Change Healthcare : Q1 FY21 Earnings Conference Call Presentation

FIRST QUARTER FISCAL 2021 EARNINGS CONFERENCE CALL

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.

Legal

FORWARD LOOKING STATEMENT:

This presentation contains "forward-looking statements" within the meaning of federal securities laws. Any statements made in this presentation that are

not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include information concerning possible or assumed future results of operations, including, but not limited to, our second quarter fiscal 2021 guidance, the supplemental information and assumptions regarding fiscal 2021, the potential length and impact of COVID-19 and descriptions of our business plans and strategies. These statements often include words such as "anticipate," "expect," "suggest," "plan," "believe," "intend," "estimate," "target," "project," "should," "could," "would," "may," "will," "forecast," "outlook," "potential," "continues," "seeks," "predicts," and the negatives of these words and other similar expressions. Forward-looking statements involve known and unknown risks, uncertainties, including, but not limited to, the uncertainty around the length and severity of the COVID-19 pandemic; the ongoing impact of the COVID-19 pandemic on our operations and financial results, on our customers

and on national, state and local economies; and new risks that may arise due to responses to the pandemic by the government, our customers and us;

and other factors disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2020 in the section entitled "Risk Factors," as such factors may be updated from time to time in our periodic filings with the SEC, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this release. All forward-looking statements are based on information currently available to Change Healthcare and are qualified in their entirety by this cautionary statement. The statements herein speak only as of the date such statements were first made. Except to the extent required by law, Change Healthcare assumes no obligation to update any such forward-looking statements or other statements included in this release.

NON-GAAP MEASURES DISCLOSURE:

In the Company's earnings releases, prepared remarks, conference calls, slide presentations and webcasts, there may be use or discussion of non-GAAP financial measures. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between the comparable GAAP financial measure and each non-GAAP financial measure are included in this presentation after the consolidated financial statements. These non-GAAP financial measures that are calculated and presented on the basis of methodologies other than in accordance with generally accepted accounting principles in the United States of America ("GAAP"). These non-GAAP financial measures should be

considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP.

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	2

08.06.20

Overview and Business Update

Neil de Crescenzo

President and CEO

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	3

Change Healthcare - First Quarter FY21 CEO Summary
Financial Results	Business Highlights	New Innovation
Q1 FY2021
Solutions	Strong Q1FY21	17 New API
Revenue	Performance	Products
$648m
Adjusted EBITDA	New Contract	Clinical Network
Wins Across
$197m	Lab Service
Portfolio
Adjusted Diluted	Advancing	Cloud-based
Clinical Data
EPS	Market
Retrieval
$0.25	Leadership

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	4

Gradual Recovery in Healthcare Utilization Since Mid-April
	120%		Medical Claims
	110%		Volume In %	Pre-Covid Volume	Lowest Volume
%)	100%					As of week
(In
					beginning
Volume
	38%				7/26/20: 8%
90%		Last Earnings		below Pre-
below		92%
	Pre-				COVID levels
Transaction
80%	COVID
levels at
	the
70%	lowest		74%
	60%		62%
	50%
				Week Of

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	5

08.06.20

Financial Performance

Fredrik Eliasson

EVP and Chief Financial Officer

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	6

Q1 FY'21 Performance

In millions except EPU		CH Inc.	CH LLC	%
	Q1 FY'21	Q1 FY'20		Change(2)
Consolidated Revenue	$	694	$	856	(18.9%)
Solutions Revenue			648		797	(18.7%)
EBITDA			129		232	(44.3%)
Net Income			(59)		72	(181.6%)
(1)			(0.18)		0.28	(164.5%)
Diluted EPU
Adjusted EBITDA			197		281	(30.0%)
Adjusted Net Income			81		141	(42.6%)
Adjusted Diluted EPS			0.25		0.56	(54.8%)
Diluted Number of Shares	(1)		320		253	26.3%

Q1 FY'21 Business Highlights

• Solutions Revenue and Adjusted EBITDA include:
• • New business wins across portfolio more than offset by COVID-19 impact
  • Net YoY revenue and AEBITDA impact from M&A of $6 million and $1 million, respectively
  • Continued execution of synergy realization and business optimization
  • Continued investment in R&D and enterprise sales
  • Revenue impacted by $55 million due to lower deferred revenue as part of fair value adjustments
• Adjusted Net Income of $81.2 million or $0.25 per diluted share
• • Lower interest expense due to reduction in YoY long-term debt outstanding and higher tax rate
  • Increased integration D&A expense

Note 1: Prior to the McKesson exit, common units of Change Healthcare LLC are equivalent to the number of outstanding common shares of Change Healthcare Inc. and membership interests of Change Healthcare LLC held by subsidiaries of McKesson.

Note 2: Percentage change does not reflect rounding of the numbers.

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	7

Q1 FY'21 Segment Performance

In millions	CH Inc.	CH LLC	%
Q1 FY'21	Q1 FY'20	Change
					(2)
Segment Revenue
S&A	$	392	$	434	(9.7%)
Network		143		142	0.9%
TES		188		248	(24.2%)
Postage and Elimination(1)		27		33	(17.0%)
Purchase Accouting Adj.		(55)		-	-
Total Net Revenue		694		856	(18.9%)
Segment Adjusted EBITDA - New Methodology
S&A	$	144	$	177	(18.5%)
Network		71		79	(11.0%)
TES		(18)		25	(169.4%)
Postage and Elimination(1)		-		-	-
Total Adjusted EBITDA		197		281	(30.0%)

Note 1: CH-LLC reflect incorporation of new allocation methodology; reconciliation is provided in the appendix.

Note 2: Percentage change does not reflect rounding of the numbers.

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.

Q1 FY'21 Segment Highlights

• S&A: Execution Across Segment
• • COVID-19related impact on contingency/renewal- based revenue of approximately (25%)
  • Strength in Payment Accuracy and Decision Support
  • Implementations and new wins in cloud-based EI solution
  • Impact from Connected Analytics sale of ~$11 million
• Network: Strength in Data Solutions
• • Strong growth in Data Solutions; increased market penetration in Medical Network and B2B Payments
  • COVID-19network volume impact of approximately (20%)
  • Investments to expand market growth for data services,
    B2B Payments, API's/ Interoperability, and Connected
    Consumer Health
• TES: Underlying RCM transformation remains intact
• • Continued positive trends in RCM win rates and deal size
  • COVID-19revenue impact approximately (30%) RCM and (20%) CPS
  • Vendor consolidation/outsourcing trends support long term growth

8

Q1 FY'21 Cash Generation & Liquidity

• Free Cash Flow for Q1 FY21 of $102.3 million(1)
• Adjusted Free Cash Flow for Q1 FY21 of $126.6 million(1)
• Net Debt $4.9 billion(2); Leverage Ratio 5.2x(2)
• Liquidity: $958.3 million

• 1. Cash and cash equivalents of approx. $178.4 million; $780.0 million undrawn secured credit facility (maturity July 2024) at quarter end
• No maintenance covenants; earliest debt maturity Term Loan B - March 2024

Note 1: Includes $14 million of pass thru funds.

Note 2: Based on Adjusted EBITDA as of June 30, 2020 in accordance with the Credit Agreement.

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	9

Financial Guidance and Assumptions

Q2 Fiscal 2021Guidance

(in millions, except per share data(1))

• Solutions revenue between $670 million to $690 million; includes impact of $39 million related to fair value adjustment for deferred revenue
• Adjusted EBITDA between
  $180 million to $190 million; no impact from fair value adjustments
• Adjusted net earnings per share 20 cents to 23 cents

Q2 Assumptions - Segments

• Software & Analytics:
• • 75% of revenue subscription or maintenance - low-single digit growth
  • 25% contingency/renewal-based revenue - negative impact ~ (10%)
• Network Solutions:
• • Approximately (10%) decline in network volumes
  • Mid-singledigit growth in B2B Payments and high teens growth in Data Solutions
• Technology-EnabledServices:
• • Approximately (15%) decline in contingency based RCM revenue, CPS decline of (20%) due to lower volumes, and remaining combined businesses stable

Full Fiscal Year 2021 Assumptions

• Continued gradual improvement of healthcare utilization throughout the fiscal year
• Expect free cash flow of $150 million - $200 million
• CapEx: ~7% of solutions revenue excluding impact of fair value adjustments and integration CapEx
• Integration related OpEx of ~$80 million and CapEx of ~$20 million
• Interest expense in the range of $250 million - $260 million
• Adjusted effective tax rate: ~25%
• Basic and fully diluted shares outstanding: 320 million(1)

Note 1: Diluted shares outstanding includes the impact of the minimum issuable shares attributable to the TEUs and excludes the effect of potential shares that would be antidilutive to Diluted EPS, based on expected GAAP Net Income (Loss) for FY2021.

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	10

08.06.20

Appendix

Q1 FY'21 Financial Statements

Q1 FY'21 and FY'19 Non-GAAP Reconciliations

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	11

Change Healthcare Inc.

Consolidated Statements of Operations (unaudited and amounts in thousands, except per share and per share amounts)

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	12

Change Healthcare Inc.

Consolidated Balance Sheets (unaudited and amounts in thousands, except share and per share amounts)

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	13

Change Healthcare Inc.

Consolidated Statements of Cash Flows (unaudited and amounts in thousands)

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	14

Change Healthcare Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	15

Change Healthcare Inc.

Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss)

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	16

Change Healthcare Inc.

Segment Results

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	17

Change Healthcare Inc.

Reconciliation of Cash Provided by (Used in) Operating Activities to Free Cash Flow and Adjusted Free Cash Flow

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	18

Change Healthcare LLC

Recast Results to Reflect New Allocation Methodology

Note: During the first quarter of fiscal year 2021, the Company decided to allocate all administrative and certain other corporate expenses to the respective reportable segments. This allocation methodology differs from the methodology utilized by the Joint Venture in prior fiscal years. Therefore, the Adjusted EBITDA of the Joint Venture's reportable segments

has been retrospectively adjusted for those periods to be consistent with the Company's current allocation methodology.

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.	19

© 2020 Change Healthcare LLC and/or one of its subsidiaries. All Rights Reserved.