Q2 2004 HealthExtras Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, everyone. Welcome to the HealthExtras second-quarter investor conference call. This call is being recorded. This conference call contains forward-looking information. Forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be significantly impacted by certain risks and uncertainties described in the Company's filings with the Securities and Exchange Commission. With that said, I would now like to introduce the Chief Executive Officer of HealthExtras, Mr. David Blair. Please go ahead, sir.

DAVID BLAIR, CEO, HEALTHEXTRAS: Good morning, and again thank you for joining us. I'm also joined with Mike Donovan is here, our Chief Financial Officer. The purpose of today's call is pretty straightforward; I'd like to discuss recent business activities, review the financial performance of the Company and then lastly respond to your questions. Clearly, we're pleased with the financial results. Revenues were up 21 percent to 114 million, and earnings were up 86 percent to 4.1 million or 11 cents per share.

I'll let Mike in a moment run through the financials in more detail, but just as important as the financial results were in the second quarter, there's also a number of significant business accomplishments, which I would like to address. There's three in particular. The acquisition of Managed Healthcare Systems, the successful implementation of the State of Louisiana contract, and then also an expanded sales and marketing effort that we made during the second quarter.

We couldn't be more pleased with the acquisition of Managed Healthcare Systems; that acquisition closed on June 16, and marks our fourth significant acquisition over the past five years. As most of you are aware of, we pursued a strategy of acquiring companies which either accelerate our ability to enter new markets, or companies which provide services that complement our business. I believe this acquisition accomplishes both.

Managed Healthcare Systems is based in Fort Lauderdale and immediately gives us a significant presence in Florida. In addition to providing traditional forms of benefit management services, MHS also has other complementary services such as managing workers comp benefits. MHS manages workers compensation pharmacy benefits for self-funded employer groups and today has several Fortune 100 companies as their clients.

Today the management of workers comp pharmacy benefits represents approximately one-third of MHS's business. These innovative workers comp services at MHS has developed allowed (ph) employees to be auto registered shortly after a work site accident into a managed pharmacy program; MHS then actively monitors, tracks, reports these expenditures which results in overall lower expenses for their clients.

Now I mentioned the workers comp product because that is a service that we believe we can successfully cross-sell to our existing client base. We have over 1000 self-funded employer groups across the country, and many of them are doing little if anything to manage their pharmacy costs and their workers comp segment.

I'm also pleased to report that Ken Sack, the President of Managed Healthcare Systems and his management team will remain with the organization. Ken brings a high level of energy, a wealth of experience and a genuine enthusiasm to take the combined organization to the next level. I view Ken as an integral member of the HealthExtras senior management team and Ken will play an important role as we continue to drive internal sales and product development.

Also during the second quarter we were awarded and implemented the contract to administer the pharmacy benefits for the State of Louisiana employees and retirees. Clearly we were pleased that a large sophisticated buyer of PBM services recognized our differentiated approach. Louisiana as many of you might recall was seeking a pharmacy benefit manager that would provide full pricing disclosure and also make decisions based solely in the State's best interest. Clearly we met those requirements.

In addition, I believe the State was favorably impressed with our commitment to establish a local presence in …