MedAssets - CompanyFundamentals Flashcards
How and when did MDAS enter the acute RCM market?
2008 acquisition of Accuro Healthcare.
- Sterne Agee, 6/11/2014
At the Aug 2014 Investor Day, Medassets talked about 3 things, in addition to its new acquisition:
- GPO performance year to date
- Last quarter’s Q2 GPO performance - what did they say?
- Current quarter Q3 - what did they say?
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- Rising revenue share obligations: what are the causes and implications? Explain the quarter to quarter fluctuation in RSO.
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- Performance related fees: what is anticipated performance related fees earned in FY 2014? Explain quarterly variability.
- Weak GPO fees in Q2 was a “one time” occurence; MDAS stock down 15% after earnings report.
- SCM results have 90 day lag
- Q2 impacted by weather and there is no drop-off in the core GPO business
- Higher administrative fees in July; signs of improving volume trends
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- Revenue Share
Revenue Share Obligations : occasionally MDAS will give away higher RSO in return for more performance improvement work. RSO percentages will likely increase over time due to the “commoditized” nature of group purchasing activity. It is MDAS’ positioning as a full “performance improvement company” that would allow the business to differentiate itself beyond discounted purchasing. MDAS recently expanded its relationship with Kaiser Permanente beyond GPO to provide Spend Analytics and Strategic Sourcing solutions
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- 2014: $16-20 mm performance related fees. Timing is related to the fact that revenue from this is not recognized until clients achieve performance targets. Variability of when these fees are booked is related to:
a) timing of when contracts were initially signed
b) achievement of the performance targets
c) clients signing off on revenue release after the targets are met
Although performance fees are recognized according to these factors, costs are booked when they are incurred. Therefore, there will be elevated margins in some quarters when the revenues come in (typically in the Q1 and Q4 range).
Source: Eric Percher, Barclays, 8/14/2014
At the Aug 2014 Investor Day, Medassets talked about its acquisition.
Name of company:
Price:
Analyst view on this acquisition:
Business overview:
Year founded:
employees:
Business model evolution:
Flagship product:
CEO:
Source: Eric Percher, Barclays, 8/14/2014
Name of company: Sg2
Price: $142 mm
Analyst view on this acquisition: Few synergies and cost savings; Sg2 is a growth platform and MDAS will invest in this asset to broaden and integrate its offerings. Sg2 has significant C-suite relationships that can help MDAS sell other offerings. MDAS is expected by analysts to apply Sg2’s analytics to its vast dataset.
Business overview: Provider of healthcare market intelligence, strategic analytics, and clinical consulting services
Year founded: 2001
employees: 200
Business model evolution: Three years ago transformed from a consulting business to a SAAS-based software technology business that generates most of its revenue from a recurring subscription based model
Flagship product: EDGE, a SAAS-based platform that uses national, regional, and local data trends to find growth opportunities within a delivery network
From Sg2 website:
“The applications within Sg2 Analytics integrate a wide variety of data sources (eg, Medicare, Nielsen, state data, national data sets, your hospital data) with Sg2’s proprietary methodologies and expert analyses to create a comprehensive view of your organization and market”
CEO: Steve Lafar
Source: Eric Percher, Barclays, 8/14/2014
When did Sg2 acquisition close?
What is Sq2’s full-year 2014 net revenue?
What is acrretion/dilution guidance?
How was acquisition paid for?
When did Sg2 acquisition close? 9/22/14
What is Sq2’s full-year 2014 net revenue? $40mm
What is acrretion/dilution guidance? “slightly accretive” in FY2015
How was acquisition paid for? existing credit facility
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MedAssets purchased Sg2 for approximately $142 million (subject to certain purchase price adjustments), which was funded with borrowings under its existing credit facility.
The Sg2 business is expected to be slightly accretive in calendar 2015 on stand-alone basis, and MedAssets may increase its investment to drive additional long-term growth opportunities.
Sg2’s full-year 2014 net revenue is expected to be approximately $40 million (excluding any potential write down of deferred revenue resulting from purchase accounting adjustments), of which about 75 percent should be derived from SaaS analytics tools generating highly-recurring subscription fees.
The company plans to update its fourth quarter and full-year 2014 financial guidance at the time of its third quarter financial report, currently scheduled for Wednesday, October 29, after market close.
Source: MDAS press release, 9/22/14
