Healthcare Information Systems

Medaphis Corporation

Products

Medaphis Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MEDA)") else Response.Write("(Nasdaq: MEDA)") end if %> systems and services provide subrogation and related recovery services primarily to healthcare payors, scheduling and information management systems to hospitals and emerging integrated healthcare delivery systems, overall systems integration, and engineering systems and services. The company's scheduling and information systems are designed to improve efficiency by automating certain scheduling and related management functions within a healthcare facility, and its systems integration and work flow engineering systems and services are designed to increase flexibility, improve end-user access to information, and increase decision-making through the strategic use and development of client/server, imaging and other advanced technologies.

The Company

After a disastrous "re-engineering," Medaphis is poised to come through as the classic turnaround play, although there is still significant risk in the business. Providing a much needed catalyst for change, David McDowell took the helm of the battered company in November of 1996 and focused on tighter controls throughout all of the company's operating divisions. The company operates in the very lucrative market of physician billing and is the largest player in the segment.

The company has recently strung together a number of quarters of sequential earnings improvements, emerging from a sea of red to post flat numbers in its second quarter. Unfortunately the company is losing cash due to an unbalanced current account, but it hopes to remedy the situation in the upcoming quarter. Acknowledging that the journey from trailing 12-month earnings of a loss of $0.53 a share to positive earnings of $0.46 a share is a long way off, the company still trades at a risk discount of 19x 1998 earnings estimates. Medaphis has already shown a significant realignment and hopes to continue with some earnings momentum going forward. Trading at just over one times sales, Medaphis offers decent value for investors willing to bear some risk.

Latest Financials

For the second quarter of 1997, consolidated revenue was $148 million, a slight increase over first quarter 1997 revenue of $147.5 million. EBITDA (earnings before interest, taxes, depreciation, amortization and restructuring and other charges) was $17.8 million in second quarter 1997, a 30% increase over EBITDA of $13.7 million in first quarter 1997. The second quarter net loss was $248,000, or $0.00 per share, excluding the extraordinary gain on the sale of HRI, as compared to a net loss of $1.8 million, or a $0.03 loss per share in the first quarter. During the second quarter, the company recorded extraordinary income of $76.4 million from the after-tax gain on the sale of HRI. Net income was $76.1 million, or $1.01 per share.

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