Healthways First-Quarter Earnings Grow 78% to $0.32 Per Diluted Share on Revenue Increase of 29%.Growth in Core Business Exceeds Expectations Adds 10 New Health Plan and 21 New Direct-to-Employer Contracts since End of Fiscal 2006 NASHVILLE, Tenn. -- Ben R. Leedle, Jr., president and chief executive officer of Healthways, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : HWAY HWAY Highway ), today announced financial results for the first quarter of fiscal 2007. Revenues increased 29% for the first quarter, which ended November 30, 2006, to $117,055,000 from $90,592,000 for the first quarter of fiscal 2006. Net income grew 83% to $11,834,000 from $6,456,000. Earnings per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share increased 78% to $0.32 for the first quarter of fiscal 2007 from $0.18 for the first quarter of fiscal 2006. Results for the first quarter of fiscal 2007 included per-share costs of a net $0.10 related to the Company's participation in two Medicare Health Support (MHS (1) (Message Handling Service) An earlier messaging system from Novell that supported multiple operating systems and other messaging protocols, including SMTP, SNADS and X.400. It used the SMF-71 messaging format. ) pilots and $0.02 related to international initiatives. Results for the first quarter of fiscal 2006 included per-share costs of $0.06 related to the MHS pilots and $0.01 related to international initiatives. Excluding MHS and international costs, the earnings per share for the Company's core commercial business increased 76% to $0.44 for the latest quarter from $0.25 for the first quarter of fiscal 2006, compared with core-business guidance for the first quarter of fiscal 2007 in a range of $0.39 to $0.40. [TABLE OMITTED] "We are pleased to report substantial profitable growth for the first quarter of fiscal 2007 as a result of the outstanding performance of our core commercial business, which produced earnings 10% above the high end of our first-quarter guidance for this component of our business," said Leedle. "This performance reflected the continued substantial expansion of our lives under management from existing and new health plan customers, particularly through the growth of our business with self-insured employers on behalf of these customers. "Our core business growth is being driven by rising demand from health plans and employers for programs that engage people at every point along the healthcare continuum. Healthways is meeting this demand through its differentiated Health and Care Support(SM) services, which are the industry's most comprehensive, single source solution to improving people's health and lowering their healthcare costs. With the completion of the acquisition of Axia Health Management, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (Axia) on December 1, 2006, we are even better positioned to meet future demand for comprehensive, personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. and integrated programs and services proven to successfully engage entire populations, one person at a time. Further, the profitable growth of our core business has continued to support our initiatives to expand our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be markets beyond the approximately 200 million individuals who comprise the domestic commercial market." * Core Commercial Business Delivers Profitable Results - Healthways produced 76% growth in earnings per diluted share from its core commercial business for the first quarter of fiscal 2007 compared to the first quarter of fiscal 2006. This growth, which follows a comparable-quarter increase in earnings per diluted share for the fourth fiscal quarter of 2006 of 68%, is primarily attributable to the 45% expansion of actual lives under management for self-insured employers to 967,000 from 666,000 at the end of the first quarter of fiscal 2006. Care Support contracts with self-insured employers on behalf of our health plan customers totaled 616 at the end of the first quarter, up 41% from 437 at the same time in fiscal 2006. The expansion of our business with self-insured employers primarily drove the 36% increase in total actual lives under management to 2,462,000 at the end of the first quarter of fiscal 2007 from 1,814,000 at the end of the first quarter of fiscal 2006. It also accounted for our backlog of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. revenues of $7.9 million at the end of the first quarter of fiscal 2007. * Growth Momentum Continues with 46 New, Expanded or Extended Health Plan and Direct-to-Employer Contracts - Healthways' potential for further significant profitable growth within its core commercial business is reflected by the addition, since the end of fiscal 2006, of 14 new, expanded or extended contracts with existing and new health plan customers and 32 additional contracts, which include 29 myhealthIQ(SM) consumer-directed Health Support(SM) contracts and three direct-to-employer Health and Care Support contracts. * Healthways expanded and extended its relationship with Rocky Mountain Health Plans making the Company's myhealthIQ services available to the plan's employer customers. Healthways will continue to provide diabetes, coronary artery disease coronary artery disease, condition that results when the coronary arteries are narrowed or occluded, most commonly by atherosclerotic deposits of fibrous and fatty tissue. (CAD) and heart failure Care Support(SM) services to the plan's members, which it initiated under a three year contract in July 2004. * The Company announced a two-year contract extension with Saint Mary's Saint Mary's, island, Scilly Islands Saint Mary's, England: see Scilly Islands. Health Plans, marking the third contract expansion since the original contract for diabetes services was signed in October 2000. Under the latest expansion, Healthways will add its Care Support programs for end-stage renal disease End-stage renal disease (ESRD) Total kidney failure; chronic kidney failure is diagnosed as ESRD when kidney function falls to 5-10% of capacity. Mentioned in: Chronic Kidney Failure end-stage renal disease (ESRD ESRD end-stage renal disease. ESRD End-stage renal disease; chronic or permanent kidney failure. Mentioned in: Dialysis, Kidney ESRD End-stage renal disease, see there ) and chronic kidney disease Chronic kidney disease (CKD), also know as chronic renal disease, is a progressive loss of renal function over a period of months or years through five stages. Each stage is a progression through an abnormally low and progressively worse glomerular filtration rate, which is (CKD See count-key-data. ) to its current offering, which includes diabetes, chronic obstructive pulmonary disease chronic obstructive pulmonary disease n. Abbr. COPD A chronic lung disease, such as asthma or emphysema, in which breathing becomes slowed or forced. (COPD COPD chronic obstructive pulmonary disease. COPD abbr. chronic obstructive pulmonary disease Chronic obstructive pulmonary disease (COPD) ), asthma, 11 impact conditions and high-risk care management. * Healthways entered a new contract with VISTA Healthplans, a Florida-based commercial and Medicare Advantage insurer, for Health Support programs that include health risk assessment, fitness center access, online coaching and personal health improvement programs for physical activity, nutrition, and smoking cessation smoking cessation Public health Temporary or permanent halting of habitual cigarette smoking; withdrawal therapies–eg, hypnosis, psychotherapy, group counseling, exposing smokers to Pts with terminal lung CA and nicotine chewing gum are often ineffective. services for certain of its commercial members, as well as the Forever Fit physical activity program for seniors and an innovative massage therapy Massage Therapy Definition Massage therapy is the scientific manipulation of the soft tissues of the body for the purpose of normalizing those tissues and consists of manual techniques that include applying fixed or movable pressure, holding, and/or benefit to its Medicare members. * Healthways announced an expansion of its existing contract with Blue Shield of California Blue Shield of California is a not-for-profit health insurance provider headquartered in San Francisco, California. An independent licensee of the Blue Cross and Blue Shield Association, Blue Shield of California is an incorporated, wholly owned subsidiary of California Physicians' under which the Company makes its diabetes, CAD, COPD and asthma Care Support programs available to the plan's fully-insured members, as it has been with the plan's self-insured employer customers. The new agreement also extends the term of the relationship until December 2009. * The Company extended its existing six-year relationship with HealthSpring for 18 months. Under the new agreement HealthSpring and the Company will extend their joint learnings about effective programming for a Medicare Advantage population to continue to make appropriate program modifications and to expand their highly successful physician pay-for-performance pilot, at scale, across all of HealthSpring's plans. * Healthways signed a new three-year contract with The Boeing Company to bring Healthways' full suite of Care Support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services to approximately 304,000 Boeing employees and dependents, up from 260,000 previously. Healthways began providing services to Boeing in 2004 through a self-insured employer contract on behalf of its health plan customer, The Regence Group. The transition to a direct-to-employer contract was facilitated by Regence, for whom Boeing remains a customer, and by Boeing's healthcare consultant, Mercer mer·cer n. Chiefly British A dealer in textiles, especially silks. [Middle English, from Old French mercier, trader, from merz, merchandise, from Latin merx . * At the start of calendar 2007, the Company launched eleven new Health Support contracts that Axia signed prior to the closing of the acquisition on December 1, 2006, including nine for health plans' Medicare Advantage programs. These contracts include two new Silver Sneakers sneakers Noun, pl US, Canad, Austral & NZ canvas shoes with rubber soles sneakers npl (US) → zapatos mpl de lona; zapatillas fpl [R] Fitness Program contracts, which provide health and wellness programs for seniors, with Blue Cross Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. of Arkansas and Presbyterian Health Plan. Seven of the remaining contracts are for the Forever Fit physical activity program for seniors and were signed with Coventry Health Care Coventry Health Care, Inc. (Coventry) (NYSE: CVH) is a managed health care company in the United States. On February 8th of 2007 Coventry agreed to acquire Concentra's Workers Compensation Managed Care Services Businesses. External links
* The Company continued to expand the number of myHealthIQ contracts, with 29 new agreements signed since the start of fiscal 2007, putting the Company on pace to double the number of these contracts for the second consecutive fiscal year. The Company believes the market's reception of myHealthIQ is representative of the potential of Healthways' ongoing innovative initiatives to develop and implement Health and Care Support programs that meaningfully engage whole populations. * New Markets - The Company believes its investments in the Medicare and International markets will provide significant long-term growth opportunities and returns for its shareholders. At the same time, the early stage of these markets makes it difficult to predict, in the short term, the levels of revenues and earnings associated with those efforts. * MHS Pilots - Based on the receipt of essentially complete first-year data which revealed smaller separation from the control group than reflected in previous reports, the Company's net per share costs in the MHS pilots for the first fiscal quarter of 2007 totaled $0.10 per diluted share, $0.04 more than previously estimated. For the first 15 months of the pilots, per member per month (PMPM PMPM Per Member Per Month PMPM Pilgrim Monument and Provincetown Museum (Massachusetts) ) beneficiary costs, including inflation, have been held flat, which the Company believes reflects meaningful impact resulting from program interventions. To date, however, the control group costs as reflected in the most recent report released by CMS' third party actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin firm are also unchanged, and do not reflect anticipated increases provided by CMS (1) See content management system and color management system. (2) (Conversational Monitor System) Software that provides interactive communications for IBM's VM operating system. nor the results of historical national and regionally-specific trends identified by third-party actuarial analysis Actuarial Analysis The analysis of an investment's risk done by an actuary. Notes: A highly educated actuary will use statistics and historical data in an attempt to measure the risk of a particular investment. See also: Actuary, Life Insurance, Risk, Risk Averse of the Standard Analytical File (better known as the Medicare 5% Sample). The Company has brought this issue to CMS' attention and has received the Agency's commitment to pursue understanding and resolution of this anomaly Abnormality or deviation. Pronounced "uh-nom-uh-lee," it is a favorite word among computer people when complex systems produce output that is inexplicable. See software conflict and anomaly detection. in a timely manner. While the Company has no direct control over the timing of this review by CMS, it will communicate progress toward resolution. Based on the strength of the Company's performance with the intervention group, particularly as compared to the Medicare 5% Sample data, as well as the questions raised by the unanticipated trend of control group costs, the Company is maintaining its fiscal 2007 guidance related to the MHS pilots until this issue can be resolved to the satisfaction of all parties. * International Development - The Company's investments in the international market are proceeding in accordance with its plan and estimates. The Company continues to progress in building the infrastructure and developing the operating plan to meet increasing international demand for programs that effectively address rising healthcare costs. As previously announced, the Company continues to expect to sign its first international contract in fiscal 2007. * Cash Flow from Operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses More than Doubles - Cash flow from operations increased 108% to $9.4 million for the first quarter of 2007 from $4.5 million for the first quarter of fiscal 2006. Because first-quarter cash flow reflects the payout of accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. bonuses for the prior fiscal year, Healthways' first quarter results were on plan for achieving its full-year target for cash flow from operations of $125 million to $130 million. Cash and cash equivalents were $161.9 million at the quarter's end, with no bank debt and stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of $293.6 million. After the end of the first quarter, Healthways used approximately $108 million in cash and approximately $350 million in borrowings under a new $600 million credit facility to fund the Axia acquisition. Financial Guidance Healthways today affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its financial guidance for fiscal year 2007 and established its guidance for the second quarter of the fiscal year. The Company's guidance for revenues for fiscal 2007 is in a range of $667 million to $701 million, a 62% to 70% increase over 2006 revenues of $412 million. The MHS pilots are expected to account for $22 million to $29 million of these revenues, with the remainder expected from the Company's core commercial business including approximately three fiscal quarters from the Axia acquisition on December 1, 2006. While the Company expects to sign international business in fiscal 2007, the Company's guidance does not include any revenues or implementation and operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. from international contracts at this time. [TABLE OMITTED] The Company's guidance for net income per diluted share for fiscal 2007 is in a range of $1.44 to $1.61. The Company's earnings guidance for fiscal 2007 includes net costs in a range of $0.03 to $0.14 per diluted share from the MHS pilots and $0.10 per diluted share for anticipated costs attributable to international initiatives. The Company's core commercial business is expected to produce net income per diluted share in a range of $1.68 to $1.74 for fiscal 2007. [TABLE OMITTED] The Company also established its guidance for net income per diluted share for the second quarter of fiscal 2007 in a range of $0.29 to $0.30, a 45% to 50% increase over second quarter fiscal 2006. The Company's second quarter earnings guidance includes (i) net costs per diluted share of $0.10 related to the MHS pilots; and (ii) costs of $0.02 per diluted share related to anticipated international investment. The Company's core commercial business is expected to produce net income per diluted share in a range of $0.41 to $0.42 for the second quarter of fiscal 2007, a 46% to 50% increase over second quarter fiscal 2006. [TABLE OMITTED] Summary Leedle added, "Our guidance for fiscal 2007 highlights the strength of our core commercial business and its role in enabling us to fund our investment in developing the new government and international markets. These markets each represent very large long-term potential growth opportunities, but as with any development stage business, there is more inherent uncertainty with respect to their short-term growth than our proven core commercial business. Our original MHS guidance for fiscal 2007 was based on our performance in fiscal 2006 including our expectations of both recovering the revenues not recognized in fiscal 2006 and recognizing at least as much new revenue, relative to the decrementing population, in fiscal 2007. Given the inherent difficulties in predicting the exact timing and extent of progression of our new market initiatives, we provided a broad range in our MHS guidance. For the reasons stated earlier, we are not changing our full year MHS guidance at this time." Leedle concluded, "Our results for the first quarter clearly demonstrate continuing strong momentum in our core commercial market for our historic suite of Health and Care Support services. Moreover, the large number of new Health Support contracts reflects that we not only accurately anticipated a significant market shift in which employers are increasingly demanding effective health support solutions that address quality, cost and personalization Custom tailoring information to the individual. On the Web, personalization means returning a page that has been customized for the user, taking into consideration that person's habits and preferences. of services for their employees, but also acted effectively to position the Company as the unqualified industry leader to meet that accelerating demand. We also believe that these capabilities will enable us to be the first to market with a completely integrated WholeHealth solution that will enable those who pay for health care services - plans, employers, governments and individual consumers - to assure provision of the highest quality proven and personalized Health and Care Support solutions for their entire population." Conference Call Healthways will hold a conference call to discuss this release today at 5:00 p.m. Eastern time. Investors will have the opportunity to listen to the conference call live over the Internet by going to www.healthways.com and clicking Investor Relations Investor relations The process by which the corporation communicates with its investors. , or by going to www.earnings.com, at least 15 minutes early to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a telephonic replay will be available for one week at 719/457-0820, code 7866481, and the replay will also be available on the Company's Web site for the next 12 months. Any material information disclosed on the quarterly conference call that has not been previously disclosed publicly will be available on the Company's website at www.healthways.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Provisions This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are based upon current expectations and involve a number of risks and uncertainties. Those forward-looking statements include all statements that are not historical statements of fact and those regarding the intent, belief or expectations of the Company, including, without limitation, all statements regarding the Company's future earnings and results of operations. In order for the Company to utilize the "safe harbor" provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, investors are hereby cautioned that the following important factors, among others, may affect these forward-looking statements. Consequently, actual operations and results may differ materially from those expressed in these forward-looking statements. The important factors include but are not limited to: the timing and costs of implementation, and the effect, of regulations and interpretations relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Medicare Prescription Drug, Improvement, and Modernization Act The Medicare Prescription Drug, Improvement, and Modernization Act (Pub.L. 108-173, 117 Stat. 2066, also called Medicare Modernization Act or MMA) is a law of the United States which was enacted in 2003. of 2003; the Company's ability to accurately forecast performance and the timing of revenue recognition under the terms of its health plan contracts and/or its cooperative agreement with CMS ahead of data collection and reconciliation in order to provide forward-looking guidance; the Company's ability to anticipate the rate of market acceptance of Health and Care Support solutions and the individual market dynamics in potential international markets and the ability of the Company to accurately forecast the costs necessary to implement the Company's strategy of establishing a presence in these markets; the Company's ability to sign and implement new contracts for Health and Care Support services; the Company's ability to effect cost savings and clinical outcomes improvements under Health and Care Support contracts and reach mutual agreement with customers and/or CMS with respect to cost savings, or to effect such savings and improvements within the time frames contemplated by the Company; the ability of the Company's customers and/or CMS to provide timely and accurate data that is essential to the operation and measurement of the Company's performance under the terms of its health plan contracts; the Company's ability to favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. resolve contract billing and interpretation issues with its customers; increased leverage incurred in conjunction with the acquisition of Axia and our ability to service our debt and make principal and interest payments as those payments become due; the Company's ability to integrate the operations of Axia and other acquired businesses or technologies into the Company's business and to achieve the results provided in our guidance with respect to Axia; the Company's ability to renew and/or maintain contracts with its customers under existing terms or restructure these contracts on terms that would not have a material negative impact on the Company's results of operations; unusual and unforeseen patterns of healthcare utilization by individuals with diabetes, cardiac, respiratory and/or other diseases or conditions for which the Company provides services; and other risks detailed in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended August 31, 2006 and other filings with the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any such forward-looking statements. About Healthways Healthways is the leading provider of specialized, comprehensive Health and Care Support(SM) solutions to help millions of people maintain or improve their health and, as a result, reduce overall healthcare costs. Healthways' programs are designed to help healthy individuals stay healthy, mitigate and slow the progression of disease associated with family or lifestyle risk factors and promote the best possible health for those already affected by disease. Our proven, evidence-based programs provide highly specific and personalized interventions for each individual in a population, irrespective of irrespective of prep. Without consideration of; regardless of. irrespective of preposition despite age or health status, and are delivered to consumers by phone, mail, internet and face-to-face interactions, both domestically and internationally. Healthways also provides a national, fully accredited accredited recognition by an appropriate authority that the performance of a particular institution has satisfied a prestated set of criteria. accredited herds cattle herds which have achieved a low level of reactors to, e.g. complementary and alternative Health Provider Network, offering convenient access to individuals who seek health services health services Managed care The benefits covered under a health contract outside of, and in conjunction with, the traditional healthcare system. For more information, please visit www.healthways.com. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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