American CareSource Reports Record Third Quarter Revenues of $18.2 Million Third Quarter Highlights

http://www.businesswire.com/news/home/20091109006601/en

* Revenues increased 13% to $18.2 million
* Diluted earnings per share were $0.02 excluding a non-recurring restructuring
charge of $223 thousand
* Adjusted EBITDA was $0.9 million
* Processed claims up 34% to 117,000

DALLAS--(Business Wire)--
American CareSource Holdings Inc. (NASDAQ: ANCI) today announced third quarter
net income of $147 thousand, or $0.01 per diluted share, compared to net income
of $1.0 million, or $0.06 per diluted share reported during the third quarter of
2008. Third quarter 2009 results include a pre-tax, non-recurring, restructuring
charge of $223 thousand, or $0.01 per diluted share. Excluding this charge,
diluted earnings per share were $0.02.

"Despite a challenging economic environment, our business continues to
demonstrate resilience by delivering continued top-line growth and solid
operating performance," said David Boone, Chief Executive Officer of American
CareSource. "Our focus on improving the cost of Ancillary healthcare remains a
compelling value proposition for our clients. We have an extensive service
provider network that gives us a breadth of services that remain unmatched in
the industry. This is why I remain confident in the sustained growth of the
Company."

Client and Provider Additions Improve Revenues

Revenues for the third quarter of 2009 increased 13% to $18.2 million compared
to $16.1 million reported the same period last year. The higher revenues were
attributed to increased revenues from new and existing clients. In particular,
the business realized strong revenue contributions from three clients
implemented in 2009; HealthMarkets, IAC and HealthScope.

Sequentially, third quarter revenues increased $1.1 million, or 6.4%, from $17.1
million reported during the second quarter of 2009. The improved results were
attributed to increased claims volumes from HealthSmart and the addition of new
client relationships such as HealthMarkets.

During the third quarter, the company added approximately 300 net new providers,
which represent approximately 4,300 additional sites. As of the end of the third
quarter, the Company had over 4,100 providers and over 32,000 provider sites.

Stronger Claims Volume

The Company processed 117,000 claims during the third quarter of 2009, which
represents a 34% increase over the 87,000 claims processed during the same
period in 2008. The increase in claims processed was driven by the expansion of
the Company`s existing clients, provider relationships, and the implementation
of new clients. Revenues per processed claim decreased to $156 reflecting a
shift in business mix toward lower cost specialties, such as laboratory
services.

The Company billed 101,000 claims during the third quarter of 2009, which
represents a 29% increase over the 78,000 claims billed during the same period
in 2008. Revenue per billed claim for the period decreased to $181 compared to
$207 per billed claim reported during the third quarter of 2008. This decrease
was attributed to a shift in business mix toward lower cost specialties, such as
laboratory services.

Compared to the second quarter of 2009, processed claims declined 4%, while
billed claims volume remained unchanged. Revenue per processed claim increased
10% while revenue per billed claim increased by 7% due to a shift in business
mix toward higher cost specialties, such as diagnostic imaging services and
surgery centers.

(Claim amounts in 000`s) 3Q 2009 2Q 2009 3Q 2008
Claims processed 117 121 87
Claims billed 101 101 78

Revenue per processed claim $ 156 $ 142 $ 185
Revenue per billed claim 181 169 207

Margin Review

The contribution margin for the third quarter of 2009 softened to $2.4 million
from $2.6 million reported during the third quarter of 2008. As a percentage of
revenues, the contribution margin was 12.9%, compared to 15.9% reported during
the third quarter of 2008. Higher payments to providers and increased claims
administration and provider development costs, which as a percentage of
revenues, were 75.7% and 6.5%, respectively, contributed to the lower
contribution margin.

On a quarterly sequential basis, the contribution margin, as a percentage of
revenues, decreased by 0.8% due to marginally higher provider payments and
administrative fees.

3Q 2009 2Q 2009 3Q 2008
Provider payments 75.7 % 75.2 % 72.9 %
Administrative fees 4.9 % 4.5 % 5.8 %
Claims administration and provider development 6.5 % 6.6 % 5.5 %
Total cost of revenues 87.1 % 86.3 % 84.2 %

Selling, General and Administrative Expenses (SG&A)

SG&A for the third quarter of 2009, excluding the restructuring charge of $223
thousand, was $1.8 million and increased 22%, or $331 thousand over the third
quarter of 2008. The results were primarily driven by increased headcount in
sales and marketing and increased non-cash compensation costs related to the
Company`s stock-based compensation plan. The restructuring charge reflects
severance costs associated with the Company`s reorganization plan.

Adjusted EBITDA

Adjusted EBITDA for the period was $936 thousand, which compares to
approximately $1.3 million reported during the same period last year. Adjusted
EBITDA reported for the third quarter of 2009 represents a 25% sequential
increase over the second quarter of 2009.

Adjusted EBITDA, (a non-GAAP measure) is defined as income from operations less
depreciation and amortization, non-cash warrant and option compensation expense
and restructuring charges. EBITDA, as adjusted, should be considered in addition
to, but not in lieu of, income from operations reported under generally accepted
accounting principles (GAAP).

Operating Income

Operating income during the period was $159 thousand, which compares to $962
thousand reported during the same period last year. The decline reflects higher
SG&A and the non-recurring, restructuring charge of $223 thousand.

Financial Liquidity

Total cash-on-hand at September 30, 2009 was $10.3 million, which compares to
$10.6 million reported at December 31, 2008. Cash generated from operating
activities for the nine months ended September 20, 2009 was $812 thousand and
includes a $1.0 million payment associated with the extension of a key client
contract. Excluding that payment, cash generated from operating activities was
$1.8 million for the period. The Company has no long-term debt outstanding.

Revenue Guidance

For the full year of 2009, the Company expects to generate revenues of
approximately $70 million, which is at the lower-end of its anticipated range of
$70 to 85 million.

Earnings Release Conference Call

As previously announced, American CareSource management will review its audited
third quarter 2009 financials during a conference call scheduled for November
10, 2009 at 8:30 AM Eastern Time. The dial-in numbers are as follows:

Domestic dial-in: (888) 279-0822
International dial-in: (706) 902-0355
Webcast: http://ir.anci-care.com/events.cfm

About American CareSource Holdings, Inc.

American CareSource Holdings is the first national, publicly traded ancillary
care network services company. The Company offers a comprehensive national
network of over 4,100 ancillary service providers at more than 32,000 sites
through its subsidiary, Ancillary Care Services. Ancillary Care Services
provides ancillary health care services through its network that offers cost
effective alternatives to physician and hospital-based services. This market is
estimated at $574 billion and has grown to 30% of total national health
expenditures. These providers offer services in 31 categories including
laboratories, dialysis centers, free-standing diagnostic imaging centers,
non-hospital surgery centers, as well as durable medical equipment such as
orthotics and prosthetics and others. The Company's ancillary network and
management provides a complete outsourced solution for a wide variety of health
care payors and plan sponsors including self-insured employers, indemnity
insurers, PPOs, HMOs, third party administrators and both federal and local
governments. For additional information, please visit www.anci-care.com.

ANCI-G

Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995:

Any statements that are not historical facts contained in this release,
including with respect to the Company`s plans, objectives and expectations for
future operations, projections of the Company`s future operating results or
financial condition, and expectations regarding the health care industry and
economic conditions, are forward-looking statements. Substantial risks and
uncertainties could cause actual results to differ materially from those
indicated by forward-looking statements, including, but not limited to, changes
in national health care policy, regulation, general economic conditions, demand
for ancillary services, pricing, competition, market acceptance/preference, the
Company`s ability to integrate with its clients, changes in the business
decisions by key clients or consolidation in the industry affecting them, the
Company`s inability to attract or maintain providers or clients or to manage
growth, implementation and performance difficulties, and other risk factors
detailed from time to time in the Company`s periodic filings with the Securities
and Exchange Commission. Except as otherwise required by law, the Company
undertakes no obligation to update or revise these forward-looking statements.

AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)

Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008

Net Revenues $ 18,234,674 $ 16,110,795 $ 51,424,977 $ 40,628,998

Cost of revenues:
Provider payments 13,799,863 11,744,523 38,670,094 29,690,099
Administrative fees 900,573 927,932 2,494,245 2,380,627
Claims administration and provider development costs 1,177,813 881,897 3,258,654 2,395,341
Total cost of revenues 15,878,249 13,554,352 44,422,993 34,466,067

Contribution margin 2,356,425 2,556,443 7,001,984 6,162,931

Selling, general and administrative expenses 2,041,884 1,488,455 5,923,449 3,795,813
Depreciation and amortization 155,448 105,887 400,560 294,559
Total operating expenses 2,197,332 1,594,342 6,324,009 4,090,372

Operating income 159,093 962,101 677,975 2,072,559

Interest income 30,729 65,531 107,397 137,439
Interest expense (128 ) (1,067 ) (440 ) (4,511 )
Unrealized gain (loss) on warrant derivative (21,923 ) - 232,186 -
Total other income, net 8,678 64,464 339,143 132,928

Income before income taxes 167,771 1,026,565 1,017,118 2,205,487
Income tax provision 20,555 25,559 57,067 61,623
Net Income $ 147,216 $ 1,001,006 $ 960,051 $ 2,143,864

Earnings per common share:
Basic $ 0.01 $ 0.07 $ 0.06 $ 0.14
Diluted $ 0.01 $ 0.06 $ 0.05 $ 0.12

Basic weighted average common shares outstanding 15,432,338 15,139,839 15,425,567 15,029,161
Diluted weighted average common shares outstanding 17,572,875 18,044,602 17,971,805 17,577,846

Reconciliation of non-GAAP financial measures to reported GAAP financial measures

Reconciliation of EBITDA and EBITDA, as adjusted:
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008

Operating income $ 159,093 $ 962,101 $ 677,975 $ 2,072,559
Depreciation and amortization 155,448 105,887 400,560 294,559
EBITDA 314,541 1,067,988 1,078,535 2,367,118
Non-cash stock-based compensation expense 347,534 169,421 964,503 485,566
Other non-cash charges 50,083 28,011 106,105 54,467
Restructuring charge1 223,357 - 223,357 21,844
EBITDA, as adjusted $ 935,515 $ 1,265,420 $ 2,372,500 $ 2,928,995

1 The Restructuring Charge includes non-cash stock-based compensation expense of $61,835.

AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)
September 30, December 31,
2009 2008
ASSETS

Current assets:
Cash and cash equivalents $ 10,341,501 $ 10,577,829
Accounts receivable, net 7,208,922 5,788,457
Prepaid expenses and other current assets 722,507 495,814
Total current assets 18,272,930 16,862,100

Property and equipment, net 1,691,376 915,224

Other assets:
Other non-current assets 1,019,119 1,127,114
Intangible assets, net 1,184,607 1,280,656
Goodwill 4,361,299 4,361,299

Total assets $ 26,529,331 $ 24,546,393

LIABILITIES and SHAREHOLDERS' EQUITY

Current Liabilities:
Due to service providers $ 6,866,804 $ 5,964,392
Accounts payable and accrued liabilities 2,081,439 3,111,862
Total current liabilities 8,948,243 9,076,254

Warrant derivative liability 109,616 -
Long-term debt - 3,053
Shareholders' equity 17,471,472 15,467,086

Total liabilities and shareholders' equity $ 26,529,331 $ 24,546,393

AMERICAN CARESOURCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine months ended
September 30,
2009 2008
Cash flows from operating activities:
Net income $ 960,051 $ 2,143,864
Adjustments to reconcile net income to net cash
provided by operations:

Stock-based compensation expense 1,026,338 485,568
Depreciation and amortization 400,560 294,559
Unrealized gain on warrant derivative (232,186 ) -
Amortization of long-term client agreement 187,500 -
Client administration fee expense related to warrants 106,105 54,467
Changes in operating assets and liabilities:
Accounts receivable (1,420,465 ) (1,309,032 )
Prepaid expenses and other assets (124,655 ) 205,510
Accounts payable and accrued liabilities (993,256 ) 599,448
Due to service providers 902,413 1,733,044
Net cash provided by operating activities 812,405 4,207,428

Cash flows from investing activities:
Redemption of certificate of deposit - 145,000
Investment in software development costs (464,194 ) (351,605 )
Additions to property and equipment (592,544 ) (258,065 )
Net cash used in investing activities (1,056,738 ) (464,670 )

Cash flows from financing activities:
Payments on long-term debt (7,355 ) (89,369 )
Proceeds from exercise of stock warrants 12,650 127,428
Proceeds from exercise of stock options 2,710 168,033
Net cash provided by financing activities 8,005 206,092

Net increase (decrease) in cash and cash equivalents (236,328 ) 3,948,850
Cash and cash equivalents at beginning of period 10,577,829 4,272,498

Cash and cash equivalents at end of period $ 10,341,501 $ 8,221,348

American CareSource Holdings, Inc.
Steven J. Armond, 972-308-6847
Chief Financial Officer
or
Investor Relations
The Cockrell Group
Rich Cockrell, 404-942-3369
rich.cockrell@thecockrellgroup.com

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