GlobeNewswire Inc | Feb 18, 2021 07:00AM EST

February 18, 2021

CHICAGO, Feb. 18, 2021 (GLOBE NEWSWIRE) -- R1 RCM Inc (NASDAQ: RCM), a leading provider of technology-driven solutions that transform the patient experience and financial performance of healthcare providers, today announced results for the three months and year ended December 31, 2020.

Fourth Quarter 2020 Results:

-- Revenue of $328.4 million, up $14.4 million and 4.6% compared to the same period last year -- GAAP net income of $78.6 million, compared to GAAP net income of $7.8 million in the same period last year -- Adjusted EBITDA of $62.7 million, up $17.6 million and 39.0% compared to the same period last year

Full Year 2020 Results:

-- Revenue of $1,270.8 million, up $84.7 million and 7.1% compared to 2019 -- GAAP net income of $117.1 million, compared to GAAP net income of $12.0 million in 2019 -- Adjusted EBITDA of $240.0 million, up $72.0 million and 42.9% compared to 2019

I am very pleased with our performance in 2020, which was a direct result of tremendous dedication by the entire R1 team in a challenging environment, said Joe Flanagan, President and Chief Executive Officer of R1. We enter 2021 with strong momentum across the business. Market demand for our offerings remains robust and we plan to continue investing in technology and our team to extend our lead in the market.

Our 2020 financial performance in a complicated environment demonstrates the strong commitment by our team and the durability of our business model, added Rachel Wilson, Chief Financial Officer and Treasurer. Given our visibility, we are well-positioned to deliver on our commitments to our stakeholders.

2021 Outlook

For 2021, R1 expects to generate:

-- Revenue of between $1,410 million and $1,460 million -- GAAP operating income of $135 million to $155 million -- Adjusted EBITDA of $315 million to $330 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 4286987. 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, 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. Such 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 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, our quarterly reports on Form 10-Q 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-driven solutions that transform the patient experience and financial performance of healthcare providers. 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) December 31, 2020 2019Assets Current assets: Cash and cash equivalents $ 173.8 $ 92.0 Accounts receivable, net of $3.7 million and $2.8 91.3 52.3 million allowanceAccounts receivable, net of $0.1 million and $0.0 30.9 30.8 million allowance - related partyPrepaid expenses and other current assets 59.4 41.6 Total current assets 355.4 216.7 Property, equipment and software, net 93.7 116.9 Operating lease right-of-use assets 57.8 77.9 Intangible assets, net 171.1 164.7 Goodwill 375.3 253.2 Non-current deferred tax assets 73.7 64.2 Non-current portion of restricted cash equivalents 1.0 0.5 Other assets 61.0 35.0 Total assets $ 1,189.0 $ 929.1 Liabilities Current liabilities: Accounts payable $ 18.2 $ 20.2 Current portion of customer liabilities 16.7 14.0 Current portion of customer liabilities - related 15.3 34.1 partyAccrued compensation and benefits 51.9 95.1 Current portion of operating lease liabilities 12.2 12.8 Current portion of long-term debt 32.3 16.3 Accrued expenses and other current liabilities 59.7 40.0 Total current liabilities 206.3 232.5 Non-current portion of customer liabilities - related 16.3 18.6 partyNon-current portion of operating lease liabilities 71.0 82.7 Long-term debt 519.7 337.7 Other non-current liabilities 36.3 10.4 Total liabilities 849.6 681.9 Preferred stock 251.5 229.1 Stockholders? equity: Common stock 1.4 1.3 Additional paid-in capital 393.7 372.7 Accumulated deficit (161.5 ) (277.8 )Accumulated other comprehensive loss (6.5 ) (4.5 )Treasury stock (139.2 ) (73.6 )Total stockholders? equity 87.9 18.1 Total liabilities and stockholders? equity $ 1,189.0 $ 929.1

Table 2R1 RCM Inc.Consolidated Statements of Operations(In millions, except share and per share data) (Unaudited) (Unaudited) (Unaudited) Three Months Ended December 31, Year Ended December 31, 2020 2019 2020 2019Net operating $ 271.4 $ 276.6 $ 1,093.8 $ 1,037.4 feesIncentive fees 27.4 14.3 70.6 56.2 Other 29.6 23.1 106.4 92.5 Net services 328.4 314.0 1,270.8 1,186.1 revenueOperating expenses:Cost of 263.7 262.6 1,021.1 987.8 servicesSelling,general and 27.9 27.8 102.4 104.4 administrativeOther 24.9 9.3 67.3 36.2 Totaloperating 316.5 299.7 1,190.8 1,128.4 expensesIncome from 11.9 14.3 80.0 57.7 operationsGain onbusiness 55.7 ? 55.7 ? dispositionLoss on debt ? ? ? (18.8 )extinguishmentNet interest (4.3 ) (4.0 ) (17.3 ) (29.1 )expenseIncome beforeincome tax 63.3 10.3 118.4 9.8 provision(benefit)Income taxprovision (15.3 ) 2.5 1.3 (2.2 )(benefit)Net income $ 78.6 $ 7.8 $ 117.1 $ 12.0 Net income(loss) per commonshare:Basic $ 0.31 $ 0.01 $ 0.41 $ (0.08 )Diluted $ 0.25 $ 0.01 $ 0.33 $ (0.08 )Weightedaverage sharesused incalculating net income(loss) percommon share:Basic 117,412,406 112,954,725 115,729,645 111,505,993 Diluted 180,530,133 168,857,622 174,573,270 111,505,993

Basic: Net income $ 78.6 $ 7.8 $ 117.1 $ 12.0 Less dividends on preferred (5.8 ) (5.3 ) (22.4 ) (20.7 )sharesLess income allocated to (36.1 ) (1.2 ) (47.3 ) ? preferred shareholdersNet income (loss) available/allocated to common $ 36.7 $ 1.3 $ 47.4 $ (8.7 )shareholders - basicDiluted: Net income $ 78.6 $ 7.8 $ 117.1 $ 12.0 Less dividends on preferred (5.8 ) (5.3 ) (22.4 ) (20.7 )sharesLess income allocated to (28.4 ) (1.0 ) (37.7 ) ? preferred shareholdersNet income (loss) available/allocated to common $ 44.4 $ 1.5 $ 57.0 $ (8.7 )shareholders - diluted

Table 3R1 RCM Inc.Consolidated Statements of Cash Flows(In millions) (Unaudited) Year Ended December 31, 2020 2019Operating activities Net income $ 117.1 $ 12.0 Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization 68.7 55.7 Amortization of debt issuance costs 1.0 1.6 Share-based compensation 24.1 18.6 Gain on sale of Emergency Medical Services business (55.7 ) ? Loss on disposal and right-of-use asset write-downs 17.0 0.1 Loss on debt extinguishment ? 18.8 Provision for credit losses 0.6 2.9 Deferred income taxes (1.2 ) (5.1 )Non-cash lease expense 7.3 11.4 Change in value of contingent consideration 4.7 ? Changes in operating assets and liabilities: Accounts receivable and related party accounts (56.5 ) 11.5 receivablePrepaid expenses and other assets (12.9 ) (17.9 )Accounts payable (3.4 ) 9.9 Accrued compensation and benefits (40.3 ) 18.2 Lease liabilities (13.6 ) (11.8 )Other liabilities 25.3 4.8 Customer liabilities and customer liabilities - (20.4 ) (16.8 )related partyNet cash provided by operating activities 61.8 113.9 Investing activities Purchases of property, equipment, and software (49.3 ) (61.0 )Acquisition of SCI, net of cash acquired and earn-out (191.0 ) ? provisionAcquisition of RevWorks, net of contingent (5.0 ) ? considerationProceeds from sale of Emergency Medical Services 128.3 ? business, net of cash disposedNet cash used in investing activities (117.0 ) (61.0 )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 (23.4 ) (276.8 )Repayment of subordinated notes and prepayment penalty ? (112.2 )Repayments on revolver (20.0 ) (20.0 )Exercise of vested stock options 18.4 13.7 Shares withheld for taxes (71.9 ) (11.0 )Finance lease payments (0.8 ) (0.8 )Other (5.0 ) ? Net cash provided by (used in) financing activities 137.9 (25.3 )Effect of exchange rate changes in cash (0.4 ) (0.2 )Net increase in cash, cash equivalents, and restricted 82.3 27.4 cashCash, cash equivalents, and restricted cash at 92.5 65.1 beginning of periodCash, cash equivalents, and restricted cash at end of $ 174.8 $ 92.5 period

Table 4R1 RCM Inc.Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA (Unaudited)(In millions) Three Months Ended 2020 vs. 2019 Change Year Ended 2020 vs. 2019 Change December 31, December 31, 2020 2019 Amount % 2020 2019 Amount %Net income $ 78.6 $ 7.8 $ 70.8 908 % $ 117.1 $ 12.0 $ 105.1 876 %Net interest expense 4.3 4.0 0.3 8 % 17.3 29.1 (11.8 ) (41 ) %Income tax provision (15.3 ) 2.5 (17.8 ) (712 ) % 1.3 (2.2 ) 3.5 159 %(benefit)Depreciation and 17.8 15.8 2.0 13 % 68.7 55.7 13.0 23 %amortization expenseShare-based compensation 8.1 5.7 2.4 42 % 24.0 18.4 5.6 30 %expenseGain on business (55.7 ) ? (55.7 ) 100 % (55.7 ) ? (55.7 ) 100 %disposition (1)Loss on debt extinguishment ? ? ? ? % ? 18.8 (18.8 ) (100 ) %(2)Other (3) 24.9 9.3 15.6 168 % 67.3 36.2 31.1 86 %Adjusted EBITDA (non-GAAP) $ 62.7 $ 45.1 $ 17.6 39 % $ 240.0 $ 168.0 $ 72.0 43 %

(1) Gain on business disposition represents the gain associated with the Emergency Medical Services business disposition.(2) Loss on debt extinguishment represents the loss associated with the repayment of the credit agreement and subordinated notes in June 2019.(3) Other costs are comprised of strategic initiatives costs, facility-exit charges, severance and related employee benefits, and certain other costs.

Table 5R1 RCM Inc.Reconciliation of GAAP Cost of Services to Non-GAAP Cost of Services(Unaudited)(In millions) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Cost of services $ 263.7 $ 262.6 $ 1,021.1 $ 987.8 Less: Share-based 3.8 1.8 9.9 6.1 compensation expenseDepreciation and 17.0 14.5 64.7 51.7 amortization expenseNon-GAAP cost of $ 242.9 $ 246.3 $ 946.5 $ 930.0 services

Table 6R1 RCM Inc.Reconciliation of GAAP Selling, General and Administrative to Non-GAAP Selling,General and Administrative (Unaudited)(In millions) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Selling, general and $ 27.9 $ 27.8 $ 102.4 $ 104.4 administrativeLess: Share-based compensation 4.3 3.9 14.1 12.3 expenseDepreciation and 0.8 1.3 4.0 4.0 amortization expenseNon-GAAP selling, general $ 22.8 $ 22.6 $ 84.3 $ 88.1 and administrative

Table 7R1 RCM Inc.Consolidated Non-GAAP Financial Information (Unaudited)(In millions) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019Net operating fees $ 271.4 $ 276.6 $ 1,093.8 $ 1,037.4 Incentive fees 27.4 14.3 70.6 56.2 Other 29.6 23.1 106.4 92.5 Net services 328.4 314.0 1,270.8 1,186.1 revenue Operating expenses: Cost of services 242.9 246.3 946.5 930.0 (non-GAAP)Selling, generaland administrative 22.8 22.6 84.3 88.1 (non-GAAP)Sub-total 265.7 268.9 1,030.8 1,018.1 Adjusted EBITDA $ 62.7 $ 45.1 $ 240.0 $ 168.0

Table 8R1 RCM Inc.Reconciliation of GAAP Operating Income Guidance to Non-GAAP Adjusted EBITDAGuidance (Unaudited)(In millions) 2021GAAP Operating Income Guidance $135-155Plus: Depreciation and amortization expense $70-80Share-based compensation expense $55-60Strategic initiatives, severance and other costs $50-55Adjusted EBITDA Guidance $315-330

Table 9R1 RCM Inc.Reconciliation of Total Debt to Net Debt (Unaudited)(In millions) December 31, December 31, 2020 2019Senior Revolver $ 70.0 $ 40.0 Senior Term Loan 484.6 316.9 Total debt 554.6 356.9 Less: Cash and cash equivalents 173.8 92.0 Non-current portion of restricted cash 1.0 0.5 Net Debt $ 379.8 $ 264.4