Change Healthcare Inc. (CHNG) Tops Q4 EPS by 5c, Offers Guidance

Change Healthcare Inc. (NASDAQ: CHNG) reported Q4 EPS of $0.42, $0.05 better than the analyst estimate of $0.37. Revenue for the quarter came in at $843.4 million versus the consensus estimate of $834.82 million.

First Quarter Fiscal 2021 Guidance

Due to uncertainty around the duration of COVID-19, the Company will only be providing quarterly guidance. In addition, Change Healthcare Inc. was required to account for the McKesson exit as a business combination through which Change Healthcare Inc. obtained control of Change Healthcare LLC. As a result, the Change Healthcare Inc. balance sheet is now reflective of the fair value of assets and liabilities of Change Healthcare LLC. The impact of the fair value adjustments is included in our guidance.

For the first quarter of fiscal 2021, the Company expects Solutions revenue to be in the range of $595 million to $620 million, which includes a reduction of $55 million in revenue resulting from an adjustment of deferred revenue to fair value as described in our assumptions below, Adjusted EBITDA to be in the range of $160 million to $175 million and Adjusted EPS to be in the range of $0.14 - $0.18 per share.

The first quarter fiscal 2021 outlook is based on the following key assumptions and expectations and is also subject to risk factors such as those described in the Forward-Looking Statements below:

• Reflects the Company’s current expectation that the largest impact from the COVID-19 pandemic will occur in the first quarter of the fiscal year with a gradual improvement throughout the remainder of the fiscal year as healthcare utilization trends improve.
• Includes the impact of the sale of Connected Analytics and the acquisition of eRx Network as of May 1, 2020, and the acquisition of PDX as of June 1, 2020.
• Assumes a revenue impact due to adjusting deferred revenue as part of fair value adjustments, which reduces revenue recognized by approximately $55 million with no impact on Adjusted EBITDA.
• Interest expense of approximately $70 million, including the impact of $325 million in additional notes and the $250 million draw on the credit facility discussed above and assumes no additional debt paydown during the year. Includes approximately $4 million in non-cash, pre-tax interest expense for fair value adjustments related to the McKesson exit.
• Depreciation and amortization2 expense of approximately $140 million, including approximately $54 million from the impact of fair value adjustments related to the McKesson exit.
• Includes up to $10 million of increased bad debt expense provision in the first quarter consistent with anticipated days sales outstanding increase.

For earnings history and earnings-related data on Change Healthcare Inc. (CHNG) click here.

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