-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lf/noTyE0fgdBvgvTxV9aIA3hubQizNNUfe0PVPvxKe+6OpKIC2ZvqRvwW8wQZB3 RjKPOjmYnLjk1E4OeBlPWA== 0000950144-05-005513.txt : 20050513 0000950144-05-005513.hdr.sgml : 20050513 20050513135238 ACCESSION NUMBER: 0000950144-05-005513 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050509 ITEM INFORMATION: Termination of a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050513 DATE AS OF CHANGE: 20050513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROXYMED INC /FT LAUDERDALE/ CENTRAL INDEX KEY: 0000906337 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 650202059 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22052 FILM NUMBER: 05828109 BUSINESS ADDRESS: STREET 1: 2555 DAVIE ROAD STREET 2: SUITE 110 CITY: FORT LAUDERDALE STATE: FL ZIP: 33317-7424 BUSINESS PHONE: 9544731001 MAIL ADDRESS: STREET 1: 2555 DAVIE ROAD STREET 2: SUITE 110 CITY: FT LAUDERDALE STATE: FL ZIP: 33317 FORMER COMPANY: FORMER CONFORMED NAME: HMO PHARMACY INC DATE OF NAME CHANGE: 19930601 8-K 1 g95302e8vk.htm PROXYMED, INC. PROXYMED, INC.
 

 
 

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):
May 9, 2005

PROXYMED, INC.

 
(Exact name of registrant as specified in its charter)
         
Florida   000-22052   65-0202059
         
(State or other jurisdiction
of incorporation) 		  (Commission
File Number) 		  (IRS Employer
Identification No.)
     
1854 Shackleford Court, Suite 200, Atlanta, Georgia   30093-2924
     
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (770) 806-9918

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

    o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
    o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
    o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
    o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 

 

TABLE OF CONTENTS

Item 1.02 Termination of a Material Definitive Agreement.
Item 2.02. Results of Operations and Financial Condition.
Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EX-99.1 PRESS RELEASE DATED MAY 9, 2005
EX-99.2 TRANSCRIPT OF 1ST QUARTER FINANCIAL RESULTS

Item 1.02 Termination of a Material Definitive Agreement.

     On May 9, 2005 a wholly owned subsidiary of ProxyMed, Inc. (the “Company”), PlanVista Corporation, repaid a $17.9 million secured senior loan between it and PVC Funding Partners, LLC, dated April 12, 2002. The repaid loan bore interest at an annual rate of 10% with an original maturity date of May 31, 2005. There were no prepayment penalty fees associated with the early repayment.

Item 2.02. Results of Operations and Financial Condition.

     On May 9, 2005, the Company announced its financial results for the first quarter ended March 31, 2005. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K. Additionally, on May 10, 2005, the Company held a teleconference call to report its financial and operating results for the quarter ended March 31, 2005. A transcript of the call, including questions from participants and answers from management, is attached as Exhibit 99.2 to this Current Report on Form 8-K.

     In accordance with General instruction B.6 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

     FORWARD LOOKING STATEMENTS — This document contains forward-looking statements that reflect the Company’s current assumptions and expectations regarding future events. While these statements reflect the Company’s current judgment, they are subject to risks and uncertainties. Actual results may differ significantly from projected results due to a number of factors, including, but not limited to, the soundness of our business strategies relative to the perceived market opportunities; ProxyMed’s ability to continue to integrate the operations of PlanVista into its existing operations, the ability to identify suitable future acquisition candidates; the ability to successfully integrate any future acquisitions; ProxyMed’s ability to successfully develop, market, sell, cross-sell, install and upgrade its clinical and financial transaction services and applications to current and new physicians, payers, medical laboratories and pharmacies; the ability to compete effectively on price and support services; ProxyMed’s assessment of the healthcare industry’s need, desire and ability to become technology efficient; ProxyMed’s ability to win and expand business based on the Company’s web-based self-service and flexible business model; and ProxyMed’s ability and that of its business associates to comply with various government rules regarding healthcare and patient privacy. For further cautions about the risks of investing in ProxyMed, we refer you to the documents we file from time to time with the Securities and Exchange Commission, particularly the Company’s Form 10-KA for the year ended December 31, 2004, which we strongly urge you to read. ProxyMed expressly disclaims any intent or obligation to update any forward-looking statements. When used, the words “believes”, “estimated”, “expects”, “anticipates”, “may” and similar expressions are intended to identify forward-looking statements.

Item 9.01. Financial Statements and Exhibits.

     (c) The following exhibits are included herein:

         
  Exhibit 99.1   Press Release dated May 9, 2005, reporting financial results for the first 1 - quarter ended March 31, 2005.
  Exhibit 99.2   Transcript of Q1 2005 financial results teleconference call held on May 10, 2005.

2

 

SIGNATURES

     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.
         
  ProxyMed, Inc.
 		  
Date: May 13, 2005  /s/ Gregory J. Eisenhauer    
  Gregory J. Eisenhauer, Executive Vice   
  President and Chief Financial Officer   
 

3

 

INDEX TO EXHIBITS

     
EXHIBIT NUMBER   DESCRIPTION
99.1
  Press Release dated May 9, 2005 reporting financial results for the first quarter ended March 31, 2005.
99.2
  Transcript of first quarter 2005 financial results teleconference call held on May 10, 2005.

4

EX-99.1 2 g95302exv99w1.txt EX-99.1 PRESS RELEASE DATED MAY 9, 2005 EXHIBIT 99.1 [PROXYMED LOGO] COMPANY NEWS RELEASE IMPORTANT NOTE: ProxyMed's live teleconference call to discuss its first quarter of 2005 results is accessible by calling 1-866-270-6388 beginning at 10:00 a.m. Eastern Time on Tuesday, May 10, 2005 and will be simultaneously broadcast on the Internet at www.proxymed.com. Replays of the teleconference call will be available at www.proxymed.com after 1:00 p.m. ET on May 10th. CONTACT: PROXYMED, INC. GREGORY J. EISENHAUER, CFA EVP & CHIEF FINANCIAL OFFICER 770-806-4780 GEISENHAUER@PROXYMED.COM PROXYMED INCREASES REVENUES 6% YEAR OVER YEAR - SENIOR DEBT SUCCESSFULLY REFINANCED AHEAD OF SCHEDULE - ATLANTA, GA (BUSINESS WIRE) MAY 9, 2005 - ProxyMed, Inc. (Nasdaq: PILL), a leading provider of healthcare transaction processing and medical cost containment services, today reported its operating results for the first quarter of 2005. FIRST QUARTER 2005 RESULTS ProxyMed reported revenues of $21.7 million for the first quarter, an increase of 5.9% compared to revenues of $20.5 million for the same period of 2004. For the quarter, the Company incurred a net loss of $1.8 million, or ($0.14) per diluted share, compared to a net loss of $0.4 million or ($0.05) per diluted share in the same quarter last year. Sequentially, revenues declined by $0.9 million, operating loss remained steady at $1.2 million, and net loss widened by $0.2 million. The Company ended the quarter with $11.6 million of cash on its balance sheet. As previously announced, the Company closed a new senior debt facility with Wachovia Bank, NA. Proceeds from this facility were used to pre-pay the Company's senior debt obligations that were maturing on May 31, 2005. 5 OPERATING SEGMENT PERFORMANCE TRANSACTION SERVICES The Transaction Services segment reported revenues of $18.6 million for the first quarter of 2005, an increase of 27.5% compared to revenues of $14.6 million for the first quarter of 2004. This revenue gain is due mostly to the inclusion of two additional months of results from the PlanVista acquisition, made last March. Core transactions grew 9.3% over the same period. Revenue gains outpaced transaction growth due to the addition of significantly higher value cost containment transactions for the entire quarter in 2005. Sequentially, core transactions grew 1%, sustaining and building upon the new levels of transactions realized by an 8.5% jump in the fourth quarter. Revenues declined modestly over the fourth quarter as a result of changes in the transaction mix. Operating loss was $1.8 million compared to a loss of $1.7 million in the fourth quarter. A reduction in the Company's cost for Sarbanes-Oxley was offset by increases in personnel expenses for accrual of paid time off, which is seasonal, and increased health insurance expense. Nancy Ham, President and Chief Operating Officer commented, "We had a good first quarter as we solidified the new business that we brought on in the fourth quarter. In addition, we have experienced significant progress in rolling out our new Web-based solutions, including our new partner portal, our PCAT transaction management solution and ProxyEnroll. These solutions are critical to our strategy of evolving from a traditional clearinghouse to a sophisticated provider of high value-added, transaction management solutions, and have been very well-received by our customer base." "For our payer customers I am pleased to announce that we are nearing completion of our first contract for ESP (Enterprise Solutions for Payers). This sale to a top 10 national payer is an early validation of our strategy, and we expect it to represent over $2 million in annualized revenue. In addition, we are making good sales progress in our core cost containment business, as can be seen by our announcement today of our expanded business with NRECA." 6 STATISTICS Management considers the following metrics important to monitor its transaction business:
DESCRIPTION: (all amounts in thousands) Q/E Q/E Q/E Q/E Q/E (unaudited) 3/31/05 12/31/04 9/30/04 6/30/04 3/31/04 ------- -------- ------- ------- ------- Core transactions (excluding 69,752 69,073 63,677 62,790 63,793 encounters) Encounters 5,916 6,558 6,561 6,086 9,967 ------ ------ ------ ------ ------ TOTAL TRANSACTIONS 75,668 75,631 70,238 68,876 73,760 ====== ====== ====== ====== ======
LABORATORY COMMUNICATION SOLUTIONS The Laboratory Communication Solutions segment reported revenues of $3.1 million for the first quarter of 2005, a decrease of 8.5% sequentially. On a year over year basis, revenue declined 47.4%, primarily as a result of the June 2004 disposition of certain contract manufacturing assets. However, year over year operating income improved by 123.7% and 23% sequentially to $0.6 million due to increased sales of higher margin products and the elimination of the loss from the contract manufacturing business in the comparable period. "The laboratory segment of ProxyMed is a relatively mature business, and we will be challenged for revenue growth as we shift our product mix away from higher revenue, lower margin products to our new products," said Nancy Ham. "However, we believe we can grow at the operating income line, as we did this quarter, as we continue to have success with the roll-out of our new products, Pilot(TM) and Navigator(TM)." LOOKING FORWARD: Kevin McNamara, Chairman of the Board and interim CEO said, "Despite a lot of change within the Company and the industry, the Company kept its focus in the first quarter and delivered solid results. I am pleased that we have accomplished two major corporate objectives: securing a new senior debt facility and nearing completion of our first ESP deal. The Company is setting the foundation for future revenue growth through building the sales pipeline, and accelerated earnings growth through the deployment of its Web-based self-service tools. Out of the major objectives I laid out last quarter, we have only one remaining, and that is completing our CEO search. We are in the final stages of this process, and I expect that we will be in a position to announce our new CEO in the next week or two. We will revisit the issue of providing financial guidance for the remainder of 2005 thereafter." 7 ABOUT PROXYMED, INC. ProxyMed provides connectivity, medical cost containment services, business process outsourcing solutions and related value-added products to physicians, payers, pharmacies, medical laboratories, and other healthcare institutions. ProxyMed's services support a broad range of both financial and clinical transactions, and we are HIPAA certified through Edifecs. To facilitate these services, ProxyMed is completing the conversion of its non-clinical EDI transactions to Phoenix(TM), our secure national electronic information platform, which provides physicians and other primary care providers with direct connectivity to payers. For more information, please visit the Company's website at www.proxymed.com. FORWARD LOOKING STATEMENT ProxyMed cautions that forward-looking statements contained in this document are based on current plans and expectations, and that a number of factors could cause the actual results to differ materially from the guidance given at this time. Some of these factors are described in the Safe Harbor statement below. Except for the historical information contained herein, the matters discussed in this document may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These statements include those concerning the potential benefits and effects, including but not limited to any expectations as to profitability, revenue growth, and other aspects of the financial performance of the combined Company. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "potential," "continue," "expects," "anticipates," "intends," "plans," "believes," "estimates," and similar expressions. While these statements reflect our current judgment, they are subject to risks and uncertainties. Actual results may differ significantly from projected results due to a number of factors, including, the soundness of our business strategies relative to the perceived market opportunities; ProxyMed's ability to successfully develop, market, sell, cross-sell, install and upgrade its clinical and financial transaction services and applications to current and new physicians, payers, medical laboratories and pharmacies; the ability to compete effectively on price and support services; ProxyMed's ability to attract and retain a qualified CEO; ProxyMed's assessment of the healthcare industry's need, desire and ability to become technology efficient; and ProxyMed's ability and that of its business associates to perform satisfactorily under the terms of its contractual obligations, and to comply with various government rules regarding healthcare and patient privacy. For further cautions about the risks of investing in ProxyMed, we refer you to the documents the Company files from time to time with the Securities and Exchange Commission, particularly the Company's Form 10-K/A for the year ended December 31, 2004, and Form 10-Q for fiscal period ending March 31, 2005. ProxyMed does not assume any obligation to update information contained in this document. Although this release may remain available on the Company's website or elsewhere, its continued availability does not indicate that the Company is reaffirming or confirming any of the information contained herein. 8 PROXYMED, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE DATA)
Three Months Ended March 31, (unaudited) --------------------------------- 2005 2004 ------------ ------------ Net revenues $ 21,714 $ 20,504 ------------ ------------ Costs and expenses: Cost of sales 7,683 8,289 Selling, general and administrative expenses 12,625 10,409 Depreciation and amortization 2,596 1,849 ------------ ------------ Total operating costs and expenses 22,904 20,547 ------------ ------------ Operating loss (1,190) (43) Interest expense, net 601 334 Provision for income taxes -- 50 ------------ ------------ Net loss $ (1,791) $ (427) ============ ============ Basic and diluted loss per share $ (0.14) $ (0.05) ============ ============ Basic and diluted weighted average shares outstanding 12,626,567 8,570,731 ============ ============
9 PROXYMED, INC. AND SUBSIDIARIES SEGMENT INFORMATION (AMOUNTS IN THOUSANDS)
Three Months Ended March 31, (unaudited) ---------------------------- 2005 2004 -------- -------- Revenues: Transaction Services $ 18,607 $ 14,594 Laboratory Communication Solutions 3,107 5,910 -------- -------- $ 21,714 $ 20,504 ======== ======== Cost of sales: Transaction Services $ 5,999 $ 4,260 Laboratory Communication Solutions 1,684 4,029 -------- -------- $ 7,683 $ 8,289 ======== ======== Selling, general and administrative expenses: Transaction Services $ 11,971 $ 7,984 Laboratory Communication Solutions 654 1,364 Corporate -- 1,061 -------- -------- $ 12,625 $ 10,409 ======== ======== Depreciation and amortization: Transaction Services $ 2,413 $ 1,554 Laboratory Communication Solutions 183 259 Corporate -- 36 -------- -------- $ 2,596 $ 1,849 ======== ======== Operating income (loss): Transaction Services $ (1,776) $ 796 Laboratory Communication Solutions 586 258 Corporate -- (1,097) -------- -------- $ (1,190) $ (43) ======== ========
10 PROXYMED, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (AMOUNTS IN THOUSANDS)
(unaudited) March 31, December 31, Assets 2005 2004 --------- ----------- Current assets: Cash and cash equivalents $ 11,559 $ 12,374 Accounts receivable - trade, net 16,335 17,591 Other receivables 218 312 Inventory, net 1,667 1,775 Other current assets 1,606 1,399 --------- --------- Total current assets 31,385 33,451 Property and equipment, net 4,765 4,801 Goodwill, net 93,604 93,604 Purchased technology, capitalized software and other intangibles, net 50,589 52,305 Restricted cash 75 75 Other long-term assets 126 167 --------- --------- Total assets $ 180,544 $ 184,403 ========= ========= Liabilities and Stockholders' Equity Current liabilities: Notes payable and current portion of long-term debt, including related party debt $ 20,085 $ 20,572 Accounts payable, accrued expenses and accrued compensation 12,303 13,637 Deferred revenue 723 691 Income taxes payable 184 215 --------- --------- Total current liabilities 33,295 35,115 Convertible notes 13,137 13,137 Other long-term debt -- 206 Long-term deferred revenue and other long-term liabilities 726 863 --------- --------- Total liabilities 47,158 49,321 --------- --------- Stockholders' equity: Series C 7% Convertible preferred stock -- -- Common stock 13 13 Additional paid-in capital 239,298 239,255 Unearned compensation (61) (113) Accumulated deficit (105,864) (104,073) --------- --------- Total stockholders' equity 133,386 135,082 --------- --------- Total liabilities and stockholders' equity $ 180,544 $ 184,403 ========= =========
11 PROXYMED, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED)
Three Months Ended March 31, ---------------------------- 2005 2004 ---------- ---------- Cash flows from operating activities: Net loss $ (1,791) $ (427) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 2,596 1,849 Provision for doubtful accounts -- 207 Non-cash interest income -- (27) Stock option compensation charges 95 106 Changes in assets and liabilities, net of effect of acquisitions: Accounts and other receivables 1,350 (641) Inventory 108 (226) Other current assets 251 60 Accounts payable and accrued expenses (1,860) (51) Accrued expenses of PlanVista paid by ProxyMed -- (4,011) Deferred revenue 41 53 Income taxes (31) -- Other, net 390 (137) -------- -------- Net cash provided by (used in) operating activities 1,149 (3,245) -------- -------- Cash flows from investing activities: Net cash acquired in acquisition -- 782 Capital expenditures (723) (705) Capitalized software (127) (380) Collections on notes receivable -- 45 Decrease in restricted cash -- 40 Payments for acquisition-related costs -- (776) -------- -------- Net cash used in investing activities (850) (994) -------- -------- Cash flows from financing activities: Net proceeds from sale of common stock -- 24,100 Proceeds from exercise of stock options and warrants -- 8,750 Draws on line of credit -- 4,900 Repayments of line of credit -- (4,400) Payment of related party note payable (600) -- Payment of notes payable, capital leases and long-term debt (514) (24,063) -------- -------- Net cash (used in) provided by financing activities (1,114) 9,287 -------- -------- Net (decrease) increase in cash and cash equivalents (815) 5,048 Cash and cash equivalents at beginning of period 12,374 5,333 -------- -------- Cash and cash equivalents at end of period $ 11,559 $ 10,381 ======== ========
12 EX-99.2 3 g95302exv99w2.txt EX-99.2 TRANSCRIPT OF 1ST QUARTER FINANCIAL RESULTS EXHIBIT 99.2 Operator At this time, I would like to welcome everyone to the ProxyMed conference to discuss financial results for the first quarter 2005. As a reminder, ladies and gentlemen, this conference is being recorded. The conference is also being webcast and replays will be available on the Internet at www.proxymed.com shortly after the call. Please be reminded that statements made by ProxyMed during this call, including answers given in response to questions, are intended to fall within the Safe Harbor provisions of the security laws and that actual results might differ materially from those in this statement. Such statements are subject to variety of risks, many of which are discussed in the Company's most recent form 10KA and other SEC filings, which the Company strongly urges you to read and which are available on the Company's website or obtained from the Investor Relations department. Leading today's call from ProxyMed are Kevin McNamara, Chairman and Interim CEO; Nancy Ham, President and COO; and Gregg Eisenhauer, Executive Vice President and CFO. I would now like to introduce Kevin McNamara to begin the conference. Kevin McNamara, ProxyMed - Chairman, Interim CEO Thank you, operator, and good morning, everyone. As we discussed on our last call, I have been acting as the Company's Interim CEO since early December 2004. At the outset of this assignment, I laid out for our board five goals that I wanted to accomplish during this "interim period". In our last call, I reported that two of those goals were successfully accomplished. One, assisting the Company with respect to meeting the compliance requirements of Sarbanes-Oxley Section 404, and, two, overseeing and assisting the senior management team in the process of closing 2004, filing the 2004 10K, and in the 2005 planning process. The next major goal was to refinance the Company's senior debt, which was to mature on May 31, 2005. I am happy to report, as previously announced, that the Company has successfully closed on an expanded credit facility with Wachovia and paid off, ahead of schedule, the maturing senior debt. Gregg will go into the specifics of this transaction in some detail in a few minutes. With the senior debt resolved, I have two remaining goals before I complete my interim assignment. The major one being assisting the Board in the selection of a new CEO. As I previously reported, we formed a search committee and engaged the executive search firm of Russell Reynolds in mid-December to evaluate both external and internal CEO candidates. Over the past couple of months, Russell Reynolds has put together quite an impressive list of candidates, and we are nearing the end of our process. The committee expects to make an announcement of our CEO within the next week. My final goal was to minimize disruptions and hopefully stimulate the Company's initiatives currently in process by the senior management team. While it has been a challenge for the Company to have an interim CEO for almost five months now, I think that we have been largely successful at keeping our eye on the ball and advancing the Company's major initiatives for 2005 and 2006. These initiatives include launching our new ESP or Enterprise Solutions for Payer strategy where we are in final contract negotiations for our first win, rolling out our new web portal and self-service tools for our partners and providers, and launching our new Pilot product to our Lab customers. Nancy will provide more background on these initiatives in just a minute. Finally, as we discussed on our last call, we don't feel that it's appropriate for the Company to offer financial guidance during this "interim period" and as such, we have suspended our practice of providing financial guidance; however, once our CEO is announced, we may revisit this decision. I will now turn the call over to Nancy and then Gregg, who will provide some further insight into our first-quarter results. Nancy? 13 Nancy Ham, ProxyMed - President, COO Good morning, everyone. As you know, our two major business initiatives for 2005 are our ESP program for payers and our Phoenix platform and tool for providers. Today, I would like to give you an update on our progress with each of these. On the payer's side, while the sales cycles within the payer community are notoriously long, sometimes longer than a year, we are pleased to announce that we are in final contract negotiations for our first win with a national payer. This payer was already a good customer of ProxyMed on the EDI side, and we have been able to cross-sell them cost containment services. Since we already have existing connectivity in place, we anticipate the client coming live late in the second quarter with the full ramp by the end of summer. On an annualized basis, we believe this deal may generate between $2 million and $2.5 million in revenue. This ability to cross-sell ProxyMed's existing EDI payer with our suite of cost containment and business process services was the major investment thesis behind our acquisition of PlanVista. So we are cautiously pleased at this validation of our strategy and we continue to make steady progress with three other top ten payers. In addition to ESP, which is really focused on the top 50 national payers, we continue to sell our core cost containment services to significant regional and local payers. For example, as we announced last night, we are very pleased with the recent growth in our business with NRECA. They were an existing client to whom we sold expanded services, which we expect will generate close to an additional $1 million in annualized revenue. In addition to this customer, we have a solid pipeline of both new and expanded business opportunities and cost containments. So while the future is bright for both ESP and cost containment, we remain cautious in our outlook for our business with payers in 2005. As we have been discussing with you, we are experiencing near-term pressure on our traditional EDI revenue with payers. Our challenge then is to execute on sufficient growth and cost containment and in our ESP program to offset this. Let's turn now from our payers to our providers. In the fourth quarter, as we previously reported, we had an excellent quarter with core transactions growing over 8% sequentially. In the first quarter, we stabilized that new volume of customer base and then added to it with another 1% of core transaction growth. On an annualized basis, we are now processing over 300 million total transactions. Looking at the transaction pipeline, our outlook for 2005 remains one of guarded optimism. We are seeing some good growth in newer transaction types such as electronic remittance advice and eligibility verification. Our business development pipeline is solid, with one larger competitive win already contracted and another nearing completion. Both of these transactions will help fuel transaction growth in the third quarter and beyond. While our transaction growth has been solid over the past two quarters, we have experienced some compression in our revenue per transaction, due primarily to declining reimbursement from payers. To offset this trend, we are currently rolling out new pricing and packaging to our provider community. This new program reflects that we are offering substantially increased value adds through our new web-based tools. It reflects that payers are, in a sense, cost shifting to providers as payers cease or reduce their reimbursement for transactions. It also reflects that we have historically been priced below our national competitors. Our new programs are being implemented throughout the second quarter and should be able to help our revenue line in the second quarter, but with the full impact on the third quarter. While we are very focused on transaction and revenue growth, we have an even better opportunity to drive operating income growth over the next 18 months. Today, we have a relatively high operating cost structure due to still operating the multiple platforms we have obtained through our acquisitions and for providing too much of our service to our customers via phone calls, e-mails, and faxes. We will reach a very important milestone in our platform consolidation by the end of May, with 100% of our outbound traffic to payers processing through our Phoenix platform. As you will recall, we steadily migrated payers to Phoenix over the past 18 months as part of our HIPPA compliance program. We reached the milestone of 90% of our volume a while ago, but we are now wrapping up the last few very small payers to reach 100% of our volume on payers on Phoenix. With that milestone behind us, we can then focus our efforts on migrating our in-bound submitter traffic to Phoenix. We are making good progress here, but we anticipate it will take us until mid-2006 to complete the consolidation. 14 In parallel with this migration, we are also consolidating our multiple customer service, enrollment, billing, and accounts receivable platforms as well. We expect to gain appreciable cost savings and efficiencies throughout the migration process, which should help our operating income growth to outpace gains in revenue. In addition to the platform consolidation, we are very busy rolling out our new web-based tools, PCAT and Proxy Enroll, as well our new partner portal and soon our new provider portal. Let me give you an example of the impact this can have. We estimate that today PCAT can resolve over 50% of our customers' questions, resulting in better service, more transparency and greatly reduced support phone calls. As we provide PCAT to every single customer, we should, therefore, experience significant cost savings to reduce phone calls, and as we roll out additional releases of PCAT throughout the rest of the year, our goal is to move that 50% to over 80%. Before I turn it over to Gregg, let me give you a quick update on our clinical businesses. While our lab business is relatively mature, it has historically been a consistent performer in terms of revenue and operating income. In the first quarter, however, we did see some mixed results. Revenues declined 8.5% sequentially, but operating income improved 23%. This is the result of our revenue mix shifting from older products with higher revenues, to our newer products with greater margins, and we expect to see our revenue mix continuing to trend in this fashion in 2005 and 2006, especially as we are successful in rolling out our new Pilot and Navigator solution. In our prescription business, we continue to make slow progress. We have signed several new relationships with national practice management and EMR companies that should set the stage for good transaction volume growth in late 2005 and especially 2006. Gregg will now take you through a few financial highlights for the quarter. Gregory Eisenhauer, ProxyMed - CFO, EVP Thank you, Nancy. Good morning, everyone. As Kevin mentioned, we accomplished one of our major financial goals for 2005 with the successful refinancing of our senior debt, which was coming due on May 31. We closed on an expanded credit facility with Wachovia, increasing our borrowing capacity with them. With the proceeds from this facility and with cash on hand, we paid off $18.8 million in related party and other debt, including accrued interest that was assumed as part of our acquisition of PlanVista last March. The new facility is LIBOR-based with a current rate under 6%. It matures in 2008. This new interest rate is substantially below the 10% rate we paid on our senior debt during the first quarter of this year. Also, by using some of our cash to reduce the outstanding loan amount, we further reduced our ongoing interest expense. The full effects of this will be felt during the third quarter. Revenue for the Company declined sequentially by 3.8% or almost $900,000. Of this, approximately $300,000 came from our lab division, where product mix changes reduced revenues while improving margins. In our transaction services business, revenue was negatively impacted in the order of about $400,000, by softness in revenue per transaction that Nancy discussed, as well as by our decision to reclassify approximately $200,000 from bad debt expense to revenue adjustment. We believe this better reflects the nature of these charges. As a result of positive changes to our product mix, gross margin percentage improved over 100 basis points to 64.6%; however, gross margin dollars declined slightly. From a bottom-line perspective, we had hoped to realize the benefit of reduced legal and Sarbanes audit fees from the fourth quarter; however, these savings were offset by two key factors. The first was an increased accrual of approximately $300,000 for paid time off. We typically see a charge in the first quarter as associates accrue time off and don't take much of it, and then a reduction as we move into the summer vacation months and the holiday season at year end. So we don't expect this to impact our results for the rest of the year. The second was an increase in our health insurance costs, reflecting our recent experience, which has been higher than expected. We are moving aggressively to fine tune our self-funded health plan to bring our costs in line with our budgeted expectation. As a result, net loss declined slightly from $1.6 million to $1.8 million, increasing the loss per share from $0.12 to $0.14. One final note. When we file our form 10Q for the first quarter of 2005 with the SEC, we expect that there could potentially be a material weakness in one of our internal controls. In the process of preparing our form 10Q for the first quarter of 2005, we discovered a computational error from last year in a technical disclosure footnote regarding 15 the pro forma expensing of stock options awarded in connection with the acquisition of one of our subsidiaries. Despite the fact that it was only a footnote made to satisfy these disclosure requirements, we are potentially required to treat it as a material weakness under Sarbanes-Oxley. I want to stress that this issue does not affect any of our key financial statements, i.e. the balance sheet, the statement of operations, or the cash flow. The computation leading to this footnote error has been remediated and as a result, we do not expect this control weakness in the second quarter. That concludes the formal part of our call today. We will now open up the line for any questions. Questions and Answers OPERATOR [OPERATOR INSTRUCTIONS] Your first question comes from Steven Halper with Thomas Weisel Partners. STEVEN HALPER, THOMAS WEISEL PARTNERS - ANALYST Yes. With respect to integrating the inbound submitter platforms, do you have an estimate on how much that's going to cost? And through mid-2006 -- conceivably, can you take a charge up front for it? NANCY HAM, PROXYMED - PRESIDENT, COO Well, we certainly have internal estimates, Steve. But we are not providing, you know forward-looking financial guidance at this time. On a very broad brush -- It is going to be north of $1 million to $2 million, we anticipate. KEVIN MCNAMARA, PROXYMED - CHAIRMAN, INTERIM CEO The second part of that, Steve. The accounting rules have changed a fair amount on that, and generally speaking, most of those rules now cut to pay as you go for just about all the elements thereof. So we are not contemplating any type of up-front charge related to that. GREGORY EISENHAUER, PROXYMED - CFO, EVP Right, no up-front charge, and I think we can go as far as to say that our overall Cap Ex is not expected to ramp up from its historical levels as a result of it, Steve. STEVEN HALPER, THOMAS WEISEL PARTNERS - ANALYST Okay. Thanks. OPERATOR Your next question comes from Michael Phillips from Ladenburg Thalmann. MICHAEL PHILLIPS, LADENBURG THALMANN - ANALYST Hello, everybody. Nancy, you were talking about three other top ten payers at some point. Can you give us an idea on the progress of working on those contracts? If we are playing a football game, are we on the 50-yard line, the 10-yard line? Where are we? NANCY HAM, PROXYMED - PRESIDENT, COO 16 I mentioned the sale cycles within payers are notoriously long, and that's definitely true the larger the payer gets. So we are in different stages in the sales process with each of those payers. So I would say one in an early stage, one in a mid-stage, and one in a slightly later stage than that. MICHAEL PHILLIPS, LADENBURG THALMANN - ANALYST In a slightly later stage, are we in negotiation -- a price negotiation with them at this point or are we just dancing? NANCY HAM, PROXYMED - PRESIDENT, COO I will not be more specific than that. MICHAEL PHILLIPS, LADENBURG THALMANN - ANALYST The other question would be with the new CEO potentially coming on within a week, will he -- realizing the stock has basically been in a free fall from $20 down to $6.30 today. Will he be able to discuss forecast as he comes in or is that another three month process the street's got to wait to hear the forecast? KEVIN MCNAMARA, PROXYMED - CHAIRMAN, INTERIM CEO I don't want to speak for that candidate, but I don't think the Company will be in a position -- if I were that candidate, I certainly wouldn't be in a position to speak to forecasts upon arrival. I think that is an approximate specific issue. That would go to any candidate coming into any new position. So that is sort of a caveat answer to that. MICHAEL PHILLIPS, LADENBURG THALMANN - ANALYST Okay. My last question would be then with the stock doing what it's done and the Company trading on one-time sales at this point, can you speak to us in terms of any strategic things, being an exiting CEO? Could we -- are any strategic opportunities or ideas that the guys are working on with the Board? KEVIN MCNAMARA, PROXYMED - CHAIRMAN, INTERIM CEO No, we are not prepared to speak to that. MICHAEL PHILLIPS, LADENBURG THALMANN - ANALYST Last question, I guess would be, then, with the stock doing what it is doing, is the Board prepared to maybe get behind it a little bit and spend -- help the shareholders out that are sitting here watching the stock deteriorate again? KEVIN MCNAMARA, PROXYMED - CHAIRMAN, INTERIM CEO I am not prepared to speak to that question either. MICHAEL PHILLIPS, LADENBURG THALMANN - ANALYST Okay. OPERATOR [OPERATOR INSTRUCTIONS] There are no further questions at this time. KEVIN MCNAMARA, PROXYMED - CHAIRMAN, INTERIM CEO 17 Thanks, operator. Thanks, everybody. OPERATOR This concludes today's first quarter 2005 conference call. You may now disconnect. 18 -----END PRIVACY-ENHANCED MESSAGE-----