American CareSource second-quarter revenues decrease to $16.0 million

Aug 13 2010

American CareSource Holdings Inc. (NASDAQ: ANCI) today announced second quarter 2010 revenues of $16.0 million compared to $17.1 million in the corresponding prior year quarter. Net income for the second quarter 2010 was $299,000, or $0.02 per diluted share, compared to $534,000, or $0.01 per diluted share, in the corresponding prior year quarter. Net income for the second quarter 2010 included a federal income tax provision of $137,000, or $0.01 per diluted share, which was not included in net income for the second quarter 2009.

"We are encouraged by the sequential revenue growth we have experienced. This is a direct result of the success we have had attracting and implementing new clients," said David Boone, Chief Executive Officer of American CareSource. "Our focus on direct selling to TPAs is paying dividends. To date, this has been our most successful year in terms of sales productivity as we added 6 accounts, which have generated approximately $1.4 million in revenue during the first half of 2010. Our pipeline remains robust and we will continue to capitalize on it to build our backlog of business during the second half of the year."

Revenues

Revenues for the second quarter of 2010 were $16.0 million compared to $17.1 million reported during the second quarter of 2009. Compared to the second quarter of 2009, claims volumes from our two key client accounts were down 25% and continued to apply downward pressure on revenue. Revenues from the Company's two key accounts accounted for 80% of second quarter 2010 revenues compared with 88% during the corresponding period last year.

Revenues in the second quarter of 2010 increased 11% compared to the first quarter of 2010 due to a 12% improvement in revenue per billed claim, which was a result of a shift in mix toward higher revenue per claim specialties.

Claims Volume

The Company billed 85,000 claims during the second quarter of 2010, a decrease from the 101,000 claims it billed during the same period last year. The lower claims volumes reflect the impact of decreased claims flow from the Company's two key client accounts. Multiple factors contributed to the declines, including the loss of covered lives and payor groups for these clients due to macroeconomic factors, the presence of larger carriers in the market, the loss of the Company's relationship with a national laboratory service provider in the third quarter of 2009 and the transition status of one of our key client accounts. Excluding these two accounts, claims volumes from all other accounts were up 11%.

Revenues per billed claim increased to $188 during the second quarter of 2010 from $169 during the second quarter of 2009. The increase in both revenue per processed claims and revenue per billed claims was driven by a shift in mix toward higher revenue per claim specialties, particularly dialysis services, from lower revenue per claim specialties such as laboratory and chiropractic services.

Following are claims volumes and revenue per claims for the periods presented:

Contribution Margin

Contribution margin for the second quarter of 2010 decreased slightly to 13.5%, compared to 13.7% reported during the second quarter of 2009. Provider margins improved compared to the prior year period due to a change in mix toward specialties that carry higher margins, specifically diagnostic imaging services, chiropractic services and dialysis services. Provider margins were offset somewhat by higher administrative fees due to greater revenue contribution from clients that carry higher relative administrative fee rates.

Following is a comparison of the components of costs of revenue as a percentage of revenue:

Selling, General and Administrative Expenses (SG&A)

SG&A for the second quarter of 2010 was $1.5 million, or 9.6% of revenue, compared to $2.0 million, or 11.6% of revenue for the second quarter of 2009 and $1.9 million, or 12.9% of revenue, for the first quarter of 2010. Lower SG&A is a reflection of cost control measures implemented to maintain and ensure continued profitability.

Adjusted EBITDA

Adjusted EBITDA for the second quarter of 2010 was $856,000, which compares to $750,000 reported in the corresponding prior year period.

Adjusted EBITDA is defined as operating income before depreciation and amortization and excludes non-cash stock-based compensation expense, warrant amortization and severance costs. Adjusted EBITDA should be considered in addition to, but not in lieu of, income from operations reported under generally accepted accounting principles (GAAP).

A reconciliation of adjusted EBITDA to operating income is provided in the tables accompanying this release.

Operating Income

During the period, the Company reported operating income of $425,000, compared to operating income of $233,000 reported during the same period last year. The increase reflects a decline in SG&A associated with the implementation of cost control measures.

Financial Liquidity

Cash and equivalents at June 30, 2010 totaled $11.3 million, which compares to $11.9 million reported at December 31, 2009. The Company has no long-term debt outstanding.