) reported third quarter 2012 adjusted (excluding one-time
expenses) earnings per share of 15 cents, beating the Zacks
Consensus Estimate of 13 cents per share but falling short of the
year-ago earnings of 28 cents per share.
Net income declined 46.9% year over year to $5 million. The
company's results continue to reflect the loss of the
Revenues decreased 5.5% year over year to $166.6 million in the
third quarter, missing the Zacks Consensus Estimate of $172
million. Revenues were driven by the acknowledgement of
performance-based fees. Upon exclusion of the Cigna contract,
revenues improved 6% year over year.
Gross margin dipped 260 basis points year over year to 23.9% in
the quarter. Healthways posted an operating margin of 7.1%, down
420 basis points year over year. Selling, general and
administrative expenses increased 3.8% year over year to $14.7
Healthways ended the third quarter with cash and cash equivalents
of only $2.6 million, down almost 61.3% year over year. Long-term
debt was $281.6 million, up 3.2% year over year.
Healthways inked 30 new, expanded or extended contracts in the
quarter. This count included twelve fresh contracts, eight
expanded and extended contracts and ten extended contracts. These
contracts are spread across domestic as well as overseas markets.
For 2012, Healthways revised its forecast revenues to a narrower
band of $670 million and $685 million compared with the earlier
guidance of $665 million to $705 million. This estimate includes
domestic revenues in the range of $643 million to $653 million
and overseas revenues of about $27 million to $32 million.
The company also lowered its forecast earnings per share in the
range of 24 cents to 30 cents for 2012 compared to its prior
guidance of 38 cents to 50 cents. This estimate comprises
earnings per share from domestic sources in a range of 24 cents
to 28 cents and from overseas operations in a band of zero and 2
Net operating cash flow for 2012 is expected in a range of $50
million to $65 million compared to the earlier forecast of $60
million to $80 million. The company expects to incur $50 million
as capital expenditures for the current year.
For 2013, Healthways envisages revenues in a range of $710 to
$750 million (after accounting $80 million for Cigna contract
loss). Moreover, the company expects organic revenues for 2014 to
exceed 2013 revenues by at least $85 million with incremental
revenues from additional contracts. EBITDA margin for 2013 is
expected in a band of 10% and 13% (closer to the 2012 band of 11%
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. It has tie-ups
with a large proportion of U.S. health plans and counts many
millions of lives in its customer base.
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 14,000
centers across the U.S. and caters to several million eligible
enrollees. Despite its unique scalable model, Healthways may face
many challenges in the short term. The company competes with
Express Scripts Holding Company
) among others.
Healthways carries a Zacks #4 Rank, which translates into a
short-term Sell rating.
CIGNA CORP (CI): Free Stock Analysis Report
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HEALTHWAYS INC (HWAY): Free Stock Analysis
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