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Investor relations presentation 8.11.16
- 2. 2 Safe Harbor / Disclaimer This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future, not past, events and are subject to risks and uncertainties. The forward-looking statements, which address the Company's expected business and financial performance and financial condition, among other matters, contain words such as: “believe,” “could,” “opportunities,” “continue,” “expect,” “may,” “will,” or “would” and other words and terms of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected income; earnings; revenues; and growth. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Factors that could cause actual results to differ materially from these forward-looking statements can be found in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and the Company’s other reports filed with the Securities and Exchange Commission. These or other uncertainties may cause the Company’s actual future results to be materially different than those expressed in any forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. This presentation also contains non-GAAP financial measures. You can find a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the appendix to this presentation.
- 3. Press Ganey Overview Mission To help healthcare organizations reduce patient and caregiver suffering and improve clinical quality, safety and the overall patient experience Transformational Solutions Patient Experience Caregiver Engagement Clinical Quality Reliability & Safety 3
- 4. 4 Disruptive Forces In Healthcare Shift to value-based models/Population health Process to outcome measures Narrow networks Growth in Spending Patient-centricity Caregiver Engagement / Care coordination Operational integration and advanced analytics Demand for reliable measures Honor consumer through transparency Brand awareness / Patient Loyalty/ Market Share Increased patient engagement Focus on performance and outcomes Expanded CAHPS programs Care Redesign Market ResponseHealthcare Dynamics Expanding Regulation Rise of Consumerism
- 5. Industry Leader With Partners Across The Continuum Of Care 80%+ 60%+ 80%+ 70%+ Note: All information as of 12/31/15 5 Acute Hospitals Major Teaching Hospitals MD Groups w/ >50 Physicians Acute Hospitals w/ 100+ Beds
- 6. Strategic Competitive Advantage Thought Leadership & Innovation 400+ Client-Facing Associates Technology & Digital Platform Analytics & Insights Advisory & Consulting 6
- 8. Actionable data targeting improvement opportunities Drive patient loyalty, improve outcomes, optimize reimbursement Operational, Clinical & Financial Performance Improvement 8 Engagement insights tiered for effective action planning Retain caregivers, increase productivity, improve performance Measure, report and act on clinical and quality performance Achieve nursing excellence and quality standards, improve outcomes Assess operational, quality and safety performance Transform culture, reduce safety events, achieve high reliability C-Level Solutions that Drive Performance Improvement Patient Experience DemonstratedROI Caregiver Engagement Clinical & Quality Outcomes Reliability & Safety Consulting
- 9. Differentiated Products Built On Leading Digital Platform 9
- 10. 4.5 3.9 3.7 0.0 1.0 2.0 3.0 4.0 5.0 6.0 Low Middle High AverageLengthofStay(Days) Reliability Score Rank by Tercile 1. Reliability and length of stay data derived from our 2013 HCAHPS all-facilities database, N=2,289,639. 2. Based on Medicare Spending by Claim, 2014 Hospital Compare and Billian’s 2014 data, N=3,080. 15.0% 8.7% 5.9% 12.1% 0% 4% 8% 12% 16% 20% Bottom Decile Top Decile ~6% less spending due to readmissions Patient Experience Solution Foundational To Clinical And Financial Performance Average Length of Stay by Patient Experience Reliability Tercile (1) Lower Cost of Care, Higher Operating Margin for Top Performers on HCAHPS (2) Patient Experience is a Powerful Tool for Performance Improvement Hospital Net Margin 10 % of Spending on Readmission HCAHPS Overall Rating
- 11. 71 70 77 82 75 76 84 31 23 42 37 50 63 47 0 20 40 60 80 100 Nurse Responsiveness Physician Pain Medication Discharge Rating AverageNationalPercentileRank Top Quintile of Employee Engagement Bottom Quintile of Employee Engagement National Percentile Rank Based on Employee Engagement Scores (1) Employee Engagement Improves Patient Experience 1. Based on Engagement data from 36 projects, year 2014. HCAHPS data from 2014 PG Database. Complementary Solutions Accelerate Performance Improvement 11 Created by Healthcare Metrics Team.
- 12. 12 Census Based Surveying Enables Innovation: Transparency Study • Census Based Surveying increases patient data by 80% • UT Transparency has resulted in 50%+ of docs in 90th percentile in 2014 Dr. Campbell Press Ganey Data 1164 Reviews 4.6 Stars vs Vitals 2.5 Dr. Campbell Press Ganey Data 1164 Reviews 4.6 Stars vs Vitals 2.5 Dr. Campbell Press Ganey Data 1164 Reviews 4.6 Stars vs Vitals 2.5 Dr. Leiser Press Ganey Data 74 Reviews 4.9 Stars vs. Vitals 2.5 Dr. Leiser Press Ganey Data 74 Reviews 4.9 Stars vs. Vitals 2.5 Dr. Leiser Press Ganey Data 74 Reviews 4.9 Stars vs. Vitals 2.5
- 13. Industry Leading Sales And Client Management Teams 13 400+ Client Facing Associates Transformational Consultants Sales Professionals Advisory Professionals Account Management Supporting Clients 44 73 135 162 Geographically-based model for majority of client base
- 14. Innovation And Thought Leadership Offer Deeper Value To Clients Executive Council members of Press Ganey nonprofit Speaking engagements Clients at national conference Attendees across regional symposiums Monthly user logins for improvement solutions 14 Investing in Thought Leadership 28 245+ 2,800 1,000+ 265,000+ Industry articles in key trade publications Participants in the online community Custom analytic reports generated annually 300+ 26,0003,000+ Participants in CNO Quarterly Best Practices Roundtable 250
- 15. GROWTH STRATEGY / TOTAL ADDRESSABLE MARKET
- 16. Total Addressable Market 16 Quality, Safety, Consulting, Other ExistingClientsProspects Patient Experience Caregiver Engagement $319 Million (2015 PGND Revenue) Patient Engagement, Care Coordination, Other Consulting $865 Million $294 Million $2.7 Billion New SolutionsExisting Solutions $4.2 Billion Total Addressable Market $1.5 Billion
- 17. Proposed Mandatory 2018 Medical Practices Expanding CAHPS Requirements Will Accelerate Improvement Efforts 2%2%2% Hospital Outpatient Surgery Departments Voluntary 2016 2017 Ambulatory Surgery Centers Voluntary Proposed Mandatory Pediatric Inpatient Hospitals Emergency Departments Planning Anticipated Voluntary Anticipated Mandatory Long Term Care Hospitals Planning Anticipated Voluntary Anticipated Mandatory Inpatient Psychiatric Facilities Planning Anticipated Voluntary Inpatient Dialysis ACOs Hospice Home Health Mandatory Inpatient Rehab Facilities Planning Anticipated Voluntary Anticipated Mandatory Voluntary Mandatory Anticipated Voluntary (with new MIPS) 17
- 18. Strategic Acquisition Track Record 18 2009 Caregiver Engagement Safety/ Consulting Clinical/ Quality Patient Experience 2013 2014 2015 2016
- 19. FINANCIAL REVIEW
- 20. Financial Overview 20 Revenue Predictability Retention: 97% client retention / 94% revenue retention 3-year average Q2 2014 – Q2 2016 Visibility: Average contract life for top 100 patient experience clients is 2.9 years Existing Solutions: $1.5B White space New Solutions: $2.7B Opportunity Cost of Revenue: Greater percentage of insights from electronic platform Technology Improvements: Redesign of platforms for collecting and sharing data Sales Force: Broader product offering Adjusted EBITDA less Capital Expenditures: 79% of Adjusted EBITDA from 2012 to 2015, 83% YTD 2Q16 Balance Sheet: deleveraged and lower interest rates Organic Growth Operating Leverage Cash Flow Long Term Growth Targets Revenue: 7-9% organic / 2-3% acquisition Adjusted EBITDA: 13-15%
- 21. $0 $50 $100 $150 $200 $250 $300 $350 2012 2013 2014 2015 YTD 2Q15 YTD 2Q16 Revenue Growth Track Record ($ in millions) $0 $25 $50 $75 $100 $125 2012 2013 2014 2015 YTD 2Q15 YTD 2Q16 Adjusted EBITDA 21
- 22. 5.4x 4.6x 4.0x 1.3x 1.0x 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 2012 2013 2014 2015 YTD 2Q16 Total Net Debt (1) / Adjusted EBITDA Ratio Adjusted EBITDA Less CapEx & Leverage Ratio 1. Net debt = total debt – cash. ($ in millions) $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 2012 2013 2014 2015 YTD 2Q16 Adjusted EBITDA Less Capital Expenditures 22
- 23. APPENDIX
- 24. Adjusted EBITDA Reconciliation 1. Includes costs associated with modification of equity awards in connection with the liquidating distribution and IPO of $70,438 in May of 2015. 2. Write-off of unamortized deferred financing fees, loss on original issue discount and lender fees in connection with debt refinancings. 3. Non-cash property and equipment and intangible impairment charges related to the discontinuation of certain clinical solutions in 2013. 4. Management fees paid to Vestar. 5. Transaction costs incurred in connection with completed and potential acquisitions. 6. Expense associated with executive separation agreements and targeted employee headcount reductions. 7. Primarily consists of professional fees incurred for the preparation for compliance with Section 404 of the Sarbanes-Oxley Act and for design of the equity incentive and compensation programs, professional fees incurred in connection with the IPO and capital structure, corporate strategic planning and technology consulting projects, as well as expenses and revenue credits related to client retention due to the discontinuation of certain clinical solutions and software applications. Fiscal Year ended December 31 YTD ($ in thousands) 2012A 2013A 2014A 2015A 2Q15 2Q16 Net income (loss) $(7,391) $99 $15,583 $(36,627) $(47,843) $16,046 Interest expense 32,157 24,644 19,832 11,163 8,354 2,366 Income tax expense (benefit) (604) 5,926 13,196 7,528 (1,360) 13,169 Depreciation & amortization 27,202 32,468 35,102 41,224 20,096 23,115 EBITDA $51,364 $63,137 $83,713 $23,288 $(20,753) $54,696 Equity-based compensation(1) 14,256 9,787 8,034 86,745 74,997 13,349 Extinguishment of debt (2) 7,185 7,922 2,894 1,750 638 - Non-cash impairment charges (3) - 2,579 - - - - Management fee to related party (4) 968 907 1,047 553 553 - Acquisition expenses (5) 1,327 902 462 945 203 1,191 Severance (6) 2,797 625 1,084 2,095 - 709 Loss (gain) on disposal of property & equipment - 274 1,719 307 (31) 20 Other non-comparable items (7) 1,465 2,159 3,606 1,802 864 106 Adjusted EBITDA $79,362 $88,292 $102,559 $117,485 $56,471 $70,071 24
- 25. Adjusted EBITDA Less Capital Expenditures Fiscal Year ended December 31 YTD ($ in thousands) 2012A 2013A 2014A 2015A 2Q16 Adjusted EBITDA $79,362 $88,292 $102,559 $117,485 $70,071 Capital Expenditures (18,191) (17,230) (19,414) (26,197) (12,231) Adjusted EBITDA Less Capital Expenditures $61,171 $71,062 $83,145 $91,288 $57,840 Adjusted EBITDA Less CapEx as Percentage of Adjusted EBITDA 77% 80% 81% 78% 83% 25
- 26. Capitalization As Reported ($ in thousands) 12/31/12 12/31/13 12/31/14 12/31/15 6/30/16 Cash $7,845 $32,635 $6,962 $35,235 $46,383 Total Debt $431,851 $434,423 $418,319 $189,267 $182,575 Net Debt $424,006 $401,788 $411,357 $154,032 $136,192 LTM Adjusted EBITDA $79,362 $88,292 $102,559 $117,485 $131,085 Total Net Leverage 5.3x 4.6x 4.0x 1.3x 1.0x 26