According to a Markets and Markets report, the global Healthcare IT market is expected to grow 15% annually to reach $390.7 billion by 2024 from $187.6 billion in 2019. Tennessee-based Change Healthcare (Nasdaq: CHNG) is a leading player in the segment.
Change Healthcare’s Offerings
Change Healthcare was founded by Christopher Parks and Robert Hendrick in 2017. It was set up as a joint venture between Nashville-based Change Healthcare (formerly HCIT Holdings) and the Technology Solutions segment of McKesson Corporation. Change Healthcare offers software, analytics, network solutions, and technology-enabled services for an integrated healthcare system. Its services are designed to improve clinical decision making, simplify billing, collection, and payment processes and enable a better patient experience. .
Its customer base includes approximately 2,200 government and commercial payer connections, 900,000 physicians, 118,000 dentists, 33,000 pharmacies, 5,500 hospitals, and 600 laboratories. Its network helps transact clinical records for over 112 million unique patients, which covers over a third of the U.S. population.
Change Healthcare’s Financials
For the third quarter, its revenues fell 1.7% over the year to $808.2 million, falling short of the market’s estimates by 0.9%. Net income was $31.2 million. On an adjusted basis, net income was $0.33 per share, ahead of the market’s forecast of $0.30 per share.
Change Healthcare operates through three segments — Software and Analytics, Network Solutions, and Technology-Enabled Services. Software and Analytics revenues grew 0.5% to $387.3 million. Revenue from Network Solutions grew 5% to $150.7 million and Technology-Enabled Services grew 6% to $241.5 million.
For the fourth quarter, the company expects Solutions revenues between $775-$785 million with adjusted net income of $115-$125 million. It expects to end the current year with revenues growing 1%-2% over the year.
Change Healthcare’s API Focus
Change Healthcare recently launched its application programming interface (API) and Services Connection, a marketplace for open standards-based API products. The marketplace will expand its growth potential by providing customers with access to interoperable services and advanced analytics. Its APIs will reduce application development time, testing and cost for developers while fostering innovation across the ecosystem.
Its marketplace will also provide the ability to cross-sell and up-sell to existing customers. Change Healthcare is already seeing new customers accessing its API & Services Connection. It will continue to add more APIs and expand its distribution through other online marketplaces such as Amazon and the Microsoft Azure API marketplace. Like other SaaS companies, Change Healthcare too has realized the importance of a PaaS strategy. It would be interesting to see if it will divulge additional statistics about the API success in the future.
Its stock is currently trading at $10.11 with a market capitalization of $3.2 billion. It touched a 52-week high of $17.57 in January this year. It had fallen to a 52-week low of $6.18 due to the market turbulence last month. Change Healthcare went public last year when it raised $557 million at a valuation of $1.5 billion by pricing its stock at $13 apiece.
Prior to going public, Change Healthcare had raised $48 million from investors including HLM Venture Partners, Mitsui Global Investment, Sandbox Industries, Noro-Moseley Partners, Global Investment Partners, Omidyar Network, BlueCross BlueShield Venture Partners, and West Health Investment Fund.
This segment is a part in the series : Cloud Stocks