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8-K - FORM 8-K - American CareSource Holdings, Inc.anci2012q28-k.htm



American CareSource Announces Financial Results for Second Quarter 2012

DALLAS, August 9, 2012 — American CareSource Holdings (NASDAQ: ANCI), the leading national network of ancillary healthcare providers, today reported revenue of $8.2 million for the second quarter of 2012, compared to $11.3 million for the same period in 2011. Net loss for the quarter was $829,000 compared to a net loss of $645,000 for the prior-year period.
Kenn S. George, CEO and Chairman of the Board stated, “While we are disappointed but not surprised by the continued declines in our legacy accounts, we are focused and working assiduously on preserving that revenue stream, in part by providing technical support to our clients to accelerate the claims flow cycle.” Mr. George continued, “More importantly, we are directing energy and resources into strategic initiatives that will offset our torpid sales conversion ratio and will diversify our revenue sources to facilitate growth in the future.”





Net Revenue
Overall, net revenue was $8.2 million for the second quarter of 2012 compared to $11.3 million in the same period in 2011. Non-legacy accounts (added in 2010-2012) contributed $2.7 million compared to $3.1 million in the second quarter of 2011. The decline in non-legacy accounts was primarily the result of technology issues experienced by two clients that negatively impacted claims flow to ACS and collection of billed amounts. While the estimated impact to second quarter revenue is estimated at approximately $305,000, ACS continues to proactively work with the clients to resolve the issues. Despite these issues, the non-legacy accounts grew 11 percent in the six months ended June 30, 2012, compared to the same period in 2011.
For the three months ended June 30, 2012, revenue from ACS’ two significant legacy accounts declined by a combined $1.8 million, or 32 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. Revenue from the other significant legacy account was negatively impacted by its continued transition related to a business combination. An additional client that was implemented in early 2009, exited the health insurance business in 2011 and generated no revenue in the second quarter of 2012 compared to $663,000 in the second quarter last year.
Claims Volumes
ACS billed 42,000 claims during the second quarter of 2012, a decrease from the 67,000 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 second quarter of 2012 declined slightly compared to the first quarter of 2012.
Following are claims volumes for the periods presented:

(Claim amounts in 000’s)
Q2 2012
Q1 2012
Q2 2011
Claims:
 
 
 
Processed
53
55
82
Billed
42
44
67






Contribution Margin
Contribution margin for the second quarter of 2012 increased to 10.5 percent, compared to 6.9 percent reported during the second quarter of 2011. The increase in contribution margin was primarily the result of the decline in provider payments as a percent of revenue, from 78.0 percent in the second quarter of 2011 to 74.0 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. ACS’ second-largest client historically carried a lower margin relative to other clients; the client contributed 8.3 percent of the company’s revenue in the second quarter of 2012 compared to 21.7 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 and durable medical equipment.
Following is a comparison of statement of operations components as a percent of net revenue:
 
 
 
 
 
 
Q2 2012

Q1 2012
 
Q2 2011

Provider payments
74.0
%
72.3
%
78.0
%
Administrative fees
4.4
%
4.9
%
4.4
%
Claims administration and provider development
11.1
%
11.0
%
10.7
%
Total cost of revenues
89.5
%
88.2
%
93.1
%
 

Selling, General and Administrative Expenses (SG&A)
SG&A for the second quarter of 2012 decreased to $1.46 million from $1.55 million in the same period last year. The decrease was primarily the result of a decline in headcount in ACS’ administrative functions and was a reflection of previously implemented cost control measures. The declines offset sales and marketing investments made earlier in 2012 and consulting costs incurred during the second quarter related to strategic initiatives and the review of the organization’s structure and alignment.
SG&A was 17.7 percent of revenues in the second quarter of 2012, compared to 13.7 percent in the second quarter of 2011. The increase is the direct result of the decline in revenues as compared to the second quarter of last year.





Adjusted EBITDA
Adjusted EBITDA for the second quarter of 2012 was a loss of $386,000, compared to a loss of $488,000 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, severance costs 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 June 30, 2012 were $10.6 million, compared to $11.3 million reported at December 31, 2011, and compared to $11.4 million reported at June 30, 2011. In addition to the operating loss incurred during the six months ended June 30, 2012, the decrease in cash and cash equivalents is a result of capital expenditures of $235,000 and the prepayment of annual property and casualty insurance premiums of $185,000. The company was debt-free as of June 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 4,800 ancillary service providers at more than 38,000 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 in their 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, 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.
– ### –

Investor Relations Contact:
Matthew D. Thompson
Chief Financial Officer
mthompson@anci-care.com
phone (972) 308-6830





AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(amounts in thousands except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
Net Revenues
 
$
8,215

 
$
11,308

 
$
17,616

 
$
24,385

 
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Provider payments
 
6,078

 
8,815

 
12,873

 
18,624

Administrative fees
 
364

 
503

 
828

 
1,175

Claims administration and provider development
 
909

 
1,211

 
1,943

 
2,379

Total cost of revenues
 
7,351

 
10,529

 
15,644

 
22,178

 
 
 
 
 
 

 
 
Contribution margin
 
864

 
779

 
1,972

 
2,207

 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
1,455

 
1,553

 
2,895

 
3,015

Depreciation and amortization
 
221

 
191

 
440

 
381

Total operating expenses
 
1,676

 
1,744

 
3,335

 
3,396

 
 
 
 
 
 
 
 
 
Loss before income taxes
 
(812
)
 
(965
)
 
(1,363
)
 
(1,189
)
Income tax provision (benefit)
 
17

 
(320
)
 
24

 
(322
)
Net loss
 
$
(829
)
 
$
(645
)
 
$
(1,387
)
 
$
(867
)
 
 
 
 
 
 
 
 
 
Loss per basic and diluted common share
 
$
(0.05
)
 
$
(0.04
)
 
$
(0.08
)
 
$
(0.05
)
Basic and diluted weighted average common shares outstanding
 
17,131

 
16,962

 
17,110

 
16,962

 
 
 
 
 
 
 
 
 
Reconciliation of non-GAAP financial measures to reported GAAP financial measures:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended
 
Six months ended
 
 
June 30,
 
June 30,
 
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
Net loss
 
$
(829
)
 
$
(645
)
 
$
(1,387
)
 
$
(867
)
Income tax provision (benefit)
 
17

 
(320
)
 
24

 
(322
)
Depreciation and amortization
 
221

 
191

 
440

 
381

Other
 
(6
)
 
(10
)
 
(9
)
 
(24
)
EBITDA
 
(597
)
 
(784
)
 
(932
)
 
(832
)
Non-cash stock-based compensation expense
 
121

 
216

 
252

 
445

Amortization of long-term client agreement
 
63

 
63

 
125

 
125

Severance costs (included in selling, general and administrative expenses)
 
27

 

 
70

 

Client administration fee expense related to warrants
 

 
17

 

 
67

EBITDA, as adjusted
 
$
(386
)
 
$
(488
)
 
$
(485
)
 
$
(195
)







AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
 
 
 
June 30, 2012
 
 
 
 
(unaudited)
 
December 31, 2011
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
10,605

 
$
11,315

Accounts receivable, net
 
3,338

 
4,317

Prepaid expenses and other current assets
 
521

 
565

Total current assets
 
14,464

 
16,197

 
 
 
 
 
Property and equipment, net
 
1,684

 
1,829

 
 
 
 
 
Other assets:
 
 
 
 
Other non-current assets
 
239

 
242

Intangible assets, net
 
832

 
896

TOTAL ASSETS
 
$
17,219

 
$
19,164

 
 
 
 
 
LIABILITIES and STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
Due to service providers
 
$
3,049

 
$
3,678

Accounts payable and accrued liabilities
 
1,033

 
1,237

Total current liabilities
 
4,082

 
4,915

 
 
 
 
 
EQUITY
 
 
 
 
Common stock
 
171

 
171

Additional paid-in capital
 
22,575

 
22,300

Accumulated deficit
 
(9,609
)
 
(8,222
)
 
 
13,137

 
14,249

TOTAL LIABILITIES AND EQUITY
 
$
17,219

 
$
19,164









AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(amounts in thousands)
 
 
 
 
 
 
 
Year ended
 
 
June 30,
 
 
2012
 
2011
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(1,387
)
 
$
(867
)
Adjustments to reconcile net loss to net cash used in operations:
 
 
 
 
Non-cash stock-based compensation expense
 
252

 
445

Depreciation and amortization
 
440

 
381

Amortization of long-term client agreement
 
125

 
125

Client administration fee expense related to warrants
 

 
67

Deferred income taxes
 
3

 
(330
)
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
979

 
213

Prepaid expenses and other assets
 
(69
)
 
(130
)
Accounts payable and accrued liabilities
 
(181
)
 
(232
)
Due to service providers
 
(629
)
 
(2,459
)
Net cash used in operating activities
 
(467
)
 
(2,787
)
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Investment in software development costs
 
(138
)
 
(353
)
Investment in property and equipment
 
(97
)
 
(19
)
Net cash used in investing activities
 
(235
)
 
(372
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Payment of income tax withholdings on net exercise of equity incentives
 
(8
)
 

Net cash used in financing activities
 
(8
)
 

 
 
 
 
 
Net decrease in cash and cash equivalents
 
(710
)
 
(3,159
)
Cash and cash equivalents at beginning of period
 
11,315

 
14,512

 
 
 
 
 
Cash and cash equivalents at end of period
 
$
10,605

 
$
11,353

 
 
 
 
 
Supplemental cash flow information:
 
 
 
 
Cash paid for taxes, net of refunds received
 
$
45

 
$

 
 
 
 
 
Supplemental non-cash financing activity:
 
 
 
 
Income tax withholdings on conversion of equity incentives
 
$

 
$
16

Accrued bonus paid with equity incentives
 
$
23

 
$