American CareSource Announces Financial Results for Third Quarter 2012

  American CareSource Announces Financial Results for Third Quarter 2012

Business Wire

DALLAS -- November 08, 2012

American CareSource Holdings (NASDAQ: ANCI), the leading national network of
ancillary healthcare providers, today reported revenue of $8.2 million for the
third quarter of 2012, compared to $11.5 million for the same period in 2011.
Net loss for the quarter was $1.1 million compared to a net loss of $6.5
million for the prior-year period.

Results from the prior-year period included a non-cash goodwill impairment
charge of $2.9 million (net of an income tax benefit of $1.5 million) and a
non-cash valuation allowance against its deferred tax assets of $2.9 million.
Excluding the non-cash goodwill impairment charge and the deferred tax
valuation allowance, the net loss for the three months ended September 30,
2011, was $781,000.

The company ended the quarter with $10.3 million of cash and cash equivalents.

During the quarter, the company made two key appointments: M. Cornelia Outten
was named vice president of strategic development and Ryan P. Hensley was
named director of performance management. The appointments were made to
realign the company’s leadership team with its strategic objectives and
priorities. In their new roles, Ms. Outten will focus on the development of
new products and strategies around our network of service providers, and Mr.
Hensley will analyze internal and external strategic opportunities.

Kenn S. George, CEO and Chairman of the Board, stated, “As we continue to
experience expected declines in legacy accounts, the ACS management team has
been moving decisively to realign the business with clients’ evolving needs.
We have strengthened our product development, performance management and
analytics functions to ensure that our resources, systems and employees share
a common focus: connecting the value of our provider network to the needs of
the marketplace. The result of our efforts will be a more relevant product
portfolio and a more diversified set of revenue streams we believe will begin
to be seen in 2013.”

Net Revenue

Net revenue was $8.2 million for the third quarter of 2012 compared to $11.5
million in the same period in 2011. Non-legacy accounts (those added in
2010-2012) grew 5.5 percent and contributed $3.3 million compared to $3.2
million in the third quarter of 2011. In addition, the non-legacy accounts
grew 9.2 percent in the nine months ended September 30, 2012, compared to the
same period in 2011. The revenue growth from the group of clients is due to
the addition of employer groups that were not previously utilizing our network
and the implementation of four new clients during 2012. Those clients
contributed incremental revenue of $133,000 and $163,000 during the three and
nine months ended September 30, 2012.

For the three months ended September 30, 2012, revenue from ACS' two
significant legacy accounts declined by a combined $3.3 million, or 51
percent, compared to the same period in 2011, due to factors described
previously by the company. Revenue and claims volume from the larger of the
two legacy clients was negatively impacted by issues related to its recent
change in technology platforms, in addition to attrition in its own client
base and a decline in laboratory service claims volume. Revenue from the other
significant legacy account was negatively impacted by its continued transition
related to a business combination. An additional client, which was implemented
in early 2009, exited the health insurance business in 2011 and generated
nominal revenue in the third quarter of 2012 compared to $544,000 in the third
quarter last year.

Claims Volumes

ACS billed 37,000 claims during the third quarter of 2012, a decrease from the
61,000 claims it billed during the same period last year. The lower claims
volume was primarily the result of the decline in claims volume from the
company's two significant legacy clients. Sequentially, claims volume in the
third quarter of 2012 declined 11.9 percent compared to the second quarter of
2012 due to the same factors.

Following are claims volumes for the periods presented:

(Claim amounts in 000’s)    Q3 2012   Q2 2012   Q3 2011
Claims:                                        
Processed                      46          53          73
Billed                         37          42          61
                                                       

Contribution Margin

Contribution margin for the third quarter of 2012 increased to 9.8 percent,
compared to 6.3 percent reported during the third quarter of 2011. The
increase in contribution margin was primarily the result of the decline in
provider payments as a percent of revenue, from 79.1 percent in the third
quarter of 2011 to 74.7 percent in the same period this year. The improvement
in margin on provider payments is the result of the change in mix of clients
generating revenue and claims volume. One of the company’s significant clients
historically carried a lower margin relative to other clients; the client
contributed 8.6 percent of the company's revenue in the third quarter of 2012
compared to 22.1 percent in the same period last year. In addition,
contribution margin benefited from a positive shift in mix toward
higher-margin service categories, such as laboratory services, infusion
services, durable medical equipment and surgery centers.

Following is a comparison of statement of operations components as a percent
of net revenue:

                                      
                                     Q3 2012     Q2 2012    Q3 2011
Provider payments                        74.7  %     74.0  %    79.1  %
Administrative fees                      4.2   %         4.4   %       5.4   %
Claims administration and provider    11.3  %     11.1  %    9.2   %
development
Total cost of revenues                90.2  %     89.5  %    93.7  %
                                                                             

Selling, General and Administrative Expenses (SG&A)

SG&A for the third quarter of 2012 decreased to $1.65 million from $1.71
million in the same period last year. Excluding the impact of a $263,000
restructuring charge, SG&A was $1.45 million in the third quarter of 2011. The
increase, excluding the prior year restructuring charge, was primarily the
result of ongoing sales and marketing investments made earlier in 2012 and
consulting costs incurred during the third quarter related to strategic
initiatives and the review of the organization's structure and alignment.
Those costs were offset by a decline in headcount in ACS' administrative
functions and were a reflection of previously implemented cost control
measures.

SG&A was 20.2 percent of revenues in the third quarter of 2012, compared to
14.9 percent in the third quarter of 2011. The increase is the direct result
of the decline in revenues as compared to the third quarter of last year.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2012 was a loss of $705,000, compared
to a loss of $485,000 reported in the prior-year period.

Adjusted EBITDA is defined as net loss excluding the impact of income taxes,
depreciation and amortization, non-cash stock-based compensation expense,
goodwill impairment charge, amortization of long-term client agreements,
restructuring charges and other non-cash charges. Adjusted EBITDA should be
considered in addition to, but not in lieu of, net income or loss reported
under generally accepted accounting principles (GAAP).

A reconciliation of adjusted EBITDA to net loss is provided in the tables
accompanying this release.

Financial Liquidity

Total cash and cash equivalents at September 30, 2012 were $10.3 million,
compared to $11.3 million reported at December 31, 2011, and compared to $10.6
million reported at June 30, 2012. In addition to the operating loss incurred
during the nine months ended September 30, 2012, the decrease in cash and cash
equivalents includes capital expenditures of $402,000.

The company was debt-free as of September 30, 2012.

About American CareSource Holdings, Inc.

American CareSource Holdings is the first national, publicly traded ancillary
care network services company. The company offers a comprehensive national
network of more than 4,900 ancillary service providers at more than 34,000
sites through its subsidiary, Ancillary Care Services. ACS provides ancillary
healthcare services through its network that offers cost-effective
alternatives to physician and hospital-based services. These providers offer
services in 30 categories including laboratories, dialysis centers,
free-standing diagnostic imaging centers, infusion centers, long-term acute
care centers, home-health services and non-hospital surgery centers, as well
as durable medical equipment. The company’s ancillary network and management
provide a complete outsourced solution for a wide variety of healthcare payors
and plan sponsors including self-insured employers, indemnity insurers, PPOs,
HMOs, third-party administrators and both federal and local governments. For
additional information, please visit www.anci-care.com.

ANCI-F

Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995:

Any statements that are not historical facts contained in this release,
including with respect to the company’s plans, objectives and expectations for
future operations, projections of the company's future operating results or
financial condition, and expectations regarding the healthcare industry and
economic conditions, are forward-looking statements.Substantial risks and
uncertainties could cause actual results to differ materially from those
indicated by such forward-looking statements, including, but not limited to,
the company’s dependence upon its two largest clients and recent declines
intheir business,the company’s inability to attract or maintain providers or
clients or achieve its financial results, changes in national healthcare
policy, federal or state regulation, and/or rates of reimbursement including
without limitation the impact of the Patient Protection and Affordable Care
Act, Health Care and Educational Affordability Reconciliation Act and medical
loss ratio regulations, general economic conditions (including the recent
economic downturns and increases in unemployment), lower than anticipated
demand for ancillary services, pricing, market acceptance/preference, the
company’s ability to integrate with its clients, consolidation in the industry
that affect the company’s key clients, changes in the business decisions by
significant clients, term expirations of contracts with significant clients,
possible termination of relationship with significant clients, increased
competition, decisions by service providers in the company’s network to
terminate their agreements with ACS, the company’s inability to manage growth,
implementation and performance difficulties, and other risk factors detailed
from time to time in the company’s periodic filings with the Securities and
Exchange Commission.Except as otherwise required by law, the company
undertakes no obligation to update or revise these forward-looking statements.

                   
AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(amounts in thousands except per share data)
                                                           
                                                                    
                           Three months ended         Nine months ended
                           September 30,               September 30,
                           2012         2011           2012         2011
                                                                    
Net Revenues               $ 8,186      $ 11,496       $ 25,802     $ 35,881
                                                                    
Cost of revenues:
Provider payments            6,119        9,091          18,992       27,715
Administrative               340          616            1,168        1,791
fees
Claims
administration and          922        1,067        2,865      3,446  
provider
development
Total cost of               7,381      10,774       23,025     32,952 
revenues
                                                                    
Contribution                 805          722            2,777        2,929
margin
                                                                    
Selling, general
and administrative           1,654        1,711          4,549        4,726
expenses
Goodwill                     -            4,361          -            4,361
impairment charge
Depreciation and            222        204          662        585    
amortization
Total operating             1,876      6,276        5,211      9,672  
expenses
                                                                    
Loss before income           (1,071 )     (5,554 )       (2,434 )     (6,743 )
taxes
Income tax                  4          969          28         647    
provision
Net loss                   $ (1,075 )   $ (6,523 )     $ (2,462 )   $ (7,390 )
                                                                    
Loss per basic and
diluted common             $ (0.19  )   $ (1.15  )     $ (0.43  )   $ (1.31  )
share
                                                                    
Basic and diluted
weighted average            5,711      5,670        5,706      5,659  
common shares
outstanding
                                                                    
                                                                    
Reconciliation of
non-GAAP financial
measures to
reported GAAP
financial
measures:
                                                                    
                           Three months ended         Nine months ended
                           September 30,               September 30,
                            2012       2011         2012       2011   
                                                                    
Net loss                   $ (1,075 )   $ (6,523 )     $ (2,462 )   $ (7,390 )
Income tax                   4            969            28           647
provision
Depreciation and             222          204            662          585
amortization
Other                       (6     )    (8     )      (15    )    (32    )
EBITDA                       (855   )     (5,358 )       (1,787 )     (6,190 )
Non-cash
stock-based                  81           187            333          632
compensation
expense
Goodwill                     -            4,361          -            4,361
impairment charge
Amortization of
long-term client             62           62             187          187
agreement
Restructuring
charges (included
in selling,                  7            263            77           263
general and
administrative
expenses)
Client
administration fee          -          -            -          67     
expense related to
warrants
EBITDA, as                 $ (705   )   $ (485   )     $ (1,190 )   $ (680   )
adjusted
                                                                    

                                                          
AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
                                                         
                                            September 30,
                                            2012
                                            (unaudited)     December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents                   $  10,295       $    11,315
Accounts receivable, net                       2,620             4,317
Prepaid expenses and other current assets     387             565      
Total current assets                           13,302            16,197
                                                            
Property and equipment, net                    1,665             1,829
                                                            
Other assets:
Other non-current assets                       239               242
Intangible assets, net                        800             896      
TOTAL ASSETS                                $  16,006      $    19,164   
                                                            
LIABILITIES and STOCKHOLDERS' EQUITY
                                                            
Current liabilities:
Due to service providers                    $  2,575        $    3,678
Accounts payable and accrued liabilities      1,288           1,237    
Total current liabilities                      3,863             4,915
                                                            
EQUITY
Common stock                                   57                57
Additional paid-in capital                     22,770            22,414
Accumulated deficit                           (10,684  )       (8,222   )
                                              12,143          14,249   
TOTAL LIABILITIES AND EQUITY                $  16,006      $    19,164   
                                                            


AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(amounts in thousands)
                                                                
                                                       Nine months ended
                                                       September 30,
                                                       2012         2011
Cash flows from operating activities:
Net loss                                               $ (2,462 )   $ (7,390 )
                                                                             
Adjustments to reconcile net loss to net cash used
in operations:
Non-cash stock-based compensation expense                333          632
Depreciation and amortization                            662          585
Goodwill impairment charge                               -            4,361
Amortization of long-term client agreement               187          187
Client administration fee expense related to             -            67
warrants
Deferred income taxes                                    3            615
Changes in operating assets and liabilities:
Accounts receivable                                      1,697        1,730
Prepaid expenses and other assets                        -            (81    )
Accounts payable and accrued liabilities                 73           76
Due to service providers                                (1,103 )    (3,662 )
Net cash used in operating activities                   (610   )    (2,880 )
                                                                    
Cash flows from investing activities:
Investment in software development costs                 (302   )     (513   )
Investment in property and equipment                    (100   )    (58    )
Net cash used in investing activities                   (402   )    (571   )
                                                                    
Cash flows from financing activities:
Payment of income tax withholdings on net exercise
of                                                      (8     )    -      
equity incentives
Net cash used in financing activities                   (8     )    -      
                                                                    
Net decrease in cash and cash equivalents                (1,020 )     (3,451 )
Cash and cash equivalents at beginning of period        11,315     14,512 
                                                                    
Cash and cash equivalents at end of period             $ 10,295    $ 11,061 
                                                                    
Supplemental cash flow information:
Cash paid for taxes, net of refunds received           $ 49        $ 65     
                                                                    
Supplemental non-cash financing activity:
Income tax withholdings on conversion of equity        $ -         $ 37     
incentives
Accrued bonus paid with equity incentives              $ 23        $ -      
                                                                    

Contact:

American CareSource Holdings
Matthew D. Thompson, 972-308-6830
Chief Financial Officer
mthompson@anci-care.com
 
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