severance (5) 1,390 1,084 2,095 1,084 Loss on
disposal of property & equipment 337 124 307 1,719 Other
non-comparable items (6) 556 1,775 1,802
3,606
Adjusted EBITDA $ 30,104 $ 26,998 $
117,485 $ 102,559
Adjusted EBITDA Margin 35.2 % 35.5
% 36.9
%
36.4 %
(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/20160229006862/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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