GlobeNewswire Inc | Aug 4, 2020 07:00AM EDT

August 04, 2020

CHICAGO, Aug. 04, 2020 (GLOBE NEWSWIRE) -- R1 RCM Inc. (NASDAQ: RCM), a leading provider of technology-enabled revenue cycle management services to healthcare providers, today announced results for the three months ended June30, 2020.

Second Quarter 2020 Results:

-- Revenue of $314.7 million, up $19.7 million and 6.7% compared to the same period last year -- GAAP net income of $15.1 million, compared to net loss of $5.2 million in the same period last year -- Adjusted EBITDA of $65.3 million, up $24.7 million compared to the same period last year

I want to thank all of our employees for supporting our healthcare provider customers and the patients they serve during these challenging times. From enabling contactless check-in to enhancing collections, R1 has been at the forefront of helping customers navigate the current crisis, and I am incredibly proud of the team, said Joe Flanagan, President and Chief Executive Officer of R1. We continue to be prepared for a variety of scenarios in the back half of the year while ensuring R1 is positioned for sustained long-term growth.

Our second quarter results demonstrate our team's commitment to successfully navigate the challenges presented by COVID-19 through disciplined overhead cost reduction while supporting growth, added Rachel Wilson, Chief Financial Officer and Treasurer. With the recovery in patient volumes experienced to date and the visibility in our business model, we are pleased to re-introduce 2020 financial guidance.

Outlook

For 2020, R1 expects to generate:

-- Revenue of between $1,220 million and $1,250 million -- GAAP operating income of $90 million to $110 million -- Adjusted EBITDA of $230 million to $240 million

Conference Call and Webcast Details

R1s management team will host a conference call today at 8:00 a.m. Eastern Time to discuss its financial results and business outlook. To participate, please dial 833-968-2190 (778-560-2796 outside the U.S. and Canada) using conference code number 5343659. A live webcast and replay of the call will be available at the Investor Relations section of the Companys web site at ir.r1rcm.com.

Non-GAAP Financial Measures

In order to provide a more comprehensive understanding of the information used by R1s management team in financial and operational decision making, the Company supplements its GAAP consolidated financial statements with certain non-GAAP financial performance measures, including adjusted EBITDA and net debt. Adjusted EBITDA is defined as GAAP net income before net interest income/expense, income tax provision/benefit, depreciation and amortization expense, share-based compensation expense, expense arising from debt extinguishment, strategic initiatives costs, transitioned employee restructuring expense, digital transformation office expenses, and certain other items. Net debt is defined as debt less cash and cash equivalents, inclusive of restricted cash.

Our board of directors and management team use adjusted EBITDA 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.

Tables 4 through 9 present a reconciliation of GAAP financial measures to non-GAAP financial measures, including adjusted EBITDA. Adjusted EBITDA 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 information that may constitute forward-looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future, not past, events and often address our expected future growth, plans and performance or forecasts. These forward-looking statements are often identified by the use of words such as anticipate, believe, designed, estimate, expect, forecast, intend, may, plan, predict, project, target, will, or would, and similar expressions or variations, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about the potential impacts of the COVID-19 pandemic, our strategic initiatives, our capital plans, our costs, our ability to successfully deliver on our commitments to our customers, our ability to deploy new business as planned, our ability to successfully implement new technologies, our future financial performance, and our liquidity. Such forward-looking statements are based on managements current expectations about future events as of the date hereof and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Subsequent events and developments, including actual results or changes in our assumptions, may cause our views to change. We do not undertake to update our forward-looking statements except to the extent required by applicable law. Readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements included herein 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 severity, magnitude and duration of the COVID-19 pandemic; responses to the pandemic by the government and healthcare providers and the direct and indirect impacts of the pandemic on our customers and personnel; the disruption of national, state and local economies as a result of the pandemic; the impact of the pandemic on our financial results, including possible lost revenue and increased expenses; and the factors discussed under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31, 2019 and any other periodic reports that the Company files with the Securities and Exchange Commission.

About R1 RCM

R1 is a leading provider of technology-enabled revenue cycle management services which transform a health systems revenue cycle performance across settings of care. R1s proven and scalable operating models seamlessly complement a healthcare organizations infrastructure, quickly driving sustainable improvements to net patient revenue and cash flows while reducing operating costs and enhancing the patient experience. To learn more, visit: r1rcm.com

Contact:

R1 RCM Inc.

Investor Relations:

Atif Rahim312-324-5476investorrelations@r1rcm.com

Media Relations:

Natalie Joslin678-585-1206media@r1rcm.com

Table 1R1 RCM Inc.Consolidated Balance Sheets(In millions) (Unaudited) June 30, December 31, 2020 2019Assets Current assets: Cash and cash equivalents $ 123.1 $ 92.0 Accounts receivable, net of $5.1 million and $2.8 64.3 52.3 million allowanceAccounts receivable, net of $0.1 million and 25.3 30.8 $0.0million allowance - related partyPrepaid expenses and other current assets 48.0 41.6 Total current assets 260.7 216.7 Property, equipment and software, net 112.3 116.9 Operating lease right-of-use assets 68.3 77.9 Intangible assets, net 240.0 164.7 Goodwill 379.8 253.2 Non-current deferred tax assets 39.1 64.2 Non-current portion of restricted cash equivalents 1.0 0.5 Other assets 39.7 35.0 Total assets $ 1,140.9 $ 929.1 Liabilities Current liabilities: Accounts payable $ 24.2 $ 20.2 Current portion of customer liabilities 19.9 14.0 Current portion of customer liabilities - related party 23.4 34.1 Accrued compensation and benefits 52.4 95.1 Current portion of operating lease liabilities 13.4 12.8 Current portion of long-term debt 25.8 16.3 Other accrued expenses 46.4 40.0 Total current liabilities 205.5 232.5 Non-current portion of customer liabilities - related 18.2 18.6 partyNon-current portion of operating lease liabilities 76.5 82.7 Long-term debt 538.6 337.7 Other non-current liabilities 15.9 10.4 Total liabilities 854.7 681.9 Preferred Stock 240.1 229.1 Stockholders? equity: Common stock 1.3 1.3 Additional paid-in capital 375.2 372.7 Accumulated deficit (245.3 ) (277.8 )Accumulated other comprehensive loss (10.4 ) (4.5 )Treasury stock (74.7 ) (73.6 )Total stockholders? equity 46.1 18.1 Total liabilities and stockholders? equity $ 1,140.9 $ 929.1

Table 2R1 RCM Inc.Consolidated Statements of Operations (Unaudited)(In millions, except share and per share data) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019Net operating $ 287.8 $ 252.9 $ 568.7 $ 494.2 feesIncentive fees 1.3 17.4 18.1 29.6 Other 25.6 24.7 48.4 47.1 Net services 314.7 295.0 635.2 570.9 revenueOperating expenses:Cost of services 248.3 246.1 502.2 483.3 Selling, generaland 23.3 25.8 48.8 48.3 administrativeOther expenses 18.0 10.7 26.7 19.5 Total operating 289.6 282.6 577.7 551.1 expensesIncome from 25.1 12.4 57.5 19.8 operationsLoss on debt ? 18.8 ? 18.8 extinguishmentNet interest 4.8 9.9 8.6 20.1 expenseIncome (loss)before income tax 20.3 (16.3 ) 48.9 (19.1 )provision(benefit)Income taxprovision 5.2 (11.1 ) 15.6 (14.1 )(benefit)Net income (loss) $ 15.1 $ (5.2 ) $ 33.3 $ (5.0 ) Net income (loss) per commonshare:Basic $ 0.04 $ (0.09 ) $ 0.10 $ (0.14 )Diluted $ 0.03 $ (0.09 ) $ 0.08 $ (0.14 )Weighted averageshares used incalculating net income (loss) percommon share:Basic 115,067,552 110,956,014 114,754,298 110,382,509 Diluted 165,887,964 110,956,014 167,809,324 110,382,509

Table 3R1 RCM Inc.Consolidated Statements of Cash Flows (Unaudited)(In millions) Six Months Ended June 30, 2020 2019Operating activities Net income (loss) $ 33.3 $ (5.0 )Adjustments to reconcile net income (loss) to net cash provided by operations:Depreciation and amortization 33.6 25.8 Amortization of debt issuance costs 0.5 1.2 Share-based compensation 9.1 9.0 Loss on disposal and right-of-use asset write-downs 4.5 ? Loss on debt extinguishment ? 18.8 Provision for credit losses 1.7 1.0 Deferred income taxes 15.1 (17.3 )Non-cash lease expense 6.0 5.6 Changes in operating assets and liabilities: Accounts receivable and related party accounts (5.4 ) 25.4 receivable Prepaid expenses and other assets (10.5 ) (10.1 ) Accounts payable 4.5 7.2 Accrued compensation and benefits (44.2 ) (12.9 ) Lease liabilities (5.9 ) (5.5 ) Other liabilities 12.7 8.3 Customer liabilities and customer liabilities - (9.7 ) (7.5 )related partyNet cash provided by operating activities 45.3 44.0 Investing activities Purchases of property, equipment, and software (31.1 ) (32.3 )Acquisition of SCI, net of cash acquired and earn-out (189.0 ) ? provisionNet cash used in investing activities (220.1 ) (32.3 )Financing activities Issuance of senior secured debt, net of discount and 190.6 321.8 issuance costsBorrowings on revolver 50.0 60.0 Repayment of senior secured debt (10.5 ) (268.7 )Repayment of subordinated notes and prepayment penalty ? (112.2 )Repayments on revolver (20.0 ) ? Exercise of vested stock options 4.3 7.7 Shares withheld for taxes (1.1 ) (4.7 )Finance lease payments (0.7 ) (0.4 )Other (5.0 ) ? Net cash provided by financing activities 207.6 3.5 Effect of exchange rate changes in cash, cash equivalents (1.2 ) 0.3 and restricted cashNet increase in cash, cash equivalents and restricted cash 31.6 15.5 Cash, cash equivalents and restricted cash, at beginning 92.5 65.1 of periodCash, cash equivalents and restricted cash, at end of $ 124.1 $ 80.6 period

Table 4R1 RCM Inc.Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA (Unaudited)(In millions) Three Months Ended 2020 vs. 2019 Six Months Ended 2020 vs. 2019 June 30, Change June 30, Change 2020 2019 Amount % 2020 2019 Amount %Net income $ 15.1 $ (5.2 ) $ 20.3 390 % $ 33.3 $ (5.0 ) $ 38.3 766 %(loss)Net interest 4.8 9.9 (5.1 ) (52 ) % 8.6 20.1 (11.5 ) (57 ) %expenseIncome taxprovision 5.2 (11.1 ) 16.3 147 % 15.6 (14.1 ) 29.7 211 %(benefit)Depreciationand 17.9 12.9 5.0 39 % 33.6 25.8 7.8 30 %amortizationexpenseShare-basedcompensation 4.3 4.6 (0.3 ) (7 ) % 9.1 8.9 0.2 2 %expenseLoss on debt ? 18.8 (18.8 ) (100 ) % ? 18.8 (18.8 ) (100 ) %extinguishmentOther expenses 18.0 10.7 7.3 68 % 26.7 19.5 7.2 37 %AdjustedEBITDA $ 65.3 $ 40.6 $ 24.7 61 % $ 126.9 $ 74.0 $ 52.9 71 %(non-GAAP)

Table 5R1 RCM Inc.Reconciliation of GAAP Cost of Services to Non-GAAP Cost of Services(Unaudited)(In millions) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019Cost of services $ 248.3 $ 246.1 $ 502.2 $ 483.3 Less: Share-based compensation 1.5 1.5 3.4 2.8 expenseDepreciation and amortization 17.0 12.1 31.4 24.5 expenseNon-GAAP cost of services $ 229.8 $ 232.5 $ 467.4 $ 456.0

Table 6R1 RCM Inc.Reconciliation of GAAP Selling, General and Administrative to Non-GAAP Selling,General and Administrative (Unaudited)(In millions) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019Selling, general and $ 23.3 $ 25.8 $ 48.8 $ 48.3 administrativeLess: Share-based compensation 2.8 3.1 5.7 6.1 expenseDepreciation and 0.9 0.8 2.2 1.3 amortization expenseNon-GAAP selling, general $ 19.6 $ 21.9 $ 40.9 $ 40.9 and administrative

Table 7R1 RCM Inc.Consolidated Non-GAAP Financial Information (Unaudited)(In millions) Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019Net operating fees $ 287.8 $ 252.9 $ 568.7 $ 494.2 Incentive fees 1.3 17.4 18.1 29.6 Other 25.6 24.7 48.4 47.1 Net services revenue 314.7 295.0 635.2 570.9 Operating expenses: Cost of services 229.8 232.5 467.4 456.0 (non-GAAP)Selling, general and 19.6 21.9 40.9 40.9 administrative (non-GAAP)Sub-total 249.4 254.4 508.3 496.9 Adjusted EBITDA $ 65.3 $ 40.6 $ 126.9 $ 74.0

Table 8R1 RCM Inc.Reconciliation of GAAP Operating Income Guidance to Non-GAAP Adjusted EBITDAGuidance (Unaudited)(In millions) 2020GAAP Operating Income Guidance $90-110Plus: Depreciation and amortization expense $65-75Share-based compensation expense $20-25Strategic initiatives, severance and other costs $45-50Adjusted EBITDA Guidance $230-240

Table 9R1 RCM Inc.Reconciliation of Total Debt to Net Debt (Unaudited)(In millions) June 30, December 31, 2020 2019Senior Revolver $ 70.0 $ 40.0 Senior Term Loan 497.5 316.9 567.5 356.9 Less: Cash and cash equivalents 123.1 92.0 Non-current portion of restricted cash equivalents 1.0 0.5 Net Debt $ 443.4 $ 264.4