MedAssets Announces Third Quarter and Nine-Month 2008 Financial Results

ATLANTA--(BUSINESS WIRE)--MedAssets, Inc. (NASDAQ: MDAS) today announced results for its third quarter and nine-month period ended September 30, 2008.

Financial Highlights

• Total net revenue was $76.0 million in the third quarter of 2008, an increase of 54.2% from total net revenue of $49.3 million in the third quarter last year.
• Adjusted EBITDA ^a increased 68.1% to $25.2 million in the third quarter of 2008 when compared to adjusted EBITDA of $15.0 million in the third quarter last year.
• Adjusted diluted earnings per share ^a in the third quarter of 2008 was $0.15, excluding non-cash acquisition-related intangible amortization on a tax-adjusted basis.

Net Revenue

Total net revenue for the third quarter of 2008 increased 54.2% to $76.0 million from $49.3 million in the third quarter of 2007, driven by revenue growth from both organic and acquisition sources. For comparative purposes, total net revenue of $76.0 million in the third quarter of 2008 increased 15.4% over total pro forma net revenue ^{a b} of $65.9 million in the third quarter of 2007.

Total net revenue for the nine-month period ended September 30, 2008 increased 45.6% to $196.0 million from $134.6 million in the first nine months of 2007. For comparative purposes, total pro forma net revenue in the first nine months of 2008 was $224.5 million, representing a 10.4% increase over total pro forma net revenue of $203.4 million in the first nine months of 2007.

Adjusted EBITDA

In the third quarter of 2008, total adjusted EBITDA was $25.2 million, or 33.2% of total net revenue, a 68.1% increase over adjusted EBITDA of $15.0 million, or 30.4% of total net revenue, in the third quarter of 2007. For comparative purposes, third quarter 2008 total adjusted EBITDA of $25.2 million was up 35.0% over total pro forma adjusted EBITDA ^{a b} in the third quarter of 2007 of $18.7 million, or 28.4% of total pro forma net revenue.

In the nine months ended September 30, 2008, adjusted EBITDA increased 34.4% to $60.3 million, or 30.8% of total net revenue, versus adjusted EBITDA of $44.8 million, or 33.3% of total net revenue, in the first nine months of 2007. For comparative purposes, pro forma adjusted EBITDA in the first nine months of 2008 increased 10.5% to $70.4 million, or 31.3% of total pro forma net revenue, compared to pro forma adjusted EBITDA of $63.7 million, or 31.3% of total pro forma net revenue, in the nine-month period ended September 30, 2007.

(a) Reconciliation of non-GAAP measures, including pro forma net revenue, adjusted EBITDA, pro forma adjusted EBITDA and adjusted diluted EPS, to their most directly comparable GAAP measure, is provided in the attached financial schedules.

(b) Pro forma results assume the completion of the XactiMed and MD-X acquisitions, as well as certain financing, occurred on January 1, 2007, and the acquisition of Accuro occurred on January 1 of each respective year.

Profitability

The Company reported net income attributable to common stockholders in the third quarter of 2008 of $3.7 million, or $0.07 per diluted share, versus a net loss attributable to common stockholders of $4.6 million, or a loss of $0.40 per diluted share, in the third quarter of 2007. Adjusted diluted earnings per share (EPS) in the third quarter of 2008 was $0.15 per diluted share, excluding non-cash acquisition-related intangible amortization on a tax-adjusted basis.

For the first nine months of 2008, the Company reported net income attributable to common stockholders of $4.8 million, or $0.09 per diluted share, versus a net loss attributable to common stockholders of $6.0 million, or a loss of $0.55 per diluted share, in the nine-month period ended September 30, 2007. Excluding non-cash acquisition-related intangible amortization and non-recurring expense items on a tax-adjusted basis, adjusted diluted EPS in the first nine months of 2008 was $0.36 per diluted share.

Share-based compensation expense, on a tax-adjusted basis, equated to $0.03 per diluted share in the third quarter and $0.08 per diluted share in the nine-month period ended September 30, 2008.

Business Segment Financial Highlights

Revenue Cycle Management (RCM) Segment

The RCM segment reported net revenue in the third quarter of 2008 of $45.8 million, up 87.8% from net revenue of $24.4 million in the third quarter of 2007. For comparative purposes, net revenue in the third quarter of 2008 of $45.8 million increased 11.8% when compared to pro forma net revenue of $41.0 million in the third quarter of 2007.

Adjusted EBITDA for the RCM segment in the third quarter of 2008 more than doubled to $14.0 million, or 30.6% of net revenue, versus adjusted EBITDA of $6.1 million, or 25.2% of net revenue, in the third quarter of 2007. For comparative purposes, adjusted EBITDA in the third quarter of 2008 of $14.0 million increased 42.5% from pro forma adjusted EBITDA in the third quarter of 2007 of $9.8 million, or 24.0% of pro forma net revenue.

For the nine-month period ended September 30, 2008, the RCM segment reported net revenue of $102.2 million, an 87.9% increase over net revenue of $54.4 million in the first nine months of 2007. Pro forma net revenue in the first nine months of 2008 was $130.8 million, compared to pro forma net revenue of $123.2 million in the first nine months of 2007.

Adjusted EBITDA in the first nine months of 2008 increased 61.4% to $26.0 million, or 25.5% of net revenue, versus adjusted EBITDA of $16.1 million, or 29.7% of net revenue, in the nine-month period ended September 30, 2007. For comparative purposes, pro forma adjusted EBITDA in the first nine months of 2008 was $36.1 million, or 27.6% of pro forma net revenue, versus pro forma adjusted EBITDA in the first nine months of 2007 of $35.0 million, or 28.4% of pro forma net revenue.

Net revenue and adjusted EBITDA growth in the RCM segment was primarily driven by increases in service and recurring subscription fee revenue, as well as the impact of acquisitions, offset slightly by a period-over-period decline in decision support revenue.

Spend Management Segment

Net revenue in the Spend Management segment increased 21.3% to $30.2 million from the $24.9 million reported in the third quarter of 2007. Adjusted EBITDA in the third quarter of 2008 was $15.2 million, or 50.4% of net revenue, versus $11.8 million, or 47.6% of net revenue, in the third quarter of 2007.

For the nine-month period ended September 30, 2008, net revenue in the Spend Management segment was $93.7 million, a 16.9% increase over the $80.2 million reported in the first nine months of 2007. Adjusted EBITDA for the Spend Management segment increased 24.1% to $46.5 million, or 49.7% of net revenue, in the first nine months of 2008, when compared to $37.5 million, or 46.7% of net revenue, in the nine-month period ended September 30, 2007.

The increase in Spend Management segment adjusted EBITDA margin in 2008 was due primarily to operating leverage and lower sales and marketing expenses as a percentage of segment net revenue.

Corporate Operations

The impact of corporate operations on total adjusted EBITDA was $4.0 million in the third quarter of 2008, versus $3.0 million in the same quarter of 2007. For the first nine months of 2008, the impact of corporate operations on total adjusted EBITDA was $12.3 million, versus $8.8 million in the first nine-month period of 2007. The increase in corporate expense was primarily attributable to higher costs associated with being a publicly-traded company and the addition of certain senior staff functions.

Cash Flow and Capital Resources

Net cash provided by operating activities increased 40.9% to $31.1 million in the first nine months of 2008, as compared to $22.1 million for the nine months ended September 30, 2007. Capital expenditures and capitalized software costs for the nine months ended September 30, 2008 were $12.3 million as compared to $12.7 million for the comparable period in 2007.

During the third quarter of 2008, the Company repaid $18.9 million of its long-term bank debt, and its balance sheet included $255.3 million in long-term bank debt at September 30, 2008. Current net leverage was approximately 2.8 times trailing adjusted pro forma EBITDA, and the Company had approximately $100 million of availability under its revolving credit facility at the end of the quarter.

Reaffirming 2008 Guidance; Initiating 2009 Guidance

MedAssets reaffirmed and narrowed its full-year 2008 financial outlook, and introduced its 2009 guidance, as follows:

(In millions, except EPS)		2008E			2009E
Net Revenue:		(As Reported)
Revenue Cycle Management		$	149 - 151		$	207 - 213
Spend Management			123 - 125			137 - 143
Total Net Revenue			272 - 276			346 - 354
Total Adjusted EBITDA			87 - 90			111 - 117
GAAP EPS (diluted)			0.17 - 0.21			0.25 - 0.33
Adjusted EPS (diluted)			0.51 - 0.55			0.54 - 0.62
Cash EPS (diluted)		$	0.61 - 0.65		$	0.74 - 0.82

At September 30, 2008, MedAssets’ rolling 12-month contracted revenue was an estimated $298.0 million, consisting of $175.0 million from the RCM segment and $123.0 million from the Spend Management segment. The Company’s rolling 12-month contracted revenue increased approximately 5.0% on a consolidated basis, as compared to the rolling 12-month total as of June 30, 2008. The Company’s contracted revenue reflects the estimated contractually committed revenue to be generated under existing customer contracts in the forward 12-month period.

Conference Call Information

The Company will host a conference call at 5:00 p.m. ET today, Thursday, November 13, 2008, to discuss its financial and business highlights and management's outlook for future performance. The live audio webcast will be accessible from the “Events & Presentations” page at http://ir.medassets.com. To access the conference call, dial 866-811-1812 or 706-902-0609 (international), and provide the conference ID number 69058140. For those unable to listen to the live broadcast, a webcast replay will be archived on MedAssets’ website for 30 days. A conference call replay will be available for one week by calling 800-642-1687 or 706-645-9291 (international), and entering conference ID number 69058140.

About MedAssets

MedAssets (NASDAQ: MDAS) partners with healthcare providers to improve their financial strength by implementing integrated spend management and revenue cycle solutions that help control cost, improve margins and cash flow, increase regulatory compliance, and optimize operational efficiency. MedAssets serves more than 125 health systems, 3,300 hospitals and 30,000 non-acute care healthcare providers. For more information, go to www.medassets.com.

Safe Harbor Statement

This Press Release contains statements that constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements contained in this Press Release include the intent, belief or current expectations of the Company and members of its management team with respect to the Company’s future business operations as well as the assumptions upon which such statements are based. Forward-looking statements include specifically, but are not limited to: 2008 and 2009 projections, costs and revenue growth, margin and other financial projections; contracted revenue forecasts; and the Company’s ability to successfully integrate and capitalize on synergies associated with its past and future acquisitions. Investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Important factors currently known to management that could cause actual results to differ materially from those contemplated by the forward-looking statements in this Press Release include, but are not limited to: failure to realize improvements in performance, efficiency and profitability; failure to complete anticipated sales under negotiations; failure to successfully implement revenue backlog; lack of revenue growth; client losses; and adverse developments with respect to the operation or performance of the Company’s business units or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can also be found in the Company’s Risk Factor disclosures in its Form 10-K for the year ended December 31, 2007 and subsequent Forms 10-Q filed with the Securities and Exchange Commission. The Company disclaims any responsibility to update any forward-looking statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
		GAAP					GAAP						Pro Forma
In 000s, except per share data		Three Months Ended					Three Months Ended						Three Months Ended
		September 30,					September 30,			Pro Forma			September 30,
			2008					2007		Adjustments c				2007
Revenue:
Administrative fees, net		$	25,663				$	22,642		$	-		$	22,642
Other service fees			50,309					26,631			16,588			43,219
Total net revenue			75,972					49,273			16,588			65,861
Operating expenses:
Cost of revenue			17,101					8,155			4,306			12,461
Product development expenses			4,719					1,916			1,786			3,702
Selling and marketing expenses			9,641					7,958			2,014			9,972
General and administrative expenses			22,779					18,148			5,358			23,506
Depreciation			2,581					1,936			353			2,289
Amortization of intangibles			7,324					5,102			3,945			9,047
											-
Total operating expenses			64,145					43,215			17,762			60,977
Operating income			11,827					6,058			(1,174	)		4,884
Other income (expense):
Interest (expense)			(5,803	)				(6,763	)		(2,580	)		(9,343	)
Other income (expense)			228					1,189			16			1,205
Income (loss) before income taxes			6,252					484			(3,738	)		(3,254	)
Income tax expense (benefit)			2,566					320			(1,736	)		(1,416	)
Net income (loss)			3,686					164			(2,002	)		(1,838	)
Preferred stock dividends and accretion d			-					(4,798	)		-			(4,798	)
Net income (loss) attributable to common stockholders		$	3,686				$	(4,634	)	$	(2,002	)	$	(6,636	)
Basic and diluted income (loss) per share:
Basic net income (loss) attributable to common stockholders		$	0.07				$	(0.40	)				$	(0.32	)
Diluted net income (loss) attributable to common stockholders		$	0.07				$	(0.40	)				$	(0.32	)
Weighted average shares — basic e			53,715					11,685			8,850			20,535
Weighted average shares — diluted e			56,136					11,685			8,850			20,535
(c) Includes all adjustments relating to the acquisition of Accuro as if this company was acquired on January 1, 2007. Refer to the Company's Form 8-K/A filed with the Securities and Exchange Commission (SEC) on August 13, 2008 for further description of similar adjustments. The unaudited pro forma results are for illustrative and informational purposes only and are not intended to represent or be indicative of what the Company's results of operations would have been if this event had occurred at the beginning of such period.
(d) The Company's participating preferred stock converted to common stock on December 18, 2007 as the result of our initial public offering. With this conversion, the Company is no longer obligated to pay the associated accrued preferred dividends, and all rights of the former preferred stockholders to accrued and unpaid preferred dividends were terminated.
(e) For the GAAP and pro forma three months ended September 30, 2007, common stock equivalents are not included in the weighted average shares outstanding since the effect would be antidilutive due to GAAP and pro forma net losses attributable to common stockholders in the period.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
		GAAP						Pro Forma					GAAP						Pro Forma
In 000s, except per share data		Nine Months Ended						Nine Months Ended					Nine Months Ended						Nine Months Ended
		September 30,			Pro Forma			September 30,					September 30,			Pro Forma			September 30,
			2008		Adjustments f				2008					2007		Adjustments g				2007
Revenue:
Administrative fees, net		$	78,355		$	-		$	78,355				$	70,966		$	-		$	70,966
Other service fees			117,610			28,540			146,150					63,631			68,774			132,405
Total net revenue			195,965			28,540			224,505					134,597			68,774			203,371
Operating expenses:
Cost of revenue			36,252			6,980			43,232					17,845			19,300			37,145
Product development expenses			11,027			4,058			15,085					5,612			6,047			11,659
Selling and marketing expenses			32,096			2,557			34,653					26,675			7,037			33,712
General and administrative expenses			66,054			6,537			72,591					44,402			20,929			65,331
Depreciation			7,051			622			7,673					5,270			1,373			6,643
Amortization of intangibles			16,117			6,204			22,321					10,933			13,872			24,805
Impairment of intangible assets			2,079			-			2,079					1,195			-			1,195
						-											-
Total operating expenses			170,676			26,958			197,634					111,932			68,558			180,490
Operating income			25,289			1,582			26,871					22,665			216			22,881
Other income (expense):
Interest (expense)			(15,120	)		(4,363	)		(19,483	)				(14,151	)		(13,669	)		(27,820	)
Other (expense) income			(2,101	)		74			(2,027	)				2,101			82			2,183
Income (loss) before income taxes			8,068			(2,707	)		5,361					10,615			(13,371	)		(2,756	)
Income tax expense (benefit)			3,259			(1,033	)		2,226					4,193			(3,867	)		326
Net income (loss)			4,809			(1,674	)		3,135					6,422			(9,504	)		(3,082	)
Preferred stock dividends and accretion h			-			-			-					(12,445	)		(998	)		(13,443	)
Net income (loss) attributable to common stockholders		$	4,809		$	(1,674	)	$	3,135				$	(6,023	)	$	(10,502	)	$	(16,525	)
Basic and diluted income (loss) per share:
Basic net income (loss) attributable to common stockholders		$	0.10					$	0.06				$	(0.55	)				$	(0.83	)
Diluted net income (loss) attributable to common stockholders		$	0.09					$	0.06				$	(0.55	)				$	(0.83	)
Weighted average shares — basic i			48,493			4,942			53,435					11,037			8,850			19,887
Weighted average shares — diluted i			51,035			4,942			55,977					11,037			8,850			19,887
(f) Includes all adjustments relating to the acquisition of Accuro as if this company was acquired at the beginning of each year presented. Refer to the Company's Form 8-K/A filed with the SEC on August 13, 2008 for further description of similar adjustments. The unaudited pro forma results are for illustrative and informational purposes only and are not intended to represent or be indicative of what the Company's results of operations would have been if this event had occurred at the beginning of such periods.
(g) Includes all adjustments relating to the acquisitions of XactiMed, MD-X and Accuro as if the these companies were acquired on January 1, 2007. Such adjustments include the effect of financing certain acquisitions and the financing of the Company's 2007 dividend payment, as though obtained on January 1, 2007. Refer to the Company's final prospectus filed on Form 424B4 with the SEC on December 13, 2007 for further description of such adjustments. The unaudited pro forma results are for illustrative and informational purposes only and are not intended to represent or be indicative of what the Company's results of operations would have been if these events had occurred at the beginning of such periods.
(h) The Company's participating preferred stock converted to common stock on December 18, 2007 as the result of our initial public offering. With this conversion, the Company is no longer obligated to pay the associated accrued preferred dividends, and all rights of the former preferred stockholders to accrued and unpaid preferred dividends were terminated.
(i) For the GAAP and pro forma nine months ended September 30, 2007, common stock equivalents are not included in the weighted average shares outstanding since the effect would be antidilutive due to GAAP and pro forma net losses attributable to common stockholders in the period.

CONDENSED SEGMENT REPORTING
(UNAUDITED)
In $000s		Three Months Ended														Nine Months Ended
		September 30,														September 30,
			2008							2007							2008							2007
ACTUAL
Net revenue
Revenue Cycle Management		$	45,791						$	24,386						$	102,218						$	54,394
Spend Management			30,181							24,887							93,747							80,203
Total net revenue		$	75,972						$	49,273						$	195,965						$	134,597
Adjusted EBITDA (a non-GAAP measure) j						% margin							% margin							% margin							% margin
Revenue Cycle Management		$	14,003			30.6	%		$	6,139			25.2	%		$	26,043			25.5	%		$	16,137			29.7	%
Spend Management			15,207			50.4	%			11,837			47.6	%			46,547			49.7	%			37,494			46.7	%
Corporate			(4,009	)						(2,987	)						(12,323	)						(8,806	)
Total Adjusted EBITDA		$	25,201			33.2	%		$	14,989			30.4	%		$	60,267			30.8	%		$	44,825			33.3	%
PRO FORMA
Net revenue
Revenue Cycle Management		$	45,791						$	40,974						$	130,758						$	123,168
Spend Management			30,181							24,887							93,747							80,203
Total net revenue		$	75,972						$	65,861						$	224,505						$	203,371
Adjusted EBITDA (a non-GAAP measure) k						% margin							% margin							% margin							% margin
Revenue Cycle Management		$	14,003			30.6	%		$	9,824			24.0	%		$	36,146			27.6	%		$	34,972			28.4	%
Spend Management			15,207			50.4	%			11,837			47.6	%			46,547			49.7	%			37,494			46.7	%
Corporate			(4,009	)						(2,987	)						(12,323	)						(8,806	)
Total Adjusted EBITDA		$	25,201			33.2	%		$	18,674			28.4	%		$	70,370			31.3	%		$	63,660			31.3	%
(j) Adjusted EBITDA is defined by the Company as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and other non-recurring, non-cash or non-operating items. Adjusted EBITDA is used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period that provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. The Company believes Adjusted EBITDA assists its board of directors, management and investors in comparing its operating performance on a consistent basis because it removes the impact of the Company's capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of MedAssets' management team (taxes), as well as other non-cash (purchase accounting adjustments, share-based compensation expense and imputed rental income) and non-recurring items, from the Company's operations. See the Company's accompanying reconciliations from consolidated Adjusted EBITDA to consolidated Net Income, the closest comparable GAAP-based metric. Such reconciliations are consistent with that of the Company's segment reporting disclosures to the consolidated financial statements for the year ended December 31, 2007 included in the Company's Form 10-K as filed with the SEC on March 24, 2008.
(k) Pro forma Adjusted EBITDA is Adjusted EBITDA after considering the effect of the acquisitions of XactiMed, MD-X and Accuro, and certain financing secured in July 2007. See the Company's accompanying reconciliations from consolidated Pro Forma Adjusted EBITDA to consolidated Pro Forma Net Income. The unaudited pro forma results are for illustrative and informational purposes only and are not intended to represent or be indicative of what the Company's results of operations would have been if these events had occurred at the beginning of such periods.

RECONCILIATION OF NET INCOME TO
CONSOLIDATED ADJUSTED EBITDA (A NON-GAAP MEASURE)
(UNAUDITED)
In $000s		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2008				2007				2008				2007
ACTUAL
Net Income		$	3,686			$	164			$	4,809			$	6,422
Depreciation			2,581				1,936				7,051				5,270
Amortization of intangibles			7,324				5,102				16,117				10,933
Amortization of intangibles (included in cost of revenue)			233				87				995				767
Interest expense, net			5,761				5,787				13,715				12,496
Income tax expense			2,566				320				3,259				4,193
EBITDA		$	22,151			$	13,396			$	45,946			$	40,081
Impairment of intangibles			-				-				2,079				1,195
Share-based compensation			2,452				1,299				6,591				2,891
Rental income from capitalized building lease			(109	)			(109	)			(329	)			(329	)
Purchase accounting adjustments			707				403				2,066				987
Interest rate swap cancellation			-				-				3,914				-
Adjusted EBITDA m		$	25,201			$	14,989			$	60,267			$	44,825
PRO FORMA
Net income (loss)		$	3,686			$	(1,838	)		$	3,135			$	(3,082	)
Depreciation			2,581				2,289				7,673				6,643
Amortization of intangibles			7,324				9,047				22,321				24,805
Amortization of intangibles (included in cost of revenue)			233				87				995				1,469
Interest expense, net			5,761				8,355				18,004				26,156
Income tax expense			2,566				(1,416	)			2,226				326
EBITDA		$	22,151			$	16,524			$	54,354			$	56,317
Impairment of intangibles			-				-				2,079				1,195
Share-based compensation			2,452				1,500				7,108				4,184
Rental income from capitalized building lease			(109	)			(109	)			(329	)			(329	)
Purchase accounting adjustments			707				759				3,244				2,293
Interest rate swap cancellation			-				-				3,914				-
Pro Forma Adjusted EBITDA n		$	25,201			$	18,674			$	70,370			$	63,660
(m) Adjusted EBITDA is defined by the Company as net income (loss) before net interest expense, income tax expense (benefit), depreciation and amortization and other non-recurring, non-cash or non-operating items. Adjusted EBITDA is used by the Company to facilitate a comparison of its operating performance on a consistent basis from period to period that provides a more complete understanding of factors and trends affecting our business than GAAP measures alone. The Company believes Adjusted EBITDA assists its board of directors, management and investors in comparing its operating performance on a consistent basis because it removes the impact of the Company's capital structure (primarily interest charges and amortization of debt issuance costs), asset base (primarily depreciation and amortization) and items outside the control of MedAssets' management team (taxes), as well as other non-cash (purchase accounting adjustments, share-based compensation expense and imputed rental income) and non-recurring items, from the Company's operations.
(n) Pro forma Adjusted EBITDA is Adjusted EBITDA after considering the effect of the acquisitions of XactiMed, MD-X and Accuro, and certain financing secured in July 2007. Explanations of each adjustment can be found in the Company's Form 10-Q for the quarter ended September 30, 2008 to be filed with the SEC on November 14, 2008. The unaudited pro forma results are for illustrative and informational purposes only and are not intended to represent or be indicative of what the Company's results of operations would have been if these events had occurred at the beginning of such periods.

RECONCILIATION OF GROSS FEES (A NON-GAAP MEASURE) TO NET REVENUE
(UNAUDITED)
In $000s		Three Months Ended								Nine Months Ended
		September 30,								September 30,
ACTUAL			2008				2007				2008				2007
Gross administrative fees		$	39,867			$	34,837			$	117,634			$	105,880
Other service fees			50,309				26,631				117,609				63,631
Gross fees			90,176				61,468				235,243				169,511
Revenue share obligation			(14,204	)			(12,195	)			(39,278	)			(34,914	)
Net revenue		$	75,972			$	49,273			$	195,965			$	134,597
PRO FORMA
Gross administrative fees		$	39,867			$	34,837			$	117,634			$	105,880
Other service fees			50,309				43,219				146,149				132,405
Gross fees			90,176				78,056				263,783				238,285
Revenue share obligation			(14,204	)			(12,195	)			(39,278	)			(34,914	)
Net revenue		$	75,972			$	65,861			$	224,505			$	203,371
RECONCILIATION OF 2008 THIRD QUARTER AND NINE-MONTH ADJUSTED DILUTED
EARNINGS PER SHARE (A NON-GAAP MEASURE) TO GAAP EARNINGS PER SHARE
(UNAUDITED)
Per share data		Three Months Ended				Nine Months Ended
		September 30,				September 30,
			2008				2008
Diluted net income attributable to common stockholders		$	0.07			$	0.09
Impairment of intangibles			-				0.02
Interest rate swap cancellation			-				0.05
Non-cash, tax-adjusted acquisition-related intangible amortization			0.08				0.20
Adjusted diluted earnings per share		$	0.15			$	0.36
Weighted average shares - diluted			56,136				51,035

CONDENSED CONSOLIDATED BALANCE SHEETS
	September 30,				December 31,
In $000s		2008				2007
	(Unaudited)
ASSETS
Current
Cash and cash equivalents	$	-			$	136,952
Restricted cash		-				20
Accounts receivable, net of allowances of $2,341 and $3,506 as of September 30, 2008 and December 31, 2007
		45,635				33,679
Deferred tax asset, current		11,307				15,049
Prepaid expenses and other current assets		6,407				4,508
Total current assets		63,349				190,208
Property and equipment, net		40,074				32,490
Other long term assets
Goodwill		512,668				232,822
Intangible assets, net		131,850				62,491
Other		17,432				8,368
Other long term assets		661,950				303,681
Total assets	$	765,373			$	526,379
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	6,380			$	4,562
Accrued revenue share obligation and rebates		20,671				29,998
Accrued payroll and benefits		22,364				13,402
Other accrued expenses		9,358				5,612
Deferred revenue, current portion		27,600				19,791
Deferred purchase consideration		18,987				-
Current portion of notes payable		2,768				2,020
Current portion of finance obligation		146				128
Total current liabilities		108,274				75,513
Notes payable, less current portion		252,531				196,264
Finance obligation, less current portion		9,899				10,009
Deferred revenue, less current portion		4,552				3,229
Deferred tax liability		13,815				5,868
Other long term liabilities		1,969				5,981
Total liabilities		391,040				296,864
Stockholders’ equity
Common stock, $0.01 par value, 150,000,000 shares authorized; 53,860,000 and 44,429,000 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively
		539				444
Additional paid in capital		601,353				464,313
Notes receivable from stockholders		(217	)			(614	)
Accumulated other comprehensive loss		(458	)			(2,935	)
Accumulated deficit		(226,884	)			(231,693	)
Total stockholders’ equity		374,333				229,515
Total liabilities and stockholders’ equity	$	765,373			$	526,379

CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
In $000s	Nine Months Ended
	September 30,
		2008				2007
Operating activities:
Net income	$	4,809			$	6,422
Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt expense		1,457				517
Depreciation		7,359				5,496
Amortization of intangibles		16,806				11,473
(Gain) loss on sale of assets		(119	)			3
Noncash stock compensation expense		6,591				2,891
Excess tax benefit from exercise of stock options		(1,697	)			(1,659	)
Amortization of debt issuance costs		895				307
Noncash interest expense, net		906				361
Impairment of intangibles		2,079				1,195
Deferred income tax expense		937				1,859
Changes in assets and liabilities:		(8,918	)			(6,794	)
Cash provided by operating activities		31,105				22,071
Investing activities:
Purchases of property, equipment, and software		(3,891	)			(7,029	)
Capitalized software development costs		(8,378	)			(5,658	)
Acquisitions, net of cash acquired		(209,423	)			(90,890	)
Cash used in investing activities		(221,692	)			(103,577	)
Financing activities:
Decrease in restricted cash		20				-
Proceeds from notes payable		142,629				160,188
Repayment of notes payable and capital lease obligations		(85,615	)			(11,860	)
Repayment of finance obligation		(483	)			(489	)
Debt issuance costs		(6,167	)			(1,397	)
Interest accrued on note receivable from stockholders		(18	)			-
Payment on note receivable from stockholders		49				255
Excess tax benefit from exercise of stock options		1,697				1,659
Payment of dividend		-				(70,000	)
Issuance of series J preferred stock, net of offering costs		-				1,000
Issuance of common stock, net of offering costs		1,523				2,795
Cash provided by financing activities		53,635				82,151
Net (decrease) increase in cash and cash equivalents		(136,952	)			645
Cash and cash equivalents, beginning of period		136,952				23,459
Cash and cash equivalents, end of period	$	-			$	24,104

RECONCILIATION OF 2008 ADJUSTED EBITDA GUIDANCE
(A NON-GAAP MEASURE) TO GAAP NET INCOME GUIDANCE
	Guidance Range for
	Year Ending
In $000s	December 31,
	2008
	(Low)			(High)
Net Income	$9,000			$11,100
Depreciation	9,900			9,700
Amortization of intangibles	23,400			23,400
Amortization of intangibles (included in cost of revenue)	1,600			1,600
Interest expense, net	20,000			19,700
Income tax expense	6,100			7,500
EBITDA	70,000			73,000
Impairment of intangible assets	2,100			2,100
Interest rate swap cancellation	3,900			3,900
Share-based compensation	8,900			8,900
Rental income from capitalized building lease	(400	)		(400	)
Purchase accounting adjustments	2,500			2,500
Adjusted EBITDA	87,000			90,000
RECONCILIATION OF 2008 ADJUSTED DILUTED EARNINGS PER SHARE GUIDANCE
(A NON-GAAP MEASURE) TO GAAP DILUTED EARNINGS PER SHARE GUIDANCE
	Guidance Range for
	Year Ending
	December 31,
In 000s, except per share data	2008
	(Low)			(High)
Net Income	$9,000			$11,100
Diluted earnings per share (EPS)	0.17			0.21
Interest rate swap cancellation	0.05			0.05
Non-cash, tax-adjusted impairment of intangible assets	0.02			0.02
Non-cash, tax-adjusted acquisition-related intangible amortization	0.27			0.27
Adjusted EPS	0.51			0.55
Non-cash, tax-adjusted share-based compensation	0.10			0.10
Cash EPS	$0.61			$0.65
Fully diluted weighted average shares outstanding	52,400			52,400

RECONCILIATION OF 2009 ADJUSTED EBITDA GUIDANCE
(A NON-GAAP MEASURE) TO GAAP NET INCOME GUIDANCE
	Guidance Range for
	Year Ending
In $000s	December 31,
	2009
	(Low)			(High)
Net Income	$14,400			$18,800
Depreciation	15,200			14,800
Amortization of intangibles	28,000			28,000
Amortization of intangibles (included in cost of revenue)	3,200			3,200
Interest expense, net	21,400			20,800
Income tax expense	9,600			12,600
EBITDA	91,800			98,200
Share-based compensation	19,100			18,700
Rental income from capitalized building lease	(400	)		(400	)
Purchase accounting adjustments	500			500
Adjusted EBITDA	111,000			117,000
RECONCILIATION OF 2009 CASH AND ADJUSTED DILUTED EARNINGS PER SHARE GUIDANCE
(A NON-GAAP MEASURE) TO GAAP DILUTED EARNINGS PER SHARE GUIDANCE
	Guidance Range for
	Year Ending
	December 31,
In 000s, except per share data	2009
	(Low)			(High)
Net Income	$14,400			$18,800
Diluted earnings per share (EPS)	0.25			0.33
Non-cash, tax-adjusted acquisition-related intangible amortization	0.29			0.29
Adjusted EPS	0.54			0.62
Non-cash, tax-adjusted share-based compensation	0.20			0.20
Cash EPS	$0.74			$0.82
Fully diluted weighted average shares outstanding	57,400			57,400

mdas/F