HealthPort Inc., a vendor of outsourced release of information services and revenue cycle management software and services, has postponed its planned initial public offering of stock.

The Alpharetta, Ga.-based company cited current market conditions for the decision. HealthPort in August filed documents for an IPO with the Securities and Exchange Commission. The vendor hoped to raise $100 million by becoming a publicly traded company.

The IPO filing came one week after claims clearinghouse/revenue cycle management software vendor Emdeon Inc. conducted an IPO.

Counting for the full year the operations of ChartOne Inc., acquired in September, 2008, HealthPort had revenue in 2008 of $242.1 million, but lost $59.4 million. For the first half of 2009, the company had a net loss of $6.9 million on revenue of $126.8 million. As of June 30, the company had cash and cash equivalents of $637,000. It had total assets of $330.1 million and total debt of $245.8 million.

Investors failed to adequately support the IPO, according to published reports, because HealthPort has yet to make a profit, has a large amount of debt and some 85% of its revenue comes from one product, the outsourced release of information services.

"I can appreciate that at first blush," says HealthPort Chairman Patrick Haynes. He notes, however that the company's losses related to acquisition-related accounting charges.

HealthPort during the first nine months of 2009 had earnings before interest, taxes, depreciation and amortization of $30 million on the way to $43 million to $45 million for the year, Haynes says. And the company expects EBITA above $50 million for 2010.

"So if you look at the losses, I encourage people to examine how the losses came," he continues. "They were non-cash losses. Our financial health is pretty good in terms of cash flow.

He also notes that more than half of HealthPort's debt is senior debt and the bulk of that is bank debt held by its equity investment firm owners.

HealthPort pulled the IPO because investors weren't willing to pay the expected $14 to $16 per share, Haynes says. The company had a lot of demand for the stock at a price it would not accept. The expectation that the stock would fetch $14 to $16 was one of several miscalculations made by HealthPort's underwriters, Deutsche Bank Securities and William Blair & Co., Haynes contends.

The underwriters failed to appreciate the number of investors who are risk-averse on health care companies until health care reform legislation is enacted, Haynes says. "They were reluctant to invest to the level we were looking for."

That aversion was borne out by the failure of Emdeon Business Services to maintain a stock price above its priced range following an IPO in August, Haynes says. The stock was priced at $15.50 and has recently traded slightly below that price.

The bottom line, Haynes says, is that HealthPort did not have to conduct an IPO to survive because its equity firm owners have $2.75 billion in available cash. Asked if an IPO remains on the table, Haynes doesn't close the door: "Let's just say disenchantment has crept in."

The company continues to have a dominant market position and is developing new products, he contends. "This was painful but at the same time, it's business as usual."

--Joseph Goedert

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