R1 RCM Inc. (“R1” or the “Company”) (NASDAQ:RCM), a leading
provider of revenue cycle management and physician advisory
services to healthcare providers, today announced results for the
three months ended March 31, 2017.
First Quarter 2017 Results:
- GAAP net services revenue of $86.9 million
- GAAP net loss of $8.3 million
- Adjusted EBITDA of negative $1.4 million, compared to net cash
generated from customer contracting activities of negative $12.6
million for the first quarter of 2016.
“Our first quarter results were ahead of our internal
expectations and reflect the progress we are making in executing
against our objectives,” said Joe Flanagan, President and Chief
Executive Officer of R1. “We reached a number of important
milestones this quarter, including listing our shares on Nasdaq and
turning to positive margin contribution from the hospitals we
started onboarding to our platform last summer.”
“I’m very pleased with the financial results for the first
quarter,” added Chris Ricaurte, Chief Financial Officer and
Treasurer of R1. “We remain focused on continued execution and
generating positive EBITDA as well as free cash flow in the second
half of the year.”
2017 OutlookFor 2017, R1 currently expects to
generate:
- Revenue of between $400 million and $425 million
- GAAP operating loss of $25 million to $30 million
- Adjusted EBITDA of $0 to positive $5 million
Conference Call and Webcast DetailsR1’s
management team will host a conference call today at 4:30 p.m.
Eastern Time to discuss its financial results and business outlook.
To participate, please dial 877-880-5884 (631-601-2894 outside the
U.S. and Canada) using conference code number 12384316. A live
webcast and replay of the call will be available at the Investor
Relations section of the Company’s web site at r1rcm.com.
Non-GAAP Financial MeasuresIn order to provide
a more comprehensive understanding of the information used by R1’s
management team in financial and operational decision making, the
Company supplements its GAAP consolidated financial statements with
certain non-GAAP financial measures, which are included in this
press release.
For the three months ended March 31, 2017: As of January 1,
2017, the Company adopted Accounting Standards Update ("ASU") No.
2014-09, Revenue from Contracts with Customers (Topic 606).
Subsequent to adoption of Topic 606, the non-GAAP financial measure
referenced in the press release is adjusted EBITDA. Adjusted EBITDA
is defined as GAAP net income before net interest income, income
tax provision, depreciation and amortization expense, share-based
compensation expense, and severance & certain other items.
For the three months ended March 31, 2016: Prior to the adoption
of Topic 606, non-GAAP financial measures utilized by the company
included gross cash generated from customer contracting activities,
and net cash generated from customer contacting activities. Gross
cash generated from customer contracting activities was defined as
GAAP net services revenue, plus the change in deferred customer
billings. Accordingly, gross cash generated from customer
contracting activities is the sum of (i) invoiced or accrued net
operating fees, (ii) cash collections on incentive fees and (iii)
other services fees. Net cash generated from customer
contracting activities was defined as net income before net
interest income, income tax provision, depreciation and
amortization expense, share-based compensation expense, and
severance & certain other items. Deferred customer billings
include the portion of both (i) invoiced or accrued net operating
fees and (ii) cash collections of incentive fees, in each case,
that have not met our revenue recognition criteria. Deferred
customer billings are included in the detail of our customer
liabilities and customer liabilities – related party balance in the
condensed consolidated balance sheets available in the Company’s
Quarterly Report on Form 10-Q for the three months ended March 31,
2016.
Our Board and management team use non-GAAP measures as (i) one
of the primary methods for planning and forecasting overall
expectations and for evaluating actual results against such
expectations; and (ii) a performance evaluation metric in
determining achievement of certain executive incentive compensation
programs, as well as for incentive compensation programs for
employees.
Table 4 presents a reconciliation of GAAP net income to adjusted
EBITDA, and GAAP net income to net cash generated from customer
contracting activities. Adjusted EBITDA and net cash generated from
customer contacting activities are non-GAAP measures and should be
considered in addition to, but not as a substitute for, the
information prepared in accordance with GAAP.
Forward Looking Statements
This press release includes statements that may constitute
forward-looking statements made pursuant to the safe harbor
provisions of the Private securities Litigation Reform Act of 1995.
In particular, any statements about future growth, plans and
performance, including any statements about the Company’s forecast
for 2017, are forward-looking statements. These statements are
often identified by the use of words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “designed,” “may,”
“plan,” “predict,” “project,” “would” and similar expressions or
variations, although not all forward-looking statements contain
these identifying words. The Company has based these
forward-looking statements on its current expectations and
projections about future events as of the date hereof and any
forward-looking statements contained herein should not be relied
upon as representing the Company’s views as of any subsequent date.
Subsequent events and developments, including actual results or
changes in our assumptions, may cause our views to change. While
the Company may elect to update these forward-looking statements at
some point in the future, it has no current intention of doing so
except to the extent required by applicable law. Although the
Company believes that the expectations reflected in such
forward-looking statements are based on reasonable assumptions,
such statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected.
Should one or more of these risks and uncertainties materialize, or
should underlying assumptions, projections, or expectations prove
incorrect, actual results, performance, financial condition, or
events may vary materially and adversely from those anticipated,
estimated, or expected.
Investors are cautioned not to place undue reliance on such
forward-looking statements. Any forward-looking statements made
herein call involve risks and uncertainties. All forward-looking
statements included in this press release are expressly qualified
in their entirety by these cautionary statements. Our actual
results and outcomes could differ materially from those included in
these forward-looking statements as a result of various factors,
including, but not limited to, the factors discussed under the
heading “Risk Factors” in our annual report on Form 10-K for the
year ended December 31, 2016 and any other periodic reports that
the Company files with the SEC.
About R1 RCM R1 serves as the one revenue cycle
management partner for select hospitals and healthcare systems
regardless of their payment models, patient engagement strategies
or settings of care. The company uses a proven operating
model based on the R1 Performance StackSM designed to fit
seamlessly into any healthcare organization’s infrastructure and to
enhance the patient experience, improve provider economics and
provide revenue predictability. To learn more, visit r1rcm.com.
Table 1 |
|
R1 RCM Inc. |
|
Condensed Consolidated Balance Sheets |
|
(In millions) |
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
2017 |
|
2016 |
|
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
142.7 |
|
|
$ |
181.2 |
|
|
Accounts receivable,
net |
|
9.0 |
|
|
4.0 |
|
|
Accounts receivable,
net - related party |
|
25.5 |
|
|
1.8 |
|
|
Prepaid income
taxes |
|
0.2 |
|
|
3.8 |
|
|
Prepaid expenses and
other current assets |
|
28.0 |
|
|
13.8 |
|
|
Total current
assets |
|
205.4 |
|
|
204.6 |
|
|
Property, equipment and
software, net |
|
35.0 |
|
|
32.8 |
|
|
Non-current deferred
tax asset |
|
100.8 |
|
|
169.9 |
|
|
Restricted cash |
|
1.5 |
|
|
1.5 |
|
|
Other assets |
|
8.1 |
|
|
6.3 |
|
|
Total assets |
|
$ |
350.8 |
|
|
$ |
415.1 |
|
|
|
|
|
|
|
|
Liabilities and
stockholders’ equity (deficit) |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
2.3 |
|
|
$ |
7.9 |
|
|
Current portion of
customer liabilities |
|
2.1 |
|
|
69.7 |
|
|
Current portion of
customer liabilities - related party |
|
13.7 |
|
|
14.2 |
|
|
Accrued compensation
and benefits |
|
28.1 |
|
|
24.8 |
|
|
Other accrued
expenses |
|
16.3 |
|
|
18.5 |
|
|
Total current
liabilities |
|
62.5 |
|
|
135.1 |
|
|
Non-current portion of
customer liabilities |
|
1.0 |
|
|
1.0 |
|
|
Non-current portion of
customer liabilities - related party |
|
6.1 |
|
|
110.0 |
|
|
Other non-current
liabilities |
|
14.0 |
|
|
9.7 |
|
|
Total liabilities |
|
83.6 |
|
|
255.8 |
|
|
|
|
|
|
|
|
Preferred Stock |
|
175.9 |
|
|
171.6 |
|
|
Stockholders’
equity (deficit): |
|
|
|
|
|
Common stock |
|
1.2 |
|
|
1.2 |
|
|
Additional paid-in
capital |
|
343.9 |
|
|
349.2 |
|
|
Accumulated
deficit |
|
(194.0 |
) |
|
(304.7 |
) |
|
Accumulated other
comprehensive loss |
|
(2.0 |
) |
|
(2.8 |
) |
|
Treasury stock |
|
(57.8 |
) |
|
(55.2 |
) |
|
Total stockholders’
equity (deficit) |
|
91.3 |
|
|
(12.3 |
) |
|
Total liabilities and
stockholders’ equity (deficit) |
|
$ |
350.8 |
|
|
$ |
415.1 |
|
|
|
Table 2 |
R1 RCM Inc. |
Consolidated Statements of Operations and
Comprehensive Income (Loss) |
(In millions, except share and per share
data) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
|
|
(Unaudited) |
Net
services revenue |
|
$ |
86.9 |
|
|
$ |
352.2 |
|
Operating
expenses: |
|
|
|
|
Cost of
services |
|
80.9 |
|
|
45.1 |
|
Selling,
general and administrative |
|
14.3 |
|
|
17.6 |
|
Other |
|
0.2 |
|
|
10.8 |
|
Total
operating expenses |
|
95.4 |
|
|
73.5 |
|
Income
(loss) from operations |
|
(8.5 |
) |
|
278.7 |
|
Net
interest income |
|
0.1 |
|
|
0.1 |
|
Income
(loss) before income tax provision |
|
(8.4 |
) |
|
278.8 |
|
Income tax
provision (benefit) |
|
(0.1 |
) |
|
111.4 |
|
Net income
(loss) |
|
$ |
(8.3 |
) |
|
$ |
167.4 |
|
|
|
|
|
|
Net income
(loss) per common share: |
|
|
|
|
Basic |
|
$ |
(0.12 |
) |
|
$ |
0.85 |
|
Diluted |
|
$ |
(0.12 |
) |
|
$ |
0.85 |
|
|
|
|
|
|
Weighted
average shares used in calculating net income (loss) per common
share: |
|
|
|
|
Basic |
|
101,364,424 |
|
|
98,289,802 |
|
Diluted |
|
101,364,424 |
|
|
99,232,974 |
|
|
|
|
|
|
Table 3 |
R1 RCM Inc. |
Condensed Consolidated Statements of Cash
Flows |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
|
|
(Unaudited) |
Operating
activities |
|
|
|
|
Net income (loss) |
|
$ |
(8.3 |
) |
|
$ |
167.4 |
|
Adjustments to
reconcile net income (loss) to net cash used in operations: |
|
|
|
|
Depreciation and amortization |
|
3.2 |
|
|
2.3 |
|
Share-based compensation |
|
3.7 |
|
|
6.8 |
|
Deferred
income taxes |
|
(0.5 |
) |
|
112.8 |
|
Changes
in operating assets and liabilities: |
|
|
|
|
Accounts
receivable and related party accounts receivable |
|
(24.2 |
) |
|
1.3 |
|
Prepaid
income taxes |
|
3.7 |
|
|
0.5 |
|
Prepaid
expenses and other assets |
|
(15.5 |
) |
|
(4.3 |
) |
Accounts
payable |
|
(4.0 |
) |
|
(3.2 |
) |
Accrued
compensation and benefits |
|
3.2 |
|
|
7.6 |
|
Other
liabilities |
|
3.5 |
|
|
3.1 |
|
Customer
liabilities and customer liabilities - related party |
|
7.3 |
|
|
(293.2 |
) |
Net cash (used in)
provided by operating activities |
|
(27.9 |
) |
|
1.1 |
|
Investing
activities |
|
|
|
|
Purchases
of property, equipment, and software |
|
(9.2 |
) |
|
(2.1 |
) |
Net cash used in
investing activities |
|
(9.2 |
) |
|
(2.1 |
) |
Financing
activities |
|
|
|
|
Series A
convertible preferred stock and warrant issuance, net of issuance
costs |
|
— |
|
|
178.7 |
|
Exercise
of vested stock options |
|
— |
|
|
0.1 |
|
Purchase
of treasury stock |
|
(0.6 |
) |
|
(0.3 |
) |
Shares
withheld for taxes |
|
(1.5 |
) |
|
(0.4 |
) |
Net cash (used in)
provided by financing activities |
|
(2.1 |
) |
|
178.4 |
|
Effect of exchange rate
changes in cash |
|
0.7 |
|
|
0.1 |
|
Net increase (decrease)
in cash and cash equivalents |
|
(38.5 |
) |
|
177.5 |
|
Cash and cash
equivalents, at beginning of period |
|
181.2 |
|
|
103.5 |
|
Cash and cash
equivalents, at end of period |
|
$ |
142.7 |
|
|
$ |
281.0 |
|
|
|
|
|
|
|
|
|
|
Table 4 |
R1 RCM Inc. |
Reconciliation of Non-GAAP to GAAP |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
|
|
|
|
|
RCM
services: net operating fees |
|
$ |
70.7 |
|
|
$ |
248.7 |
|
RCM
services: incentive fees |
|
5.6 |
|
|
98.0 |
|
RCM
services: other |
|
3.0 |
|
|
2.4 |
|
Other
services fees |
|
7.6 |
|
|
3.1 |
|
Net
services revenue |
|
$ |
86.9 |
|
|
$ |
352.2 |
|
Change in deferred customer billings (non-GAAP) |
|
n.a. |
|
|
(311.3 |
) |
Gross
cash generated from customer contracting activities (non-GAAP) |
|
n.a. |
|
|
$ |
40.9 |
|
|
|
|
|
|
Net
income (loss) |
|
$ |
(8.3 |
) |
|
$ |
167.4 |
|
Net interest income |
|
(0.1 |
) |
|
(0.1 |
) |
Income tax provision (benefit) |
|
(0.1 |
) |
|
111.4 |
|
Depreciation and amortization expense |
|
3.2 |
|
|
2.3 |
|
Share-based compensation expense |
|
3.7 |
|
|
6.9 |
|
Other |
|
0.2 |
|
|
10.8 |
|
Adjusted EBITDA (non-GAAP) |
|
$ |
(1.4 |
) |
|
$ |
298.7 |
|
Change in deferred
customer billings (non-GAAP) |
|
n.a. |
|
|
(311.3 |
) |
Net cash generated from
customer contracting activities |
|
n.a |
|
|
$ |
(12.6 |
) |
|
|
|
|
|
n.a. - Due
to the adoption of Topic 606 as of January 1, 2017, the non-GAAP
measure of gross and net cash generated from customer contracting
activities that were utilized by the Company in 2016 are not
applicable for 2017. Gross and net cash generated from customer
contracting activities have been provided for the three months
ended March 31, 2016 as they are the most comparable metric to net
services revenue and adjusted EBITDA, respectively, for the three
months ended March 31, 2017. |
|
Table 5 |
R1 RCM Inc. |
Share-Based Compensation Expense Allocation
Details |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
|
|
|
|
|
Cost of services |
|
$ |
1.2 |
|
|
$ |
2.0 |
|
Selling, general and
administrative |
|
2.5 |
|
|
4.9 |
|
Other |
|
— |
|
|
— |
|
Total share-based
compensation expense |
|
$ |
3.7 |
|
|
$ |
6.9 |
|
|
|
|
|
|
|
|
|
|
Table 6 |
R1 RCM Inc. |
Depreciation and Amortization Expense
Allocation Details |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
|
|
|
|
|
Cost of services |
|
$ |
2.9 |
|
|
$ |
2.1 |
|
Selling, general and
administrative |
|
0.3 |
|
|
0.2 |
|
Total share-based
compensation expense |
|
$ |
3.2 |
|
|
$ |
2.3 |
|
|
|
|
|
|
|
|
|
|
Table 7 |
R1 RCM Inc. |
Reconciliation of GAAP Net Services Revenue to
Non-GAAP Gross Cash Generated |
from Customer Contracting
Activities |
|
(In millions) |
|
|
|
|
|
Three Months Ended March 31, 2016 |
|
Net Services Revenue |
Change in deferred customer
billings |
Gross cash generated (1) |
RCM services: net
operating fees |
$ |
248.7 |
|
$ |
(223.9 |
) |
$ |
24.8 |
|
RCM services: incentive
fees |
98.0 |
|
(89.1 |
) |
8.9 |
|
RCM services:
other |
2.4 |
|
1.7 |
|
4.1 |
|
Other services
fees |
3.1 |
|
— |
|
3.1 |
|
Total |
$ |
352.2 |
|
$ |
(311.3 |
) |
$ |
40.9 |
|
|
|
|
|
(1) Due to
the adoption of Topic 606 as of January 1, 2017, the non-GAAP
measure of gross cash generated from customer contracting
activities that was utilized by the Company in 2016 is not
applicable for 2017. Gross cash generated from customer contracting
activities has been provided for the three months ended March 31,
2016 as it is the most comparable metric to net services revenue
for the three months ended March 31, 2017. |
|
Table 8 |
R1 RCM Inc. |
Condensed Consolidated Non-GAAP Financial
Information |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
RCM services: net
operating fees |
|
$ |
70.7 |
|
|
$ |
24.8 |
|
RCM services: incentive
fees |
|
5.6 |
|
|
8.9 |
|
RCM services:
other |
|
3.0 |
|
|
4.1 |
|
Other services
fees |
|
7.6 |
|
|
3.1 |
|
Net services
revenue (GAAP) (2017), Gross cash generated from customer
contracting activities (non-GAAP) (2016) (2) |
|
86.9 |
|
|
40.9 |
|
|
|
|
|
|
Operating expenses (1)
: |
|
|
|
|
Cost of
services (non-GAAP) |
|
76.8 |
|
|
41.0 |
|
Selling,
general and administrative (non-GAAP) |
|
11.5 |
|
|
12.5 |
|
Sub-total |
|
88.3 |
|
|
53.5 |
|
|
|
|
|
|
Adjusted EBITDA
(non-GAAP) (2017), Net cash generated from customer contracting
activities (non-GAAP) (2016) (2) |
|
(1.4 |
) |
|
(12.6 |
) |
|
|
|
|
|
(1)
Excludes share-based compensation, depreciation and amortization
and other costs |
(2) Due to
the adoption of Topic 606 as of January 1, 2017, the non-GAAP
measure of gross and net cash generated from customer contracting
activities that were utilized by the Company in 2016 are not
applicable for 2017. Gross and net cash generated from customer
contracting activities have been provided for the three months
ended March 31, 2016 as they are the most comparable metric to net
services revenue and adjusted EBITDA, respectively, for the three
months ended March 31, 2017. |
|
Contact:
R1 RCM Inc.
Investor and Media Relations:
Atif Rahim
312.324.5476
investorrelations@r1rcm.com
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