MedAssets Inc. MDAS reported adjusted earnings of 27 cents (including stock-based compensation expense) per share in the third quarter of 2015, beating the Zacks Consensus Estimate by 4 cents but declining almost 7% on a year-over-year basis.
However, shares gained almost 31% ($7.32) to close at $31.00 on Nov 2, following the news of the company’s takeover by Pamplona Capital Management.
Tracking the Top Line
Revenues increased 8.1% on a year-over-year basis to $190.0 million and steered past the Zacks Consensus Estimate of $188 million. Moreover, this was the fourth consecutive quarter of revenue beat for the company.
Excluding Sg2 revenues, which the company acquired in Sep 2014, MedAssets generated revenue growth of 2.3% in the reported quarter.
Spend and Clinical Resource Management (SCM) revenues rose 10.8% on a year-over-year basis to $119.9 million on the back of significant contributions from Sg2 and higher group purchasing administrative fees. Excluding the impact of Sg2, SCM revenues inched up 1.1% on a year-over-year basis.
Revenues from Revenue Cycle Management (RCM) improved 4% to $72.7 million. Technology-related revenues, which consist of 66.1% of total RCM revenues, increased 1.8%. Meanwhile, service-related revenues climbed 8.7%.
Costs & Margins
Operating expenses spiked 20.1% on a year-over-year basis to $181.5 million, primarily owing to 19.9%, 13.1% and 11.8% rise in selling and marketing expenses, cost of revenue and general and administrative expenses, respectively.
Notably, MedAssets implemented an expense reduction program that includes reduction in workforce and other non-employee related expenses. The company incurred $5 million of restructuring expenses in the reported quarter which highlights a 67% year-over-year rise.
Adjusted EBITDA (including stock-based compensation expense) stood at $53.2 million in the third quarter compared with $54.6 million in the year-ago quarter. The decline may be attributed to the hike in operating expenses.
Adjusted EBITDA margin was reported at 28% in the third quarter as compared with 31.1% in the year-ago quarter.
Buyback
Meanwhile, during the third quarter of 2015, MedAssets repurchased shares worth $16.4 million.
Acquisition
On Nov 2, Pamplona Capital Management announced that it has agreed to acquire MedAssets for $2.7 billion in cash ($31.35 per share). Owing to the impending takeover, MedAssets did not provide any financial guidance.
Zacks Rank & Key Picks
MedAssets currently sports a Zacks Rank #1 (Strong Buy).
Other favorably ranked stocks in the medical sector include EDAP TMS SA EDAP, PRA Health Sciences, Inc. PRAH and Masimo Corporation MASI. All the stocks sport a Zacks Rank #1.
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