Superior Consultant (NASDAQ:SUPC)
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Superior Consultant Reports Third Quarter Revenue and Profit
Growth on Consulting and Outsourcing Strength
Strong momentum expected to drive growth in 2005 and beyond
DEARBORN, Mich., Oct. 28 /PRNewswire-FirstCall/ -- Superior Consultant
Holdings Corporation (NASDAQ:SUPC) today reported its third quarter 2004
operating results, confirmed its 2004 annual guidance, and indicated that it
expects continued growth in revenue, EBITDA, and earnings in 2005.
For the third quarter, the company reported a net revenue increase of 23% to
$27.7 million, compared with $22.6 million in the same quarter a year ago, and
$26.9 million in the second quarter of 2004. The company reported a 111%
increase in earnings before interest, taxes, depreciation, and amortization
(EBITDA) for the quarter to $2.3 million and earnings per diluted share of
$0.06, or $0.07 per basic share. The performance compares with EBITDA of $1.1
million and a net loss of ($0.06) per diluted and basic share in the same
quarter last year, and EBITDA of $1.9 million and earnings per diluted and
basic share of $0.03 in the second quarter of 2004.
Outsourcing net revenue increased 56% over the same quarter in the prior year.
Superior has now achieved more than $139 million in outsourcing bookings during
2004, and the outsourcing sales prospect pipeline has increased to
approximately $1 billion from $859 million last quarter. Additionally, the
company signed a Letter of Intent with another mid-sized health system for an
information technology infrastructure outsourcing assignment.
Consulting net revenue remained consistent with the same quarter in the prior
year. During the quarter, the company gained $18.8 million in new consulting
bookings, an increase of 27% over the same quarter of 2003. Total consulting
bookings for 2004 reached approximately $72 million as of October 22, 2004.
Included among the significant contract wins during the quarter were several
large system implementation engagements, revenue cycle projects, and clinical
transformation work.
The company expects to meet its increased guidance for 2004 as reported on
September 20, 2004. Superior anticipates that it will enter 2005 at an annual
revenue run rate of $118 million and expects continued revenue improvement. As
of October 27, 2004, the booked revenue backlog for 2005 is $81.6 million.
"Superior's success in constructing a unique set of services that bring
tangible return to our healthcare clients is gaining increasing favor in the
market," said Chief Executive Officer Richard D. Helppie. "Coupled with
disciplined sales management and delivery, we expect to gain additional
outsourcing and consulting clients who seek the results of Superior's
healthcare expertise, healthcare domain depth and robust IT infrastructure. The
growth figures recorded to date, together with the visibility provided by our
recurring revenue backlog and the opportunities in our sales prospect pipeline,
give us confidence for a strong finish to 2004 and momentum in 2005 and
beyond."
"Superior increased its net revenue over the same quarter last year and
achieved additional operating efficiencies," said Richard R. Sorensen, Chief
Financial Officer. "We reported increases in our profit, operating margin,
operating cash, and EBITDA. We ended the quarter with $12.1 million in cash.
Uses of cash during the quarter consisted primarily of capital purchases for
software, equipment, and associated implementation services related to our
outsourcing contracts and debt service associated with our financing
arrangements."
The company generated $2.7 million in cash from operations.
Superior has secured $16 million in financing for recent and future capital
expenditures associated with new outsourcing contracts and for general capital
requirements. Also, the company is evaluating additional credit sources and
indicates that interest in supporting the company's capital requirements
appears strong.
SG&A in the third quarter improved to 21.8% of net revenue from 22.5% last
quarter and 28.7% in the same quarter of 2003. Days Sales Outstanding (DSO)
were 51, compared with 55 last quarter and 50 one year ago.
Operating margin improved to 3.4% in the quarter, compared with 2.1% (4.2%
excluding the impact of the sale of the company's former headquarters building)
in the prior quarter and (1.1%) in the same quarter of 2003. Gross margin for
the quarter was 25.2%, compared with 27.7% in the same quarter one year ago and
26.6% last quarter.
"Superior's outsourcing and consulting units achieved sales and delivery
success," said George S. Huntzinger, President and Chief Operating Officer. "As
noted, we have signed a Letter of Intent with a Midwest health system, making
it the ninth middle-market health system to make use of Superior's
healthcare-specific IT infrastructure. In consulting, we won new clinical
transformation, application delivery, and revenue cycle engagements as well as
strategic and IT planning engagements. We were awarded more than 20 consulting
engagements, each valued in excess of $200,000, four of which are valued in
excess of $1 million. We gained 25 new clients and $18.8 million in accepted
consulting proposals during the third quarter. Year to date, we have achieved
approximately $72 million in consulting sales, exceeding our original forecast
of $56 million to $62 million for the entire year. And, during the course of
all of this, we moved to our new corporate headquarters in Dearborn, Michigan,"
Huntzinger concluded.
OUTLOOK
"Superior anticipates a strong finish to 2004 and momentum into 2005," said
Helppie. "In analyzing our outsourcing sales prospect pipeline, we show
approximately a billion dollars in middle-market outsourcing opportunity. In
addition, we are getting opportunities for larger contracts."
Superior expects continued growth in 2005 and the years beyond. The company
has a rising revenue run rate, large backlog of sold work, and strong sales
pipelines. The revenue backlogs for 2005 and 2006 are now $81.6 million and
$55.5 million, respectively. The company's recurring revenue has provided
greater visibility. For example, in comparing revenue backlogs as of the end
of the third quarter in 2003 and 2004, the backlog has increased $142 million,
from $217 million to $359 million, or 65%. Similarly, the revenue run rate for
2005 is anticipated to be at least $118 million at the end of 2004, and a
comparable figure for the year prior would be $98 million.
For 2004, the company confirms its expectation to generate EBITDA of $8.9
million, prior to the effect of a non-cash charge related to the second quarter
sale of the former headquarters office building, or $8.3 million after the
effect of the non-cash charge related to the building sale, on revenue of $108
million. Earnings per basic share is expected to reach $0.17, or $0.23 before
the effect of the non-cash charge related to the office building sale.
The revenue forecast for 2004 is based on revenue of $79.2 million for the
first nine months, $26.7 million in fourth-quarter 2004 recognized revenue and
revenue backlog, and current client indications of an additional $1.7 million.
The EBITDA and earnings per basic share forecasts are based on results achieved
in the first nine months of 2004 and expected results for the fourth quarter.
The company's guidance is predicated on anticipated success in winning and
servicing new outsourcing and consulting contracts, achievement of the
anticipated revenue mix between outsourcing and consulting, and continued
expense controls.
Superior anticipates some continued capital expenditures in connection with the
launch and service of outsourcing relationships. The company expects to meet
the capital and cash requirements through the associated outsourcing revenue
streams, operating cash flow, and financing sources.
"Smart application of healthcare information technology can and does improve
quality and reduce costs," concluded Helppie. "We are privileged to be chosen
as partners by healthcare organizations on the front lines of change and
honored to be supported by an outstanding work force."
Conference Call Broadcast:
Superior Consultant's senior executives will discuss the third quarter 2004
results during an investor teleconference scheduled for 11:00 a.m. eastern time
on Friday, October 29, 2004. To listen to the broadcast, participants may log
onto http://www.superiorconsultant.com/ and go to the "Investors" section of
the Web site. We suggest you log onto the Web site 10 minutes prior to the
conference call to download and install any necessary software.
Conference Call Replay:
An online replay will be available after 2:30 p.m. eastern time on Friday,
October 29, 2004, under the "Investors" section of
http://www.superiorconsultant.com/ .
Statements included in this press release which are not historical in nature,
are intended to be, and are hereby identified as "forward-looking statements"
for purposes of the safe harbor provided by Section 21E of the Securities
Exchange Act of 1934, as amended by Public Law 104-67. Forward- looking
statements may be identified by words including, but not limited to:
"anticipate," "believe," "intends," "estimates," "promises," "expect,"
"should," "conditioned upon" and similar expressions. This release contains
forward-looking statements relating to future financial results or business
expectations. Business plans may change as circumstances warrant. Actual
results may differ materially as a result of factors and events which the
company is unable to accurately predict or over which the company has no
control. Such factors include, but are not limited to: the award or loss of
significant client assignments, timing of contracts, recruiting and new
business solicitation efforts, the healthcare market's acceptance of and demand
for the company's offerings, demands upon and consumption of the company's cash
and cash equivalent resources or changes in the company's access to working
capital, regulatory changes and other factors affecting the financial
constraints on the company's clients, competitive pressures (both domestic and
foreign), the ability to successfully manage currency risk, obtain foreign work
permits and otherwise successfully execute and manage international contracts,
economic factors specific to healthcare, general economic conditions,
unforeseen disruptions in transportation, communications or other
infrastructure components, acquisitions under consideration and the ability to
integrate acquisitions on a timely basis. Additional information regarding
these risk factors and others, and additional information concerning the
company are included in the company's reports on file with the Securities and
Exchange Commission.
About Superior Consultant Holdings Corporation
Recipient of Frost & Sullivan's 2003 Best Bang for the Buck Award for providing
services and solutions with the highest ratio of value to cost, Superior
Consultant is a leading national provider of transformational outsourcing,
management and information technology consulting services and solutions to the
healthcare industry. Superior specializes in Digital Business
Transformation(TM) services that enable clients to thrive in the
information-driven economy, and its transformational outsourcing, management
and information technology consulting services and solutions help clients plan
and execute better business strategies and meet their fiscal challenges while
advancing clinical quality. Superior's best practices outsourcing model
includes a full range of flexible business process and information technology
solutions, including data center services, 24/7/365 network monitoring and help
desk services, facility management, interim management, and application
outsourcing services. For 20 years, Superior has been recognized as an
innovative leader within the healthcare industry and has been rewarded with
full and partial outsourcing contracts, thousands of engagements, approximately
170 interim management assignments, and nearly 3,000 clients.
For more information on Superior Consultant Holdings Corporation simply dial
1-800-PRO-INFO and enter the Company ticker: SUPC (a no-cost fax-on- demand
service) or visit the Company's Web site at http://www.superiorconsultant.com/
.
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30, December 31,
ASSETS 2004 2003
Current assets
Cash and cash equivalents $12,093 $12,688
Accounts receivable, net 15,688 12,592
Other current assets 4,016 4,000
Total current assets 31,797 29,280
Property and equipment, net 26,407 24,235
Other long-term assets 199 338
Total Assets $58,403 $53,853
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to bank $4,400 $1,900
Other current liabilities 18,224 16,300
Total current liabilities 22,624 18,200
Senior subordinated debentures, net 7,640 7,552
Long-term liabilities 3,383 5,185
Stockholders' equity 24,756 22,916
Total Liabilities and
Stockholders' Equity $58,403 $53,853
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September September September September
30, June 30, 30, 30, 30,
2004 2004 2003 2004 2003
Revenue
Consulting
Revenue before
reimbursements (net
revenue) $13,149 $13,767 $13,244 $40,085 $40,953
Out-of-pocket
reimbursements (1) 1,875 1,911 1,698 5,245 5,348
Total consulting
revenue 15,024 15,678 14,942 45,330 46,301
Outsourcing
Revenue before
reimbursements (net
revenue) 14,558 13,090 9,345 39,101 26,413
Out-of-pocket
reimbursements (1) 55 101 174 264 399
Total outsourcing
revenue 14,613 13,191 9,519 39,365 26,812
Consolidated revenue 29,637 28,869 24,461 84,695 73,113
Cost of services
Consulting
Cost of services before
reimbursements (net cost
of services) 8,024 8,123 8,285 24,592 25,460
Out-of-pocket
reimbursements (1) 1,875 1,911 1,698 5,245 5,348
Total consulting cost
of services 9,899 10,034 9,983 29,837 30,808
Outsourcing
Cost of services before
reimbursements (net cost
of services) 12,707 11,577 8,057 34,096 23,332
Out-of-pocket
reimbursements (1) 55 101 174 264 399
Total outsourcing cost
of services 12,762 11,678 8,231 34,360 23,731
Consolidated cost of
services 22,661 21,712 18,214 64,197 54,539
Gross Profit
Consulting 5,125 5,644 4,959 15,493 15,493
Outsourcing 1,851 1,513 1,288 5,005 3,081
Consolidated gross
profit 6,976 7,157 6,247 20,498 18,574
Selling, general and
administrative expenses 6,037 6,044 6,493 18,004 19,863
Loss on sale of building - 562 - 562 -
Earnings (loss) from
operations 939 551 (246) 1,932 (1,289)
Other expense, net (251) (205) (344) (712) (573)
Earnings (loss)
before income tax
benefit 688 346 (590) 1,220 (1,862)
Income tax benefit - - - - -
Net earnings (loss) $688 $346 $(590) $1,220 $(1,862)
Net earnings (loss) per share
Basic $0.07 $0.03 $(0.06) $0.12 $(0.17)
Diluted $0.06 $0.03 $(0.06) $0.10 $(0.17)
Weighted average number of
common shares outstanding
Basic 10,495 10,415 10,478 10,423 10,668
Diluted 11,926 11,849 10,478 11,812 10,668
SUPERIOR CONSULTANT HOLDINGS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September September September September
30, June 30, 30, 30, 30,
2004 2004 2003 2004 2003
GAAP to Non-GAAP
Reconciliations:
Consolidated revenue $29,637 $28,869 $24,461 $84,695 $73,113
Less: Out-of-pocket
reimbursements (1) (1,930) (2,012) (1,872) (5,509) (5,747)
Net Revenue $27,707 $26,857 $22,589 $79,186 $67,366
Operating expenses
Consolidated cost of
services $22,661 $21,712 $18,214 $64,197 $54,539
Selling, general and
administrative expenses 6,037 6,044 6,493 18,004 19,863
Loss on sale of building - 562 - 562 -
Operating expenses - GAAP 28,698 28,318 24,707 82,763 74,402
Less: loss on sale of
building - (562) - (562) -
Less: Out-of-pocket
reimbursements (1) (1,930) (2,012) (1,872) (5,509) (5,747)
Operating expenses, as
adjusted $26,768 $25,744 $22,835 $76,692 $68,655
Net earnings (loss) - GAAP $688 $346 $(590) $1,220 $(1,862)
Loss on sale of building - 562 - 562 -
Net earnings (loss),
excluding loss on sale
of building $688 $908 $(590) $1,782 $(1,862)
Basic net earnings (loss)
per share, excluding
loss on sale of building $0.07 $0.09 $(0.06) $0.17 $(0.17)
Diluted net earnings
(loss) per share,
excluding loss on sale
of building $0.06 $0.08 $(0.06) $0.15 $(0.17)
Net earnings (loss) $688 $346 $(590) $1,220 $(1,862)
Depreciation and
amortization 1,369 1,354 1,383 4,079 3,722
Interest expense, net 251 205 301 712 521
Income tax benefit - - - - -
EBITDA $2,308 $1,905 $1,094 $6,011 $2,381
2004 EBITDA, as reported $1,905 $6,011
Adjustment for loss on
sale of building 562 562
2004 EBITDA, adjusted for
loss on sale of building,
amounts used in 2004
annual EBITDA guidance $2,467 $6,573
Capital expenditures, net of
financing $2,669 $3,026 $1,842 $8,301 $5,165
Gross profit % - Consulting
(1) 39.0% 41.0% 37.4% 38.7% 37.8%
Gross profit % - Outsourcing
(1) 12.7% 11.6% 13.8% 12.8% 11.7%
Gross profit % - Consolidated
(1) 25.2% 26.6% 27.7% 25.9% 27.6%
SGA % 21.8% 22.5% 28.7% 22.7% 29.5%
Headcount 677 669 570 677 570
(1) In November 2001, the Financial Accounting Standards Board issued Staff
Announcement Topic No. D-103, "Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred," which states that
reimbursements received for out-of-pocket expenses should be characterized as
revenue in the income statement. The application of Staff Announcement Topic
No. D-103 does not have an impact on current or previously reported net
earnings (loss) or earnings (loss) per share. We will continue to use net
revenue (revenue before out-of-pocket reimbursements) and net cost of services
(cost of services before out-of-pocket reimbursements) to compute percentage
and margin calculations, as well as for purposes of comparing the results of
operations for the quarter ended September 30, 2004, to the quarters ended June
30, 2004, and September 30, 2003, and the nine months ended September 30, 2004
to the nine months ended September 30, 2003.
DATASOURCE: Superior Consultant Holdings Corporation
CONTACT: Richard D. Helppie - Chief Executive Officer, Richard R.
Sorensen - Chief Financial Officer, or Susan M. Synor - Executive Vice
President, of Superior Consultant Holdings Corporation, +1-248-386-8300
Web site: http://www.superiorconsultant.com/