Change Healthcare reported a loss of $109 million in the first three months of 2020 as the company felt the impact of lower patient volumes at its provider clients and reduced healthcare spending.
In the same period a year ago, the Nashville, Tennessee-based company brought in $38 million in profit and reported earnings of 15 cents per share.
In its fourth fiscal quarter ending March 31, Change Healthcare reported a loss of 34 cents per share.
The results beat Wall Street expectations. Earnings, adjusted for nonrecurring costs and stock option expense, came to 42 cents per share. The average estimate of 10 analysts surveyed by Zacks Investment Research was for earnings of 37 cents per share.
Change Healthcare provides data analytics, software and network solutions for providers and payers. The company's quarterly revenue took a hit of $6.3 million due to the impact of the COVID-19 pandemic, Change Healthcare's chief financial officer and executive vice president Fredrik Eliasson said during a fourth fiscal quarter and fiscal year earnings call Thursday.
In April, the company saw medical claims transactions drop to 38% from pre-COVID-19 levels.
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"We are seeing early indicators of recovery based on claims volume. As utilization increases, we will see relatively consistent improvement in our business," said company CEO and President Neil de Crescenzo.
Eliasson said the company expects a bigger hit to its financial performance in the current quarter ending in July due to the COVID-19 pandemic.
The company's net loss in the quarter was primarily impacted negatively due to recognition of a $164.6 million McKesson tax receivable agreement liability as a part of McKesson's disposition of its ownership interest in Change Healthcare. The adoption of a new accounting standard also reflected an unfavorable revenue impact of $10.6 million, according to the company.
Change Healthcare posted revenue of $843.4 million in the quarter, up 0.8% from the same period a year ago. That also topped Street forecasts. Eight analysts surveyed by Zacks expected $839.5 million.
Solutions revenue grew 1% to $843.4 million.
Within its business segments, software and analytics revenue for the quarter came in at $418.7 million, down 0.1% on a year-over-year basis. Network solutions revenue grew 8.6% to $152.2 million. Technology-enabled services revenue came in at $242.4 million, down 0.6% year over year.
Change Healthcare reported an operating loss of $661.5 million, narrower than the year-ago operating loss of $971 million.
The company exited the quarter with cash and cash equivalents of $410.4 million compared with $3.4 million in the prior quarter.
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In its first year as a public company, Change Healthcare posted annual revenue of $3.3 billion, up 0.6% from the previous year. For the year, the company reported a loss of $5.6 million, or 2 cents per share.
"Change Healthcare delivered strong performance in our first year as a public company, achieving our desired financial and operational goals, executing on our transformation initiatives, and strengthening our platform for future growth. In fiscal 2020, we delivered underlying growth across all three segments, expanded margins, and delivered strong free cash flow," de Crescenzo said.
The company has used its technology expertise to accelerate innovation and address specific needs for providers and payers during the COVID-19 crisis, he said.
Change Healthcare rolled out new services including its National Payments Connector solution to drive increased electronic payments and a virtual front desk to enable touchless waiting rooms for providers.
Recognizing the rapid adoption of telehealth, the company rolled out new services that combine industry-standard application programming interfaces, software solutions and hardware bundles to help telehealth platform vendors and healthcare providers rapidly deploy virtual care services.
The company also 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.
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Just this week, the company rolled out a new consumer health platform in collaboration with Microsoft and Adobe.
In the wake of COVID-19, healthcare organizations are becoming more agile and faster to embrace innovation, de Crescenzo said.
Providers are looking to use data analytics to help manage volatility. "COVID-19 has increased people's understanding and appetite for data," he said.
He added, "We're seeing an increase in the pace of innovation. The idea around digital, interoperability, real-time analytics, customers are saying we need to adopt them now."
"The solutions we provide to streamline operations, improve patient engagement, and increase revenue are even more important given the impact of COVID-19," de Crescenzo said.