Change Healthcare reported better-than-expected results in the second quarter of 2020 despite the ripple effect from lower patient volumes at its provider clients.
The Nashville-based healthcare technology company reported a loss of $59 million and an earnings loss of 18 cents per share in its first fiscal quarter ending June 30.
In the same period a year ago, Change Healthcare brought in $72 million in profit and reported earnings of 28 cents per share.
Revenue during the quarter also fell 19% to $694 million from $856 million during the same period a year ago, the company reported.
But results topped both the company's forecast and Wall Street expectations. Earnings, adjusted for nonrecurring costs and stock option expense, came to 25 cents per share. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 15 cents per share. Adjusted earnings came to 56 cents per share during the same period last year.
Adjusted EBITDA was $197 million for the most recent quarter. Change Healthcare was expecting adjusted EBITDA to be in the range of $160 million to $175 million and adjusted earnings per share to be in the range of 14 cents to 18 cents per share.
Change Healthcare provides data analytics, artificial intelligence capabilites and revenue cycle management and patient engagement solutions for providers and payers. The company facilitates more than $1.5 trillion in claims and 15 billion transactions annually.
As its provider clients continue to see lower patient volumes and reduced healthcare spending during the pandemic, Change Healthcare's solutions revenue fell 19% or by $149 million during the quarter, Change Healthcare's chief financial officer and executive vice president Fredrik Eliasson said during a first fiscal quarter earnings call Thursday.
Solutions revenue came to $648 million compared to $797 million during the period a year ago.
The company had braced for a bigger financial hit from the pandemic this quarter as compared to the first three months of 2020.
Quarterly revenue also reflected a deferred revenue adjustment of $55 million associated with McKesson's disposition of its ownership interest in Change Healthcare, Eliasson said.
It was a strong first quarter for Change Healthcare "even in the face of these challenging times," he said.
The drop in revenue was partially offset by the net impact of merger and acquisition activity of $6 million and new sales and organic revenue growth in the quarter, he said.
The company made two deals during the quarter to expands its business in the pharmacy network. In June, Change Healthcare acquired PDX for $208 million following its acquisition of e-prescribing company eRx Network for nearly $213 million in May.
During the earnings call, Change Healthcare President and CEO Neil de Crescenzo said he is projecting that utilization levels will not return to pre-COVID levels until the end of its fiscal year, March 2021.
Despite the financial challenges caused by the pandemic, de Cresenzo said the company has focused on rolling out new solutions to address current and future needs of consumers, providers and payers.
"Despite the short-term uncertainty related to COVID-19, we believe positive underlying demand across our portfolio combined with continued innovation will enable us to drive increased value for both our customers and shareholders moving forward," he said.
In June, the company launched a new consumer and financial engagement platform that it developed in collaboration with Microsoft and Adobe. That software, called the connected consumer health solution, provides patients the same experience booking healthcare procedures as shopping for a hotel room or rental car.
Change Healthcare also launched a clinical data retrieval service, a new cloud-based interoperability solution that makes it easy for payers to instantly retrieve patient records from virtually any electronic health record (EHR).
During the quarter, the company signed multimillion-dollar deals in its payer accuracy business as it expanded its relationships with several of the largest managed care companies in the country, de Crescenzo said.
Change Healthcare also signed multimillion-dollar deals with leading regional hospital systems including RWJBarnabas Health and Providence Health system for its imaging solutions.
The company has taken steps to make its data available to researchers and healthcare organizations. It launched an online COVID-19 research database to help healthcare organizations track disease progression and treatment efficacy.
"Change Healthcare has been and will continue to be instrumental in research related to the prevalence and spread of disease, efficacy of treatments, patient tracing and other applications which underscores the value of our data and the significant growth potential ahead of us," de Crescenzo said.