-----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, ApLEJS+0Sq7qsvHlVSjON5FRcSoD8zLifW1OH/kp4J/g5mkFBhi75D8fImfulDIv q28mRBcHzUdlNPOE6v4+6A== 0001021408-02-012796.txt : 20021024 0001021408-02-012796.hdr.sgml : 20021024 20021024082216 ACCESSION NUMBER: 0001021408-02-012796 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021023 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20021024 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: 02796626 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 d8k.txt CURRENT REPORT - 10/23/2002 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): October 23, 2002 ---------------- PROXYMED, INC. -------------- (Exact name of registrant as specified in its charter) Florida 0-22052 65-0202059 ------- ------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2555 Davie Road, Suite 110, Ft. Lauderdale, Florida 33317-7424 --------------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (954) 473-1001 ------------- Item 9. Regulation FD Disclosure. On October 24, 2002 at 10 a.m EDT, ProxyMed, Inc. (the "Company") will hold a teleconference call to report its financial and operating results for the quarter ended September 30, 2002. Information that will be presented in the call is attached. Additionally, the Company's press release dated October 23, 2002 reporting financial results for the three and nine months ended September 30, 2002 is also attached. 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; our ability to successfully identify and integrate acquisition candidates; our ability to successfully develop, market, sell, cross-sell, install and upgrade our clinical and financial transaction services and applications to current and new physicians, payers, medical laboratories and pharmacies; our ability to consummate and integrate any acquisitions successfully; our ability to compete effectively on price and support services; our assessment of the healthcare industry's need, desire and ability to become technology efficient; and our ability and that of our business associates to comply with various government rules regarding healthcare and patient privacy. These and other risk factors are more fully discussed in the Risk Factor disclosure in our Form 10-K for the year ended December 31, 2001 and our other filings with the Securities and Exchange Commission, 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 7. Financial Statements and Exhibits. (c) The following exhibits are included herein: Exhibit 99.1 Information to be presented in third quarter 2002 financial results teleconference call to be held on October 24, 2002. Exhibit 99.2 Press Release dated October 23, 2002 reporting financial results for the three and nine months ended September 30, 2002. 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: October 24, 2002 /s/ Judson E. Schmid ---------------- -------------------- Judson E. Schmid, Executive Vice President and Chief Financial Officer 3 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION 99.1 Information to be presented in third quarter 2002 financial results teleconference call to be held on October 24, 2002 99.2 Press Release dated October 23, 2002 reporting financial results for the three and nine months ended September 30, 2002. EX-99.1 3 dex991.txt FINANCIAL REPORT EXHIBIT 99.1 PROXYMED Third Quarter 2002 Financial Results Conference Call October 24, 2002 10:00 a.m. EDT Chairperson: Michael K. Hoover, Chairman and Chief Executive Officer Judd Schmid Thank you, Operator. Good morning everyone. Thank you for joining us for ProxyMed's conference call to discuss the company's results for the third quarter of 2002. I am Judd Schmid, ProxyMed's Chief Financial Officer. Before we begin our discussion, let me take a minute to reference the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. "This conference call 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; our ability to successfully identify and integrate acquisition candidates; our ability to successfully develop, market, sell, cross-sell, install and upgrade our clinical and financial transaction services and applications to current and new physicians, payers, medical laboratories and pharmacies; our ability to consummate and integrate any acquisitions successfully; our ability to compete effectively on price and support services; our assessment of the healthcare industry's need, desire and ability to become technology efficient; and our ability and that of our business associates to comply with various government rules regarding healthcare and patient privacy. These and other risk factors are more fully discussed in the Risk Factor disclosure in our Form 10-K for the year ended December 31, 2001 and our other filings with the Securities and Exchange Commission, 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." Leading today's conference call is Mike Hoover, ProxyMed's Chairman and CEO, and providing an operational summary will be Nancy Ham, our President. Now I would like to turn the call over to Mike. Michael Hoover Good morning everyone, and welcome to ProxyMed's third quarter earnings conference call. I am pleased to report that we had another quarter of improved results on both an operational basis and at the bottom line. On a consolidated basis we delivered revenue of $12.9 million and EBITDA of $1.1 million. This is the first time in the company's history that we have exceeded the million-dollar mark for EBITDA, and we also set a record for EBITDA margin at over 8%. This positive result came primarily from our Transaction Services division getting back on track with increased revenues, increased EBITDA and transaction growth contributing to our success. In addition, Transaction Services had a record-breaking quarter for signing new contracts, both at the physician and partner level. We start the fourth quarter with a very large backlog - perhaps the largest in our history - and with the new sales pipeline continuing to build on this record success. We also completed two acquisitions in this division during the quarter. In summary, we had a good quarter operationally, but perhaps more importantly, we laid a lot of important groundwork that will pay off in the fourth quarter. Some of these sales wins did come later, in fact much later, than we had originally forecast, but they are in the door now and we are well positioned to support our accelerating growth in Q4 and beyond. With no further delay, let me turn it over to Judd and Nancy to discuss and review our third quarter results and the foundation for the fourth quarter. Judd Schmid As Mike pointed out, we again had a successful quarter including the reporting of EPS of $0.11, meeting our analysts' consensus. However, our results included a favorable settlement of a contract dispute which added $265,000 to net income, or $0.04 cents per share. As a result, we generated $0.07 per share on an operational basis, 2 an improvement over last quarter and a significant increase from the loss reported in last year's third quarter. Turning now to our detailed results, ProxyMed is reporting quarterly revenues of $12.9 million, (up 8% over the same period a year ago), EBITDA profits of $1.1 million (an increase of 42% over that same quarter), and net income of $724,000 or $0.11 per share (compared to a net loss of $4.3 million or $1.85 loss per share last year). Our revenue increase came from our Healthcare Transaction Services segment, where revenues increased 21% from $4.7 million last year to $5.7 million this year. Included in these revenues is approximately $323,000 of new revenues from our recent acquisitions of MDIP (in August) and the customers acquired from Claimsnet.com (in mid-September). On a sequential basis, our overall revenue was up 2% over the second quarter. Healthcare Transaction Services revenues led the way, increasing its revenue by 8% on a sequential basis. The year-over-year revenue increase in Healthcare Transaction Services was led by a 24% increase in total transactions processed over the third quarter of 2001, as we processed a total of 29.2 million clinical and financial transactions through ProxyNet, our secure, national healthcare information network. Since transactions are a key driver of our business, we have increased the amount of information provided in our earnings press release issued last night. We hope this will provide more visibility to our analysts and to the public. In today's market environment, more disclosure is certainly better. Let me take a minute to explain these new metrics we reported, and will be reporting going forward. We have broken total transactions down into three categories: "core" transactions (which include all transactions except for encounters and transactions acquired in the current quarter), "acquired" transactions (those from our current acquisitions), and "encounters". As we've noted in the past, we are only able to report on acquisitions in the quarter they happen since we pursue rapid integration, but we hope you will still find the initial information useful. With regards to encounters, they are an administrative reporting transaction for payers but do not generate revenue for the provider who must submit them. Accordingly, rather than submitting on a daily or weekly basis, most providers choose to periodically "catch up" on their submissions, and this creates monthly and quarterly swings in both the number of encounters we process, and what percentage of our transaction mix they represent. Since encounters are at a significantly lower price point than claims, these swings make it difficult to easily analyze our 3 quarter-over-quarter growth in our core business. In addition, we do not expect our encounter volume to grow on an annual basis, as payers are not expanding the capitated service model underpinning encounters. Therefore, we believe that breaking out encounters will show more clearly our growth in core transactions, which are the growth engine for Transaction Services. As you saw in the press release, included in the current quarter's total transactions of 29.2 million transactions are 22 million core transactions, 6 million encounters and 1.2 million acquired financial transactions. "Peeling the onion" then, our core transaction growth is up 32% from last year. Sequentially, core transactions are up 4% since last quarter. And just to clarify, since we get many questions on internal growth vs. growth from acquisitions, our overall transaction increase was 5.6 million total transaction, or 24%, from Q3 2001 to Q3 2002. Of this increase, only 1.2 million, or 22%, was related to acquisitions, while 4.4 million, or 78%, was due to internal growth. As a result, we are currently on an annualized run rate of almost 119 million total transactions. On the expense side, as we continue to monitor and control our SG&A expenses, we were able to decrease our consolidated SG&A expenses by $50,000, even after additional expenses from our acquisitions. As a percentage of revenues our SG&A expenses dropped from 47.1% to 45.8% from last quarter. EBITDA dollars continued to increase and we reported an EBITDA profit of $1,068,000 for the quarter, an increase of 42% from last year's EBITDA of $754,000, and a 19% increase over last quarter's EBITDA of $901,000. We remain confident in achieving expanding EBITDA margins on an annual basis and our consolidated EBITDA margin for the quarter was 8.3%, up from 7.1% last quarter. With our allocation of purchase prices completed, amortization expense related to our 2002 acquisitions of KenCom, MDIP and Claimsnet.com totaled $140,000 for the quarter and is expected to run approximately $146,000 per quarter going forward. Also below the EBITDA line, as noted previously, we favorably settled a contract dispute in our Lab Communications business unit, for $265,000, net of legal expenses. As a result of the above, net income for the third quarter increased to $724,000 from a loss of $4.3 million last year and net income of $446,000 last quarter. Just a couple of comments now on the balance sheet and capital structure. We continue to be in a great financial position, with cash of $24 million, strong working capital led by our 4 Accounts Receivable DSO of 42 days and no debt. We've also lowered our inventory levels as we've improved our ordering methodologies. During the quarter, we spent $533,000 in capital expenditures primarily for upgrades and enhancements to our customer relationship software, for HIPAA compliance, and for our data center consolidation efforts. We also added to the balance sheet $76,000 in capitalized software development related to our production network enhancements and other projects. We will continue to capitalize appropriate development expenses and expect the rate of capitalization to increase slightly for the balance of the year. As a result, our consolidated capitalized software development is expected to be between 14% and 17% of our total research and development costs for all of 2002, up slightly from our last quarter's estimate of 10% to 15%. Our capital structure remains virtually unchanged from last quarter. Our Compensation Committee did approve the issuance of 138,500 options across the company during the quarter, including 103,000 options to executive management. As a result, our current capital structure, is as follows: 6,742,000 million shares outstanding; 20,000 underlying common shares for our preferred stock; 730,000 warrants; and 1,070,000 stock options all totaling 8.6 million fully-diluted shares. Nancy Ham: So far in this call we have talked mainly about our third quarter results. We were able to meet our bottom line EPS consensus of $0.11, but as Judd discussed, we were behind at the operating line. I'm going to focus now on what happened in third quarter that contributed to this, but perhaps more importantly, I'm going to walk through some of our outlook for the fourth quarter in some detail so that we give you maximum visibility into the sources of increased transactions, revenue and EBITDA. Let's start by discussing Transaction Services, which includes our payer services and prescription services divisions, and our performance in Q3. On the physician side of our network, we added 2,900 physicians during the quarter, handily beating our previous quarterly total of 1,815. These new physicians signed up for over 6,400 services, or 2.2 services per physician. I would like to congratulate the entire sales team on a terrific job! Our 5 implementation team is now hard at work converting those physicians into revenue producers for Q4 and beyond. In addition to this direct customer expansion, we added 17 new Electronic Commerce Partners, representing almost 9,500 indirect physicians in multiple markets and bringing our total of active partners to 175. We ended the quarter with direct relationships with over 70,000 physicians and indirect relationships with another 56,000. Turning now to payers, in addition to Aetna, we signed up another 4 new payers in the quarter. Combined with payers from our MDIP acquisition, this brings our total of direct payer connections to 394. Although we have been very successful at signing new payers, for the next 12 months or so, we will be shifting our payer sales focus. Most payers are now very internally focused with their HIPAA compliance efforts, and as a result we do not anticipate a lot of new payer connections being granted in the industry. In contrast, we see payers making the decision to actually REDUCE their overall numbers of connections to concentrate their connectivity with fewer, higher quality partners who can deliver HIPAA compliance. We think this is a tremendous opportunity for ProxyMed. Today we generally only have a physician claims and encounter connection with our payers. Therefore we are focusing our sales efforts over the next few quarters on cross-selling our existing 394 payers to add hospital and dental claims, real-time transactions and our FOCUS program for converting small physician offices from submitting on paper to submitting electronically. With our strong existing payer relationships, and with our Aetna implementation as a benchmark reference, we think this payer cross-sell opportunity will be significant for us. Since Judd has already discussed the financial results for the third quarter, I'd like to focus on the important building blocks we accomplished in the quarter, and how that translates into improved results for the fourth quarter. One of the biggest accomplishments of course was signing the Aetna contract. As you will recall, we signed a national contract with Aetna on July 1st for a complete suite of physician and hospital transactions. I am very pleased to report that Aetna has been in production for physician claims since October 7th, and for hospital claims since October 11th. In addition to this success on the implementation side, we are also doing very well on the sales front. In the initial press release, we stated that in the first year of the agreement we anticipated sending Aetna over 7 million electronic transactions. I am pleased to report that we are already on track to exceed that number, which I will explain in detail. 6 Having Aetna in production on a direct basis drives several major improvements to our transaction volume and financials. First, ProxyMed has been sending approximately 250,000 claims per month to Aetna through another connection. Under our new contract, we have moved of course to a direct connection, which carries significantly better reimbursement rates. Second, we have already signed contracts with other partners totaling over 350,000 Aetna claims per month, with additional contracts in various final stages of negotiations. The currently contracted partners will have the majority of their volume migrated to us during this month, with additional volume from them and from the remaining contracts coming on board in November and December. Finally, the addition of the remaining Aetna transactions (eligibility, referrals, claims status and ERA) over the rest of the quarter will also drive additional growth. We estimate that the net effect of Aetna will drive additional EBITDA in the fourth quarter of between $85,000 (based on what is already contracted) and $150,000 (based on our total pipeline). In addition to Aetna, we had a very successful third quarter for new business. Along with our record setting 2,900 new physicians, we also signed a number of contracts with larger billing services, physician groups and strategic partners. On the 12 largest contracts, we did experience a significant delay in the legal contracting cycle as everyone struggled with how to handle HIPAA liability for the first time. In fact, on average these contracts closed more than 90 days later than originally planned, which means they did not have a chance to impact the third quarter. However, they are in the door now, and represent over 1.0 million transactions on a monthly basis at full ramp. In addition to these contracting delays, I have to admit that over the past quarter we also had a bit of a bottleneck in implementation due to our dedicated focus on the Aetna implementation for most of August and especially September. However, with Aetna now in production, implementation is back to its normal schedule, and we should add at least $90,000 to $110,000 in EBITDA in Q4 from these signed contracts. On the acquisition side, in the fourth quarter we will have three full months of MDIP (vs. two months in the third quarter), and three full months of Claimsnet (vs. a partial month in the third quarter). This will add approximately $85,000 to 100,000 in incremental EBITDA. Finally, Q4 is traditionally a strong quarter for encounters and for overall claims submission as providers seek to close out the fiscal year with all filings up to date 7 Shifting now to Prescription Services, the big news during the quarter was the signing of our national connectivity agreement with Rite Aid. One of the nation's largest pharmacy chains with over 3,500 stores, Rite Aid adds significant presence in a number of new markets, such as San Francisco, where ProxyMed already has a large base of customers for our financial products, and Michigan. We anticipate that Rite Aid will be in production by the end of November, although it will not add a significant amount of revenue in the fourth quarter. The bigger source of Q4 growth will instead be from our just announced relationship with SureScript, which provides for financial sponsorship of the first year's subscription fee for up to 3,000 physicians. This sponsorship should allow us to greatly accelerate the signing of new physicians, and in fact, we have already signed up over 100 new physicians in the first few weeks, with some very large groups in the pipeline. Turning now to Lab Communication Solutions, we had a solid quarter on the technology and services side. We continue to make steady progress in enrolling customers in our subscription-based FleetWatch service, with another 330 physician offices enrolled during the quarter. This brings our total sales to over 1,500 offices since January of this year. In addition, for the past three years we have been providing services to half of Quest Diagnostics (the former SmithKline Beecham business) under a subcontract with another party. That subcontract has expired and we are now providing our services on a direct basis to all of Quest Diagnostics. We hope that this will allow us to forge a closer service and support relationship with this important customer, who is the largest lab in our industry, and getting larger through acquisitions. In fact, let me take a minute to talk about the changing dynamics in our lab customer base. When we began the year, our top 6 customers, in alphabetical order, were Ameripath, AML, Dynacare, LabCorp, Quest Diagnostics, and Unilab. Assuming that the pending acquisition of Unilab by Quest closes, then we will have seen our top 6 customers combine to become our top three. As you can imagine, all this activity has caused various delays and disruptions in normal ordering patterns for our products. The LabCorp-Dynacare merger in particular slowed business this year, as we assisted LabCorp in converting the Dynacare fleet rather than forcing the sales of replacement reporting devices. While this hurt us in the short run, this cooperation has been much appreciated by LabCorp and has solidified our relationship. In addition, we're starting to realize new gains in product business with Quest. Quest, Unilab and AML business, on a consolidated basis, has increased 62% year to date, and in Q3 was up over 8 108% to Q3 last year. So as you can see, the disruptions caused by these mergers is gradually resolving itself, with Key retaining our position as the sole or largest supplier to both Quest and LabCorp. Primarily as a result of these merger-related disruption, revenues and EBITDA were basically flat to slightly down over both the prior quarter and over the same period last year. Looking ahead to the fourth quarter, this is historically a difficult quarter due to the exhaustion of capital budgets at our customers. However, we believe that the turnaround in device orders from Quest Diagnostics will continue as we fulfill orders for pent-up demand created by these consolidations. In addition, this quarter we are completing the first phase rollout of a new color results reporting device for a leading anatomic pathology laboratory. Based on the initial success to date, we anticipate that this offering will be rolled out to the remaining regions beginning late this year and on into the first quarter of 2003. We have also been working hard to build the services and contract manufacturing business, as I was just discussing, which helps to mitigate these historical quarterly swings in product orders. It is rather early still in the quarter, but the initial signs are promising that revenue will be steady compared to the third quarter and will not suffer the typical drop-off. Michael Hoover: I admit that I am somewhat challenged to summarize the quarter. Overall, I am very pleased with the performance of our team, especially as we look back at where we have come from. We find ways to meet our goals, such as our EPS consensus guidance for the quarter. However, we can't avoid the fact that although we did meet our EPS consensus, we fell short on the operating line. I absolutely do not believe that this shortfall reflects any weakness in our business model or our market position, and I'd like to take a minute to discuss this. Our company has made tremendous progress over the past 4 short quarters. Revenue is up over 20% from the prior period. EBITDA has gone from a long-standing negative number to breaking the $1 million dollar mark for the first time. We have delivered 2 consecutive quarters of positive and increasing EPS. Our balance sheet and capital structure have gone from a 9 complex mess to a debt free balance sheet with $24 million in cash. Financially, we are in the best shape ever. Our operational metrics are equally strong. Our transaction run rate has increased from 94 million to over 119 million. We have signed up an additional 10,000 doctors, growing our direct physician customer base from 60,000 to 70,000. And our payer connectivity has exploded from 333 to almost 400. In addition to signing up all these new physicians, we have been able to sell more services to our existing customers. Over the past year we've grown our services per physician from 1.3 to 2.05, proving that our cross-selling model works. In addition, we've been able to make some small but smart acquisitions. We've made these acquisitions with cash, causing no dilution to our shareholders, and we've been able to integrate them quickly. All this proves to me that our focused business model is working, and that it is sustainable over the next three to five years. Looking ahead, we have a lot of new business already in hand that is coming on stream in the fourth quarter. Taking our Q3 exit rate and adding the specific items Nancy discussed, which included our new direct connection to Aetna and pull-through of our large backlog, we already have clear visibility for $13 million in revenues and $1.3 million in EBITDA for Q4, with identified opportunities totaling up to another $ 1 million in revenue and $600,000 in EBITDA, for a potential total of $14 million in revenue and $1.9 million in EBITDA. This translates into an EPS range of $0.09 to $0.17 per share. We certainly have a lot of work to do to meet the high end of our range, but the team is 100% focused on what needs to happen. With regards to our outlook for 2003, we will have our budgets complete by late November and will provide an update at that time. We remain confident of our ability to grow revenue on an annual basis at 20-30 percent, and to grow EBITDA and EPS at 50 to 100 percent. [END OF INFORMATION PROVIDED] 10 EX-99.2 4 dex992.txt PRESS RELEASE EXHIBIT 99.2 [LOGO] ProxyMed Company News Release FOR IMMEDIATE RELEASE IMPORTANT NOTE: ProxyMed's live teleconference call to discuss its third quarter 2002 results and outlook for the fourth quarter of 2002 is accessible by calling 1-800-915-4836 beginning at 10:00 a.m. Eastern Daylight Time on Thursday, October 24, 2002 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. EDT on October 24th. Contact: Judson E. Schmid Chief Financial Officer (954) 473-1001, ext. 353 investorrelations@proxymed.com PROXYMED REPORTS THIRD QUARTER 2002 RESULTS INCLUDING REVENUE OF $12.9 MILLION AND EARNINGS PER SHARE OF $0.11 Fort Lauderdale, Florida (Business Wire) October 23, 2002 - ProxyMed, Inc. (Nasdaq: PILL), a leading provider of physician healthcare transaction processing services, today reported operating results for its third quarter of 2002. ProxyMed reported revenues of $12.9 million for the third quarter, an increase of 8% compared to revenues of $11.9 million for the same period of 2001. For the nine months ended September 30, 2002, revenues were $37.0 million, an increase of 21% compared to revenues of $30.5 million for the nine months ended September 30, 2001. For the third quarter of 2002, net income applicable to common shareholders and diluted earnings per share were $0.7 million and $0.11, respectively, compared to a net loss of $4.3 million and diluted net loss per share of $1.85 for the third quarter of 2001. Diluted weighted average shares outstanding for the quarters ended September 30, 2002 and 2001 were 6,785,096 and 2,339,700, respectively. Included in the results for the third quarter of 2002 is a favorable settlement of a contract dispute in the Company's Laboratory Communication Solution segment for $264,500, or $0.04 per diluted share. For the nine months ended September 30, 2002, net income applicable to common shareholders and diluted earnings per share were $0.6 million and $0.10, respectively, compared to a net loss of $14.3 million and diluted net loss per share of $8.04 for the nine months ended September 30, 2001. Diluted weighted average shares outstanding for the nine months ended September 30, 2002 and 2001 were 6,282,258 and 1,783,637, respectively. Additionally, for the third quarter of 2002, the Company's profit before interest, taxes, depreciation and amortization (EBITDA) increased 42% to $1.1 million, compared to $0.8 million a year ago. For the nine months ended September 30, 2002, the Company's EBITDA increased 316% to $2.6 million, compared to $0.6 million for the same period in 2001. Judson E. Schmid, ProxyMed's chief financial officer said, "With our second straight quarter of positive EPS, we remain encouraged with our progress so far this year. Our focus on driving higher EBITDA margins from our core business resulted in our best quarter ever, with an overall EBITDA margin of 8.3%. This increase was fueled by a 4% growth rate in core financial transactions over last quarter (excluding encounters) as well as from transactions from our acquisitions in the quarter, together driving an 8% growth in transaction revenues. This operational progress is supported by a strong balance sheet, with no debt and over $24 million in cash." Operating Highlights: Corporate . Appointed Kevin McNamara, former Chief Financial Officer of Envoy Corporation, to ProxyMed's Board of Directors. . Research coverage initiated by Thomas Weisel Partners. . Added to the Russell 3000 and 2000 Indexes. Electronic Healthcare Transaction Processing . Processed 29.2 million total financial and clinical transactions through ProxyNet(R), ProxyMed's secure, proprietary, national healthcare information network, representing an increase of 24% over the same quarter last year. . Signed a national connectivity services agreement with Aetna on July 1 to provide claims processing and other transaction processing services. . Signed a national pharmacy connectivity agreement with Rite Aid to provide end-to-end electronic prescribing capabilities to Rite Aid's 3,500 locations. . Added 5 new payers and 17 strategic partners. . Added 2,900 physicians representing over 6,400 services sold. Laboratory Communication Solutions . Added 24 new accounts. . Enrolled over 330 physician offices for our FleetWatch(SM) monitoring service. 2 Acquisitions: In addition to these operating events, ProxyMed also made two acquisitions during the quarter: .. Acquired substantially all of the assets of MDIP, Inc., a provider of hospital claims processing services, for $2.4 million cash in August. .. Acquired over 1,100 customers, contracts and the revenue base from Claimsnet.com, Inc. for $700,000 cash in September. These acquisitions were accretive to ProxyMed's Electronic Healthcare Transaction Processing operating results for the third quarter, adding 1,216,000 transactions, combined revenues of $322,900, and EBITDA of $47,100. Amortization expense related to intangible assets purchased in these acquisitions was $48,200 for the quarter. "We made two significant steps during the quarter to expand our products and services and to increase the number of services used by our physician and payer customers. With Aetna now in national production, we send over 95% of our physician volume directly to one of our direct connected payers, providing a high quality end-to-end experience. And for our payer customers, the acquisition of MDIP in August added the capability for hospital and dental processing services, allowing us to provide "one-stop shopping" for provider connectivity," said Michael K. Hoover, ProxyMed's chairman and chief executive officer. "In addition, we strengthened our corporate leadership by welcoming Kevin McNamara to our Board of Directors. Kevin brings to our company industry experience that will be invaluable in helping us achieve our future success." Quarterly Statistics: In order to increase transparency to the marketplace, ProxyMed will now provide on a quarterly basis the following additional transaction and operational information:
---------------------------------------------------------------------------------------------------- Description Q/E 9/30/02 Q/E 6/30/02 Q/E 9/30/01 ---------------------------------------------------------------------------------------------------- Core transactions (excluding encounters) 21,995,800 21,156,000 16,724,200 Acquired transactions (from 2002 acquisitions) 1,216,000 N/A N/A Encounters 5,977,400 7,297,600 6,870,700 ---------- ---------- ---------- Total transactions 29,189,200 28,453,600 23,594,900 ========== ========== ========== Number of direct physicians 70,000 63,800 60,000 Number of indirect physicians 56,250 46,750 40,000 Number of services utilized per physician 2.05 2.04 1.30
3 About ProxyMed - Where Healthcare Connects(TM) ProxyMed solves the business problems of physician offices every day by automating their financial, administrative and clinical transactions with healthcare institutions. To facilitate these services, ProxyMed operates ProxyNet(R), its secure, proprietary national electronic information network, which provides physicians and other healthcare providers with direct connectivity to one of the industry's largest list of payers, the largest list of chain and independent pharmacies and the largest list of clinical laboratories. ProxyMed exceeds customer expectations through our expertise, proven methodologies and dedication to service excellence. Safe Harbor Statement Note: This press release contains forward-looking statements that reflect our current assumptions and expectations regarding future events. 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; our ability to identify suitable acquisition candidates; our ability to successfully integrate any future acquisitions; our ability to successfully develop, market, sell, cross-sell, install and upgrade our clinical and financial transaction services and applications to current and new physicians, payers, medical laboratories and pharmacies; our ability to compete effectively on price and support services; our assessment of the healthcare industry's need, desire and ability to become technology efficient; and our ability and that of our business associates to comply with various government rules regarding healthcare and patient privacy. These and other risk factors are more fully discussed in the Risk Factors disclosure in our Form 10-K for the year ended December 31, 2001 and our other filings with the Securities and Exchange Commission, which we strongly urge you to read. We expressly disclaim 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. More information on ProxyMed is available on its home page at www.proxymed.com. 4 PROXYMED, INC. AND SUBSIDIARIES Consolidated Statements of Operations (unaudited)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Revenues $ 12,858,100 $ 11,851,000 $ 36,988,200 $ 30,457,100 ------------ ------------ ------------ ------------ Costs and expenses: Cost of sales 5,896,900 5,863,300 17,060,700 13,910,700 Selling, general and administrative expenses 5,893,100 5,233,400 17,327,300 15,921,100 Operating depreciation and amortization (1) 505,300 427,100 1,458,700 1,304,200 ------------ ------------ ------------ ------------ Total operating costs and expenses (1) 12,295,300 11,523,800 35,846,700 31,136,000 ------------ ------------ ------------ ------------ Operating income (loss), as adjusted (1) 562,800 327,200 1,141,500 (678,900) Acquisition-related amortization charges (239,200) (992,800) (438,300) (5,417,900) Litigation settlement, net 264,500 - 264,500 - Interest income (expense), net 136,000 (90,700) 250,800 (20,100) ------------ ------------ ------------ ------------ Net income (loss) 724,100 (756,300) 1,218,500 (6,116,900) Deemed dividends and other charges - 3,563,000 611,700 8,219,400 ------------ ------------ ------------ ------------ Net income (loss) applicable to common shareholders $ 724,100 $ (4,319,300) $ 606,800 $(14,336,300) ============ ============ ============ ============ Diluted earnings (loss) per share: $ 0.11 $ (1.85) $ 0.10 $ (8.04) ============ ============ ============ ============ Diluted weighted average shares outstanding 6,785,096 2,339,700 6,282,258 1,783,637 ============ ============ ============ ============ EBITDA (2) $ 1,068,100 $ 754,300 $ 2,600,200 $ 625,300 ============ ============ ============ ============
(1) Excludes acquisition-related amortization charges related to goodwill and other intangibles. Amortization of goodwill ceased as of January 1, 2002 under FAS No. 142. (2) EBITDA is a metric that ProxyMed believes is a meaningful measurement of operating performance. The calculation of EBITDA has no basis in Generally Accepted Accounting Principles. 5 PROXYMED, INC. AND SUBSIDIARIES Segment Information (unaudited)
Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 2002 2001 2002 2001 -------------- -------------- ------------- -------------- Revenues: Electronic healthcare transaction processing $ 5,735,400 $ 4,726,200 $ 16,345,000 $ 11,533,600 Laboratory communication solutions 7,122,700 7,124,800 20,643,200 18,923,500 -------------- -------------- ------------- -------------- $ 12,858,100 $ 11,851,000 $ 36,988,200 $ 30,457,100 ============== ============== ============= ============== Cost of sales: Electronic healthcare transaction processing $ 2,250,000 $ 1,964,000 $ 6,449,200 $ 4,249,900 Laboratory communication solutions 3,646,900 3,899,300 10,611,500 9,660,800 -------------- -------------- ------------- -------------- $ 5,896,900 $ 5,863,300 $ 17,060,700 $ 13,910,700 ============== ============== ============= ============== Selling, general and administrative expenses: Electronic healthcare transaction processing $ 2,864,800 $ 2,555,500 $ 8,498,600 $ 7,440,000 Laboratory communication solutions 2,400,400 2,067,900 6,915,000 5,959,700 Corporate 627,900 610,000 1,913,700 2,521,400 -------------- -------------- ------------- -------------- $ 5,893,100 $ 5,233,400 $ 17,327,300 $ 15,921,100 ============== ============== ============= ============== Depreciation and amortization: Electronic healthcare transaction processing $ 416,500 $ 1,221,300 $ 1,144,200 $ 6,052,100 Laboratory communication solutions 277,400 136,800 601,100 402,700 Corporate 50,600 61,800 151,700 267,300 -------------- -------------- ------------- -------------- $ 744,500 $ 1,419,900 $ 1,897,000 $ 6,722,100 ============== ============== ============= ============== Operating income (loss): Electronic healthcare transaction processing $ 204,100 $ (1,014,600) $ 253,000 $ (6,208,400) Laboratory communication solutions 798,000 1,020,800 2,515,600 2,900,300 Corporate (678,500) (671,800) (2,065,400) (2,788,700) -------------- -------------- ------------- -------------- $ 323,600 $ (665,600) $ 703,200 $ (6,096,800) ============== ============== ============= ============== EBITDA: Electronic healthcare transaction processing $ 620,600 $ 206,700 $ 1,397,200 $ (156,300) Laboratory communication solutions 1,075,400 1,157,600 3,116,700 3,303,000 Corporate (627,900) (610,000) (1,913,700) (2,521,400) -------------- -------------- ------------- -------------- $ 1,068,100 $ 754,300 $ 2,600,200 $ 625,300 ============== ============== ============= ==============
6 PROXYMED, INC. AND SUBSIDIARIES Consolidated Balance Sheet (unaudited)
September 30, December 31, Assets 2002 2001 ------ ---- ---- Current assets: Cash and cash equivalents 24,052,300 12,601,000 Accounts receivable - trade, net 7,675,200 5,588,800 Notes and other receivables 193,900 88,800 Inventory 2,979,400 3,351,100 Other current assets 514,700 330,600 ------------- ------------- Total current assets 35,415,500 21,960,300 Property and equipment, net 4,247,100 3,831,700 Goodwill, net 10,480,000 7,960,400 Purchased technology, capitalized software and other intangibles, net 5,741,900 2,075,800 Other assets 252,100 53,300 ------------- ------------- Total assets $ 56,136,600 $ 35,881,500 ============= ============= Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Note payable $ - $ 7,000,000 Accounts payable and accrued expenses 5,870,400 5,344,600 Deferred revenue and other current liabilities 405,800 222,300 ------------- ------------- Total current liabilities 6,276,200 12,566,900 Long-term deferred revenue and other long-term liabilities 307,400 442,100 ------------- ------------- Total liabilities 6,583,600 13,009,000 ------------- ------------- Stockholders' equity: Series C 7% Convertible preferred stock - 300 Common stock 6,700 4,900 Additional paid-in capital 145,737,000 120,276,500 Accumulated deficit (96,004,800) (97,223,300) Note receivable from stockholder (185,900) (185,900) ------------- ------------- Total stockholders' equity 49,553,000 22,872,500 ------------- ------------- Total liabilities and stockholders' equity $ 56,136,600 $ 35,881,500 ============= =============
7 PROXYMED, INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (unaudited)
Nine Months Ended September 30, ------------------------------- 2002 2001 ----- ---- Cash flows from operating activities: Net income (loss) $ 1,218,500 $ (6,116,900) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,897,000 6,722,100 Provision for doubtful accounts 6,800 54,000 Provision for obsolete inventory 112,500 24,200 Compensatory stock options and warrants - 433,300 Changes in assets and liabilities, net of effect of acquisitions and dispositions: Accounts and other receivables (1,880,100) (807,800) Inventory 413,200 (1,119,200) Prepaid expenses (168,400) (166,900) Accounts payable and accrued expenses (235,900) 1,689,400 Deferred revenue 83,800 (129,800) Other, net (47,700) (52,100) ------------ ------------ Net cash provided by operating activities 1,399,700 530,300 ------------ ------------ Cash flows from investing activities: Acquisition of businesses, net of cash acquired (5,270,600) (3,000,000) Acquisition of assets (700,000) - Short term investments (15,000,000) (3,000,000) Redemption of short term investments 15,000,000 3,000,000 Capital expenditures (1,395,400) (783,800) Capitalized software (276,600) - Payments for acquisition-related costs (23,000) (42,400) ------------ ------------ Net cash used in investing activities (7,665,600) (3,826,200) ------------ ------------ Cash flows from financing activities: Proceeds from stock offering, net 24,886,100 - Payment of note payable related to acquisition of business (7,000,000) - Dividends on preferred stock - (4,900) Collections on notes receivable 18,300 34,200 Payment of notes payable, capital leases and long-term debt (187,200) (126,200) ------------ ------------ Net cash provided by (used in) financing activities 17,717,200 (96,900) ------------ ------------ Net increase (decrease) in cash and cash equivalents 11,451,300 (3,392,800) Cash and cash equivalents at beginning of period 12,601,000 8,841,100 ------------ ------------ Cash and cash equivalents at end of period $ 24,052,300 $ 5,448,300 ============ ============
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