MedAssets Reports Third Quarter and Nine-Month 2009 Financial Results

October 28, 2009 4:04 PM EDT

ATLANTA--(BUSINESS WIRE)-- MedAssets, Inc. (NASDAQ: MDAS) today announced results for its third quarter and nine-month period ended September 30, 2009, as summarized below:

 (In millions, except per share)       3Q-09    3Q-08    9 mos-09   9 mos-08*

 Net Revenue:

 Revenue Cycle Management              $ 51.6   $ 45.8   $ 149.4    $ 102.2

 Spend Management                        30.8     30.2     96.2       93.7

 Total Net Revenue                       82.4     76.0     245.6      196.0

 Net Income                              5.9      3.7      10.0       4.8

 Diluted earnings per share (EPS)        0.10     0.07     0.17       0.09

 Non-GAAP adjusted EBITDA                28.5     25.2     75.4       60.3

 Non-GAAP cash diluted EPS             $ 0.22   $ 0.18   $ 0.54     $ 0.44

 Weighted average shares - diluted       57.9     56.1     57.2       51.0

 * Column amounts may not add to total amount due to rounding

Net Revenue

Third Quarter

Total net revenue for the third quarter of 2009 increased 8.5% to $82.4 million from $76.0 million in the third quarter of 2008. The Revenue Cycle Management segment growth was driven primarily by increased demand for the Company's reimbursement and compliance technology tools, as well as growth from its revenue cycle services and decision support capabilities. The Spend Management segment experienced growth in its medical device consulting services as well as its analytics solutions.

Nine-month Period

Total net revenue for the nine-month period ended September 30, 2009 increased 25.3% to $245.6 million from $196.0 million in the first nine months of 2008. Comparing period-over-period organic growth, the Company's total net revenue for the first nine months of 2009 increased 9.4% to $245.6 million from non-GAAP acquisition-affected total net revenue of $224.5 million in the same period of 2008.

Non-GAAP Adjusted EBITDA

Third Quarter

In the third quarter of 2009, non-GAAP total adjusted EBITDA was $28.5 million, or 34.6% of total net revenue, a 13.3% increase over non-GAAP total adjusted EBITDA of $25.2 million, or 33.2% of total net revenue, in the third quarter of 2008.

Nine-month Period

For the nine-month period ended September 30, 2009, non-GAAP total adjusted EBITDA increased 25.1% to $75.4 million, or 30.7% of total net revenue, versus non-GAAP total adjusted EBITDA of $60.3 million, or 30.8% of total net revenue, in the first nine months of 2008.

Comparing period-over-period organic growth, the nine-month 2009 non-GAAP total adjusted EBITDA of $75.4 million increased 7.1% from non-GAAP acquisition-affected adjusted EBITDA of $70.4 million, or 31.3% of non-GAAP acquisition-affected total net revenue, in the same period of 2008.

Net Income and Earnings per Share

Third Quarter

Net income in the third quarter of 2009 was $5.9 million, or $0.10 per diluted share, versus net income of $3.7 million, or $0.07 per diluted share, in the third quarter of 2008.

Non-GAAP cash EPS, which is defined as EPS excluding acquisition-related intangible amortization, share-based compensation expense and non-recurring expense items on a tax-adjusted basis, was $0.22 per diluted share in the third quarter of 2009, compared to non-GAAP cash EPS of $0.18 per diluted share in the third quarter of 2008.

Nine-month Period

For the first nine months of 2009, net income was $10.0 million, or $0.17 per diluted share, versus net income of $4.8 million, or $0.09 per diluted share, in the first nine months of 2008. Non-GAAP cash EPS was $0.54 per diluted share in the first nine months of 2009, compared to non-GAAP cash EPS of $0.44 per diluted share in the same period of 2008.

Cash Flow and Capital Resources

Net cash provided by operating activities in the first nine months of 2009 was $40.0 million, compared to net cash provided by operating activities of $31.1 million in the first nine months of last year. During the third quarter of 2009, the Company repaid $10.6 million of its long-term bank debt. The Company's balance sheet as of September 30, 2009 included $230.8 million in total bank debt, which is leverage of approximately 2.2 times trailing 12-month non-GAAP adjusted EBITDA.

2009 Financial Guidance

The Company refined its 2009 financial guidance, as follows:

 (In millions, except EPS)   12 Months ended 12/31/09

 Net Revenue:                Updated         Previous

 Revenue Cycle Management    $ 206 - 209     $ 210 - 216

 Spend Management            133 - 136       134 - 140

 Total Net Revenue           341 - 345       346 - 354

 Diluted EPS                 0.31 - 0.37     0.29 - 0.37

 Non-GAAP adjusted EBITDA    110 - 114       111 - 117

 Non-GAAP cash diluted EPS   $ 0.78 - 0.84   $ 0.76 - 0.84

At September 30, 2009, the Company's rolling 12-month non-GAAP contracted revenue was an estimated $356.0 million ($222.4 million from the Revenue Cycle Management segment and $133.6 million from the Spend Management segment). This is a year-over-year increase of 19.5% on a consolidated basis, and a 7.1% increase when compared to the rolling 12-month total of $332.4 million as of June 30, 2009.

Conference Call Information

Time/Date: 5:00 p.m. ET today, Wednesday, October 28, 2009

Phone: 866-811-1812 (or 702-696-4559 international/local), conference code 33693258

Webcast: http://ir.medassets.com, "Events & Presentations" page

Replay: Webcast will be archived for at least 30 days, or call 800-642-1687 (conf code 33693258)

The Company intends to file its Form 10-Q for the third quarter and nine-month period ended September 30, 2009 with the Securities and Exchange Commission on or before November 9, 2009, and this filing will contain additional information about the Company's results of operations.

About MedAssets

MedAssets (NASDAQ: MDAS) partners with healthcare providers to improve their financial strength by implementing spend management and revenue cycle solutions that help control cost, improve margins and cash flow, increase regulatory compliance, and optimize operational efficiency. MedAssets serves more than 125 health systems, 3,300 hospitals and 30,000 non-acute care healthcare providers. For more information, go to www.medassets.com.

Use of Non-GAAP Financial Information

In order to provide investors with greater insight, promote transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making, the Company supplements its consolidated financial statements presented on a GAAP basis with non-GAAP financial information, including: gross fees; revenue share obligation; EBITDA; adjusted EBITDA; cash diluted EPS; acquisition-affected net revenue; acquisition-affected EBITDA; acquisition-affected adjusted EBITDA; and contracted revenue.

Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures, where possible, are included in the accompanying financial schedules. Also, see "Use of Non-GAAP Financial Measures" following these financial schedules for more information.

Safe Harbor Statement

This Press Release contains statements that constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained in this Press Release include the intent, belief or current expectations of the Company and its management team with respect to the Company's future business operations that include, but are not limited to: 2009 projections, costs and revenue growth, margin and other financial projections; contracted revenue forecasts; and the Company's ability to successfully integrate and capitalize on synergies associated with its past acquisitions. Investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to: failure to realize improvements in performance, efficiency and profitability; failure to complete anticipated sales under negotiations; failure to successfully implement revenue backlog; lack of revenue growth; client losses; and adverse developments with respect to the operation or performance of the Company's business units or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can also be found in the Company's Risk Factor disclosures in its Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission and available at http://ir.medassets.com. The Company disclaims any responsibility to update any forward-looking statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

In 000s,
except per        Three Months Ended                       Nine Months Ended
share data

                  September 30,                            September 30,

                    2009          2008        %              2009           2008         %
                                              Change                                     Change

Revenue:

Administrative    $ 25,631      $ 25,663      -0.1   %     $ 78,495       $ 78,355       0.2    %
fees, net

Other service       56,762        50,309      12.8   %       167,091        117,610      42.1   %
fees

Total net           82,393        75,972      8.5    %       245,586        195,965      25.3   %
revenue

Operating
expenses:

Cost of             21,472        17,101                     55,830         36,252
revenue

Product
development         4,156         4,719                      15,424         11,027
expenses

Selling and
marketing           10,038        9,641                      36,529         32,096
expenses

General and
administrative      23,039        22,779                     77,971         66,054
expenses

Depreciation        3,125         2,581                      9,020          7,051

Amortization        7,018         7,324                      21,029         16,117
of intangibles

Impairment of
property and
equipment,
intangibles         -             -                          -              2,079
and in process
research and
development

Total
operating           68,848        64,145      7.3    %       215,803        170,676      26.4   %
expenses

Operating           13,545        11,827      14.5   %       29,783         25,289       17.8   %
income

Other income
(expense):

Interest            (4,259 )      (5,803 )    -26.6  %       (14,015 )      (15,120 )    -7.3   %
(expense )

Other income        223           228                        404            (2,101  )
(expense)

Income before       9,509         6,252                      16,172         8,068
income taxes

Income tax          3,613         2,566                      6,196          3,259
expense

Net income          5,896         3,686       60.0   %       9,976          4,809        107.4  %

Basic net
income per          0.11          0.07                       0.18           0.10
share

Diluted net
income per        $ 0.10        $ 0.07        42.9   %     $ 0.17         $ 0.09         88.9   %
share

Weighted
average shares      54,792        53,715                     54,589         48,493
-- basic

Weighted
average shares      57,855        56,136      3.1    %       57,223         51,035       12.1   %
-- diluted

CONSOLIDATED BALANCE SHEETS

                                                   September 30,    December 31,

In 000s, except shares                               2009             2008

                                                   Unaudited        Audited

ASSETS

Current

Cash and cash equivalents                          $ 4,675          $ 5,429

Accounts receivable, net of allowances of $1,898
and $2,247 as of                                     55,638           55,048
September 30, 2009 and December 31, 2008

Deferred tax asset, current                          13,780           13,780

Prepaid expenses and other current assets            7,476            5,997

Total current assets                                 81,569           80,254

Property and equipment, net                          53,123           42,417

Other long term assets

Goodwill                                             511,861          508,748

Intangible assets, net                               102,756          124,340

Other                                                19,586           18,101

Other long term assets                               634,203          651,189

Total assets                                       $ 768,895        $ 773,860

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable                                   $ 6,954          $ 6,725

Accrued revenue share obligation and rebates         24,700           29,698

Accrued payroll and benefits                         17,851           21,837

Other accrued expenses                               7,846            6,981

Deferred revenue, current portion                    25,886           24,280

Deferred purchase consideration                      -                19,361

Current portion of notes payable                     2,499            30,277

Current portion of finance obligation                159              149

Total current liabilities                            85,895           139,308

Notes payable, less current portion                  228,287          215,349

Finance obligation, less current portion             9,737            9,860

Deferred revenue, less current portion               5,483            6,411

Deferred tax liability                               13,834           15,817

Other long term liabilities                          5,296            4,176

Total liabilities                                    348,532          390,921

Stockholders' equity

Common stock, $0.01 par value, 150,000,000
shares authorized; 56,488,000 and 53,917,000         565              539
shares issued and outstanding as of September
30, 2009 and December 31, 2008, respectively

Additional paid in capital                           632,631          605,340

Accumulated other comprehensive loss                 (1,957   )       (2,088   )

Accumulated deficit                                  (210,876 )       (220,852 )

Total stockholders' equity                           420,363          382,939

Total liabilities and stockholders' equity         $ 768,895        $ 773,860

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

                                                  Nine Months Ended

In 000s                                           September 30,    September 30,

                                                    2009             2008

Operating activities:

Net income                                        $ 9,976          $ 4,809

Adjustments to reconcile net income from
continuing operations to net cash provided by
operating activities:

Bad debt expense                                    3,823            1,457

Depreciation                                        10,858           7,359

Amortization of intangibles                         21,585           16,806

Loss (gain) on sale of assets                       147              (119     )

Non-cash stock compensation expense                 12,911           6,591

Excess tax benefit from exercise of stock           (6,073  )        (1,697   )
options

Amortization of debt issuance costs                 1,382            895

Noncash interest expense, net                       1,049            906

Deferred income tax (benefit) expense               (36     )        937

Impairment of intangibles                           -                2,079

Changes in assets and liabilities                   (15,671 )        (8,918   )

Cash provided by operating activities               39,951           31,105

Investing activities:

Purchases of property, equipment, and software      (9,233  )        (3,891   )

Capitalized software development costs              (12,268 )        (8,378   )

Acquisitions, net of cash acquired                  (18,275 )        (209,423 )

Cash used in investing activities                   (39,776 )        (221,692 )

Financing activities:

Proceeds from notes payable                         71,797           142,629

Repayment of notes payable and capital lease        (86,638 )        (85,615  )
obligations

Repayment of finance obligation                     (494    )        (483     )

Debt issuance costs                                 -                (6,167   )

Interest accrued on note receivable from            -                (18      )
stockholders

Payment on note receivable from stockholders        -                69

Excess tax benefit from exercise of stock           6,073            1,697
options

Issuance of common stock, net of offering costs     8,333            1,523

Cash (used in) provided by financing activities     (929    )        53,635

Net decrease in cash and cash equivalents           (754    )        (136,952 )

Cash and cash equivalents, beginning of period      5,429            136,952

Cash and cash equivalents, end of period          $ 4,675          $ -

SUPPLEMENTAL SEGMENT REPORTING

RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES

(UNAUDITED)

In 000s                  Three Months Ended September 30,

                           2009                   2008                % Change

Net revenue

Revenue Cycle Management $ 51,635               $ 45,791              12.8     %
("RCM")

Spend Management           30,758                 30,181              1.9      %

Total net revenue          82,393                 75,972              8.5      %

Non-GAAP Adjusted EBITDA              % margin               % margin

Revenue Cycle Management $ 17,964     34.8 %    $ 14,003     30.6 %   28.3     %

Spend Management           15,710     51.1 %      15,207     50.4 %   3.3      %

Corporate                  (5,126  )              (4,009  )           27.9     %

Total non-GAAP Adjusted  $ 28,548     34.6 %    $ 25,201     33.2 %   13.3     %
EBITDA

                         Nine Months Ended September 30,

                           2009                   2008                % Change

Net revenue

Revenue Cycle Management $ 149,425              $ 102,218             46.2     %
("RCM")

Spend Management           96,161                 93,747              2.6      %

Total net revenue          245,586                195,965             25.3     %

Non-GAAP
acquisition-related RCM    -                      28,540
adjustments a

Total non-GAAP
acquisition-affected net $ 245,586              $ 224,505             9.4      %
revenue

Non-GAAP Adjusted EBITDA              % margin               % margin

Revenue Cycle Management $ 44,785     30.0 %    $ 26,043     25.5 %   72.0     %

Spend Management           46,135     48.0 %      46,547     49.7 %   -0.9     %

Corporate                  (15,529 )              (12,323 )           26.0     %

Total non-GAAP Adjusted  $ 75,391     30.7 %    $ 60,267     30.8 %   25.1     %
EBITDA

Non-GAAP
acquisition-related RCM    -                      10,103
adjustments a

Total non-GAAP
acquisition-affected     $ 75,391     30.7 %    $ 70,370     31.3 %   7.1      %
Adjusted EBITDA

(a) Acquisition-related RCM adjustments include the historical results of
Accuro's operations from January 1, 2008 through June 2, 2008 (the date of
acquisition), inclusive of certain purchase accounting adjustments.

See "Use of Non-GAAP Financial Measures" following financial schedules for more
information on non-GAAP measures.

SUPPLEMENTAL REVENUE REPORTING

RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE

(UNAUDITED)

In 000s                                 Three Months Ended

                                        September 30,

ACTUAL                                    2009                 2008

Non-GAAP gross administrative fees      $ 39,222             $ 39,867

Other service fees                        56,762               50,309

Non-GAAP gross fees                       95,984     RSO %     90,176     RSO %

Non-GAAP revenue share obligation         (13,591 )  34.7 %    (14,204 )  35.6 %
(RSO)

Net revenue                             $ 82,393             $ 75,972

                                        Nine Months Ended

                                        September 30,

ACTUAL                                    2009                 2008

Non-GAAP gross administrative fees      $ 119,498            $ 117,634

Other service fees                        167,091              117,610

Non-GAAP gross fees                       286,589    RSO %     235,244    RSO %

Non-GAAP revenue share obligation         (41,003 )  34.3 %    (39,279 )  33.4 %
(RSO)

Net revenue                             $ 245,586            $ 195,965

NON-GAAP ACQUISITION-AFFECTED RESULTS

Non-GAAP gross administrative fees                           $ 117,634

Other service fees                                             117,610

Non-GAAP acquisition-related RCM                               28,540
adjustments b

Non-GAAP gross fees b                                          263,784    RSO %

Non-GAAP revenue share obligation                              (39,279 )  33.4 %

Net revenue b                                                $ 224,505

(b) Non-GAAP, acquisition-affected adjustments include the historical results of
Accuro's operations from January 1, 2008 through June 2, 2008 (the date of
acquisition), inclusive of certain purchase accounting adjustments.

See "Use of Non-GAAP Financial Measures" following financial schedules for more
information on non-GAAP measures.

SUPPLEMENTAL REPORTING OF ADJUSTED EBITDA

RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES

(UNAUDITED)

In 000s                          Three Months Ended       Nine Months Ended

                                 September 30,            September 30,

ACTUAL RESULTS                     2009        2008         2009        2008

Net Income                       $ 5,896     $ 3,686      $ 9,976     $ 4,809

Depreciation                       3,125       2,581        9,020       7,051

Amortization of intangibles        7,018       7,324        21,029      16,117

Amortization of intangibles        801         233          2,391       995
(included in cost of revenue)

Interest expense, net              4,255       5,761        13,994      13,715

Income tax expense                 3,613       2,566        6,196       3,259

Non-GAAP EBITDA                    24,708      22,151       62,606      45,946

Impairment of intangibles          -           -            -           2,079

Share-based compensation           3,951       2,452        12,911      6,591

Rental income from capitalized     (110   )    (109   )     (329   )    (329   )
building lease

Purchase accounting adjustments    (1     )    707          203         2,066

Interest rate swap cancellation    -           -            -           3,914

Non-GAAP Adjusted EBITDA         $ 28,548    $ 25,201     $ 75,391    $ 60,267

NON-GAAP ACQUISITION-AFFECTED
RESULTS

Net Income                                                $ 9,976     $ 4,809

Non-GAAP acquisition-related                                -           (1,674 )
net income

Non-GAAP acquisition-affected                               9,976       3,135
net income

Depreciation c                                              9,020       7,673

Amortization of intangibles c                               21,029      22,321

Amortization of intangibles                                 2,391       995
(included in cost of revenue) c

Interest expense, net c                                     13,994      18,004

Income tax expense c                                        6,196       2,226

Non-GAAP acquisition-affected                               62,606      54,354
EBITDA

Impairment of intangibles                                   -           2,079

Share-based compensation c                                  12,911      7,108

Rental income from capitalized                              (329   )    (329   )
building lease

Purchase accounting adjustments                             203         3,244
c

Interest rate swap cancellation                             -           3,914

Non-GAAP acquisition-affected                             $ 75,391    $ 70,370
Adjusted EBITDA

(c) Non-GAAP, acquisition-affected adjustments include the historical results of
Accuro's operations from January 1, 2008 through June 2, 2008 (the date of
acquisition), inclusive of certain purchase accounting adjustments.

See "Use of Non-GAAP Financial Measures" following financial
schedules for more information on non-GAAP measures.

SUPPLEMENTAL EARNINGS PER SHARE REPORTING

RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES

(UNAUDITED)

                                Three Months Ended        Nine Months Ended

Per share data                  September 30,             September 30,

                                  2009       2008           2009          2008

Diluted EPS attributable to     $ 0.10     $ 0.07         $ 0.17        $ 0.09
common stockholders

Non-cash, tax-adjusted
acquisition-related               0.08       0.08           0.23          0.20
intangible amortization

Non-cash, tax-adjusted            0.04       0.03           0.14          0.08
share-based compensation

Tax-adjusted interest rate        -          -              -             0.05
swap cancellation

Non-cash, tax-adjusted            -          -              -             0.02
impairment of intangibles

Non-GAAP cash diluted EPS       $ 0.22     $ 0.18         $ 0.54        $ 0.44

Weighted average shares -         57,855     56,136         57,223        51,035
diluted (in 000s)

SUPPLEMENTAL 2009 ADJUSTED EBITDA GUIDANCE

RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES

(UNAUDITED)

                                           Guidance Range for

                                           Twelve Months Ending

In 000s                                    December 31,

                                           2009

                                           (Low)          (High)

Net Income                                 $ 18,100       $ 21,200

Depreciation                                 12,700         12,300

Amortization of intangibles                  28,000         28,000

Amortization of intangibles                  3,200          3,200
(included in cost of revenue)

Interest expense, net                        18,200         17,800

Income tax expense                           12,200         14,300

Non-GAAP EBITDA                              92,400         96,800

Share-based compensation                     17,500         17,100

Rental income from                           (400    )      (400    )
capitalized building lease

Purchase accounting                          500            500
adjustments

Non-GAAP adjusted EBITDA                   $ 110,000      $ 114,000

SUPPLEMENTAL 2009 EARNINGS PER SHARE GUIDANCE

RECONCILIATION OF SELECTED NON-GAAP MEASURES TO GAAP MEASURES

(UNAUDITED)

                                           Guidance Range for

                                           Twelve Months Ending

                                           December 31,

In 000s, except per share                  2009
data

                                           (Low)          (High)

Net Income                                 $ 18,100       $ 21,200

Diluted EPS                                  0.31           0.37

Non-cash, tax-adjusted
acquisition-related                          0.29           0.29
intangible amortization

Non-cash, tax-adjusted                       0.18           0.18
share-based compensation

Non-GAAP cash diluted EPS                  $ 0.78         $ 0.84

Fully diluted weighted                       57,400         57,400
average shares outstanding

See "Use of Non-GAAP Financial Measures" following financial schedules for more
information on non-GAAP measures.

Use of Non-GAAP Financial Measures

In order to provide investors with greater insight, promote transparency and
allow for a more comprehensive understanding of the information used by
management and the board of directors in their financial and operational
decision-making, the Company supplements its consolidated condensed financial
statements presented on a GAAP basis with the following non-GAAP financial
information: gross fees, revenue share obligation, EBITDA, adjusted EBITDA;
cash diluted EPS; acquisition-affected net revenue, acquisition-affected
adjusted EBITDA and contracted revenue.

These non-GAAP financial measures may have limitations as analytical tools and
should not be considered in isolation or as a substitute for analysis of the
Company's results as reported under GAAP. The Company compensates for such
limitations by relying primarily on the Company's GAAP results and using
non-GAAP financial measures only supplementally. Where possible, the Company
provides reconciliations of non-GAAP financial measures to the most directly
comparable GAAP measures. Investors are encouraged to carefully review those
reconciliations. In addition, because these non-GAAP measures are not measures
of financial performance under GAAP and are susceptible to varying
calculations, these measures, as defined by the Company, may differ from and
may not be comparable to similarly titled measures used by other companies.

Gross fees include all administrative fees the Company receives pursuant to its
vendor contracts and all other fees the Company receives from customers. The
Company's revenue share obligation represents the portion of the administrative
fees the Company is contractually obligated to share with certain of its GPO
customers. Total net revenue (a GAAP measure) reflects the Company's gross fees
net of its revenue share obligation. These non-GAAP measures assist management
and the board of directors and may be helpful to investors in analyzing the
Company's growth in its Spend Management segment given that administrative fees
constitute a material portion of the Company's revenue and are paid to the
Company by over 1,200 vendors contracted by its GPO, and that the Company's
revenue share obligation constitutes a significant outlay to certain of its GPO
customers.

The Company defines: EBITDA as net income (loss) before net interest expense,
income tax expense (benefit), depreciation and amortization; adjusted EBITDA as
net income (loss) before net interest expense, income tax expense (benefit),
depreciation and amortization and other non-recurring, non-cash or
non-operating items; and adjusted diluted EPS as earnings per share excluding
non-cash acquisition-related intangible amortization and non-recurring expense
items on a tax-adjusted basis. EBITDA, adjusted EBITDA and adjusted diluted EPS
are used by the Company to facilitate a comparison of its operating performance
on a consistent basis from period to period and provides for a more complete
understanding of factors and trends affecting our business. These measures
assist management and the board of directors and may be useful to investors in
comparing the Company's operating performance consistently over time as it
removes the impact of its capital structure (primarily interest charges and
amortization of debt issuance costs), asset base (primarily depreciation and
amortization) and items outside the control of the management team (taxes), as
well as other non-cash (purchase accounting adjustments and imputed rental
income) and non-recurring items, from the Company's operational results.
Adjusted EBITDA also removes the impact of non-cash share-based compensation
expense. EBITDA, adjusted EBITDA and adjusted diluted EPS are not measures of
liquidity under GAAP, or otherwise, and are not alternatives to cash flow from
continuing operating activities.

The Company defines cash diluted EPS as earnings per share excluding non-cash
acquisition-related intangible amortization and non-recurring expense items on
a tax-adjusted basis and non-cash tax-adjusted shared-based compensation
expense. Cash diluted EPS is not a measure of liquidity under GAAP, or
otherwise, and is not an alternative to cash flow from continuing operating
activities. Cash diluted EPS growth is used by the Company as the financial
performance metric tied to the vesting of certain equity awards granted
pursuant to the Company's Long-Term Performance Incentive Plan. Use of this
measure for this purpose allows management and the board of directors to
analyze the Company's operating performance on a consistent basis by removing
the impact of certain non-cash and non-recurring items from our operations, and
by rewarding organic growth and accretive business transactions. As a
significant portion of senior management's incentive based compensation is
based on the achievement of certain cash diluted EPS growth over time,
investors may find such information useful.

Acquisition-affected results include the activity of Accuro prior to the
Company's actual ownership. The Accuro acquisition was consummated on June 2,
2008. These results assume the acquisition of Accuro occurred on January 1,
2008. Acquisition-affected net revenue and adjusted EBITDA are used by
management and the board of directors to better understand the extent of growth
of the Revenue Cycle Management segment. Given the significant impact that this
transaction had on the Company during the fiscal year ended December 31, 2008
and the nine months ended September 30, 2009, the Company believes such
acquisition-affected measures may be useful and meaningful to investors in
their analysis of such growth. Non-GAAP acquisition-affected measures are for
illustrative and informational purposes only and are not intended to represent
or be indicative of what the Company's results of operations would have been if
this transaction had occurred at the beginning of 2008. These measures also
should not be considered representative of the Company's future results of
operations.

Contracted revenue is a forward-looking operating measure used by management
and the board of directors to better understand revenue growth trends within
the Company's business segments as it reflects the Company's current estimate
of contractually committed revenue to be generated under existing customer
contracts in the forward 12-month period. Such information may be useful to
investors in their analysis of the Company's revenue growth trends. A
reconciliation to the most directly comparable GAAP measure cannot be performed
without unreasonable effort.

mdas/F

    Source: MedAssets, Inc.

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