Healthways Runs into Loss, Revs Up - Analyst Blog


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Healthways ( HWAY ) reported first-quarter fiscal 2012 adjusted loss per share of 8 cents, falling short of the Zacks Consensus Estimate of breakeven earnings per share and lower than the year-ago earnings of 12 cents per share.

The company sank into a loss in the quarter on account of negative factors such as loss of revenues from the Cigna ( CI ) contract, delay in implementation of the Caisse Nationale d'Assurance Maladie des Travailleurs Salaries ("CNAMTS") contract and the timing of accounting for productivity-linked contracts. Net loss amounted to $2.7 million (8 cents per share) in the reported quarter compared with a profit of $4.1 million (12 cents per share) in the year-ago quarter.    

Revenues and Margins

Revenues came in at $165.2 million in the first quarter, up 1.4% year over year, beating the Zacks Consensus Estimate of $154 million. Upon exclusion of the Cigna contract, revenue growth was 13% year over year.

Healthways posted an operating loss of $0.9 million in the first quarter compared with an operating income of $10.8 million in the year-ago quarter. 

Balance Sheet and Cash Flow

The company had cash and cash equivalents of only $1.1 million, as of March 31, 2012, down 73.5% year over year. Long-term debt stood at $290.8 million, up 21.3% year over year.

Contract Activity

During the reported quarter, Healthways inked 33 new, expanded or extended contracts.

This count included 9 enhanced contracts, 9 fresh contracts and 15 extended contracts. The company has already renewed 1 of the 3 contracts (constituting over 2% of total sales) set for renewal in 2012. 


Healthways continues to forecast revenues for fiscal 2012 in a band of $665 million and $705 million. This estimate includes domestic sales of $638 million to $670 million and international sales of about $27 million to $35 million. Healthways believes that quarterly revenues will grow on a sequential basis during 2012 as revenues from large projects start to flow in and performance-based sales recognition takes effect.

The company continues to forecast earnings per share in a band of 42 cents to 54 cents. This estimate comprises earnings per share from domestic sources in a range of 42 cents to 50 cents and from overseas operations in a band of zero to 4 cents.  

The Healthways model encourages people to make favorable lifestyle changes that lead to enhanced well-being, reduced healthcare costs, improved performance and economic value for customers. The company has invested in technology platforms that provide scalable support with large populations.

Due to its unique scalable business model, Healthways shares present a compelling, long-term investment opportunity although it may face many challenges in the short term. Healthways is the leader in a strategically critical and rapidly evolving part of the health care services market. Its fitness program (SilverSneakers) for seniors is available at centers across the U.S. Healthways competes with Express Scrips ( ESRX ) among others. We currently have a Neutral recommendation on Healthways. The stock retains a Zacks #3 Rank, which translates into a short-term "Hold" recommendation.

CIGNA CORP ( CI ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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