GlobeNewswire Inc | Aug 3, 2021 07:00AM EDT

August 03, 2021

MURRAY, Utah, Aug. 03, 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 ended June30, 2021.

Second Quarter 2021 Results:

-- Revenue of $353.4 million, up $38.7 million or 12.3% compared to the same period last year -- GAAP net income of $18.4 million, up $3.3 million or 21.9% compared to the same period last year -- Adjusted EBITDA of $78.8 million, up $13.5 million or 20.7% compared to the same period last year

Our second quarter results demonstrate the continued momentum in our business, driven by strong operational execution and benefits from our investments in automation, said Joe Flanagan, president and chief executive officer of R1. Demand for our solutions remains very strong and we continue to invest heavily in advancing our technology roadmap in order to deliver transformational value to healthcare providers.

I am proud of our teams steady focus on execution, which is driving strong financial outcomes for R1 as well as for our customers, added Rachel Wilson, chief financial officer and treasurer. Given our performance in the first half of the year, we are pleased to be in a position to raise our 2021 guidance and look forward to continuing to deliver on our commitments.

Outlook

The company is updating 2021 guidance and now expects to generate:

-- Revenue of between $1,460 million and $1,480 million -- GAAP operating income of $135 million to $145 million -- Adjusted EBITDA of $330 million to $340 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 4689838. A live webcast and replay of the call will be available at the Investor Relations section of the Companys website 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, strategic initiatives costs, 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 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, 2020 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 Rahim 312-324-5476 investorrelations@r1rcm.com

Media Relations:

Natalie Joslin 678-585-1206 media@r1rcm.com

Table 1R1 RCM Inc.Consolidated Balance Sheets(In millions) (Unaudited) June 30, December 31, 2021 2020Assets Current assets: Cash and cash equivalents $ 164.9 $ 173.8 Accounts receivable, net of $2.2 million and $3.7 96.8 91.3 million allowanceAccounts receivable, net of $0.1 million and 31.9 30.9 $0.1million allowance - related partyPrepaid expenses and other current assets 59.7 59.4 Total current assets 353.3 355.4 Property, equipment and software, net 89.8 93.7 Operating lease right-of-use assets 56.5 57.8 Intangible assets, net 162.2 171.1 Goodwill 375.5 375.3 Non-current deferred tax assets 62.6 73.7 Non-current portion of restricted cash equivalents 0.5 1.0 Other assets 77.4 61.0 Total assets $ 1,177.8 $ 1,189.0 Liabilities Current liabilities: Accounts payable $ 21.0 $ 18.2 Current portion of customer liabilities 30.8 16.7 Current portion of customer liabilities - related 6.7 15.3 partyAccrued compensation and benefits 76.6 51.9 Current portion of operating lease liabilities 10.7 12.2 Current portion of long-term debt 38.7 32.3 Other accrued expenses 53.3 59.7 Total current liabilities 237.8 206.3 Non-current portion of customer liabilities - 16.4 16.3 related partyNon-current portion of operating lease liabilities 65.3 71.0 Long-term debt 500.7 519.7 Other non-current liabilities 35.5 36.3 Total liabilities 855.7 849.6 Preferred Stock ? 251.5 Stockholders? equity: Common stock 3.0 1.4 Additional paid-in capital 587.2 393.7 Accumulated deficit (117.3 ) (161.5 )Accumulated other comprehensive loss (7.1 ) (6.5 )Treasury stock (143.7 ) (139.2 )Total stockholders? equity 322.1 87.9 Total liabilities and stockholders? equity $ 1,177.8 $ 1,189.0

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, 2021 2020 2021 2020Net operating $ 285.2 $ 287.8 $ 571.3 $ 568.7 feesIncentive fees 37.5 1.3 66.5 18.1 Other 30.7 25.6 58.2 48.4 Net services 353.4 314.7 696.0 635.2 revenueOperating expenses:Cost of 287.0 248.3 554.2 502.2 servicesSelling,general and 29.0 23.3 54.6 48.8 administrativeOther expenses 9.8 18.0 22.8 26.7 Totaloperating 325.8 289.6 631.6 577.7 expensesIncome from 27.6 25.1 64.4 57.5 operationsNet interest 3.4 4.8 7.3 8.6 expenseIncome beforeincome tax 24.2 20.3 57.1 48.9 provisionIncome tax 5.8 5.2 12.9 15.6 provisionNet income $ 18.4 $ 15.1 $ 44.2 $ 33.3 Net income(loss) per commonshare:Basic $ 0.07 $ 0.04 $ (2.16 ) $ 0.10 Diluted $ 0.06 $ 0.03 $ (2.16 ) $ 0.08 Weightedaverage sharesused incalculating net income(loss) percommon share:Basic 268,251,790 115,067,552 253,850,972 114,754,298 Diluted 320,832,913 165,887,964 253,850,972 167,809,324

Basic: Net income $ 18.4 $ 15.1 $ 44.2 $ 33.3 Less dividends on preferred ? (5.6 ) (592.3 ) (11.0 )sharesLess income allocated to ? (4.7 ) ? (11.0 )preferred shareholdersNet income (loss) available/allocated to common shareholders $ 18.4 $ 4.8 $ (548.1 ) $ 11.3 - basicDiluted: Net income $ 18.4 $ 15.1 $ 44.2 $ 33.3 Less dividends on preferred ? (5.6 ) (592.3 ) (11.0 )sharesLess income allocated to ? (3.8 ) ? (8.9 )preferred shareholdersNet income (loss) available/allocated to common shareholders $ 18.4 $ 5.7 $ (548.1 ) $ 13.4 - diluted

Table 3R1 RCM Inc.Consolidated Statements of Cash Flows (Unaudited)(In millions) Six Months Ended June 30, 2021 2020Operating activities Net income $ 44.2 $ 33.3 Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization 35.5 33.6 Amortization of debt issuance costs 0.5 0.5 Share-based compensation 36.5 9.1 Loss on disposal and right-of-use asset write-downs 0.6 4.5 Provision for credit losses 0.2 1.7 Deferred income taxes 10.5 15.1 Non-cash lease expense 5.2 6.0 Changes in operating assets and liabilities: Accounts receivable and related party accounts (8.8 ) (5.4 )receivablePrepaid expenses and other assets (15.2 ) (10.5 )Accounts payable 2.2 4.5 Accrued compensation and benefits 25.0 (44.2 )Lease liabilities (7.4 ) (5.9 )Other liabilities (6.9 ) 12.7 Customer liabilities and customer liabilities - related 6.4 (9.7 )partyNet cash provided by operating activities 128.5 45.3 Investing activities Purchases of property, equipment, and software (18.4 ) (31.1 )Acquisition of SCI, net of cash acquired and earn-out ? (189.0 )provisionProceeds from disposal of assets 2.6 ? Net cash used in investing activities (15.8 ) (220.1 )Financing activities Issuance of senior secured debt, net of discount and ? 190.6 issuance costsBorrowings on revolver ? 50.0 Repayment of senior secured debt (12.9 ) (10.5 )Repayments on revolver ? (20.0 )Payment of contingent consideration liability (4.8 ) ?

Inducement of preferred stock conversion (105.0 ) ? Exercise of vested stock options 5.7 4.3 Shares withheld for taxes (4.5 ) (1.1 )Other ? (5.7 )Net cash (used in) provided by financing activities (121.5 ) 207.6 Effect of exchange rate changes in cash, cash (0.6 ) (1.2 )equivalents and restricted cashNet (decrease) increase in cash, cash equivalents and (9.4 ) 31.6 restricted cashCash, cash equivalents and restricted cash, at beginning 174.8 92.5 of periodCash, cash equivalents and restricted cash, at end of $ 165.4 $ 124.1 period

Table 4R1 RCM Inc.Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA (Unaudited)(In millions) Three Months Ended 2021 vs. 2020 Six Months Ended June 2021 vs. 2020 June 30, Change 30, Change 2021 2020 Amount % 2021 2020 Amount %Net income $ 18.4 $ 15.1 $ 3.3 22 % $ 44.2 $ 33.3 $ 10.9 33 %Net interest 3.4 4.8 (1.4 ) (29 ) % 7.3 8.6 (1.3 ) (15 ) %expenseIncome tax 5.8 5.2 0.6 12 % 12.9 15.6 (2.7 ) (17 ) %provisionDepreciationand 17.6 17.9 (0.3 ) (2 ) % 35.5 33.6 1.9 6 %amortizationexpenseShare-basedcompensation 23.8 4.3 19.5 453 % 36.5 9.1 27.4 301 %expenseOther 9.8 18.0 (8.2 ) (46 ) % 22.8 26.7 (3.9 ) (15 ) %expensesAdjustedEBITDA $ 78.8 $ 65.3 $ 13.5 21 % $ 159.2 $ 126.9 $ 32.3 25 %(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, 2021 2020 2021 2020Cost of services $ 287.0 $ 248.3 $ 554.2 $ 502.2 Less: Share-based 15.7 1.5 23.0 3.4 compensation expenseDepreciation and 16.8 17.0 33.9 31.4 amortization expenseNon-GAAP cost of $ 254.5 $ 229.8 $ 497.3 $ 467.4 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020Selling, general and $ 29.0 $ 23.3 $ 54.6 $ 48.8 administrativeLess: Share-based compensation 8.1 2.8 13.5 5.7 expenseDepreciation and 0.8 0.9 1.6 2.2 amortization expenseNon-GAAP selling, general $ 20.1 $ 19.6 $ 39.5 $ 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, 2021 2020 2021 2020Net operating fees $ 285.2 $ 287.8 $ 571.3 $ 568.7 Incentive fees 37.5 1.3 66.5 18.1 Other 30.7 25.6 58.2 48.4 Net services revenue 353.4 314.7 696.0 635.2 Operating expenses: Cost of services 254.5 229.8 497.3 467.4 (non-GAAP)Selling, general andadministrative 20.1 19.6 39.5 40.9 (non-GAAP)Sub-total 274.6 249.4 536.8 508.3 Adjusted EBITDA $ 78.8 $ 65.3 $ 159.2 $ 126.9

Table 8R1 RCM Inc.Reconciliation of GAAP Operating Income Guidance to Non-GAAP Adjusted EBITDAGuidance (Unaudited)(In millions) 2021GAAP Operating Income Guidance $135-145Plus: Depreciation and amortization expense $75-85Share-based compensation expense $75-85Strategic initiatives, severance and other costs $40-50Adjusted EBITDA Guidance $330-340

Table 9R1 RCM Inc.Reconciliation of Total Debt to Net Debt (Unaudited)(In millions) June 30, December 31, 2021 2020Senior Revolver $ 70.0 $ 70.0 Senior Term Loan 471.7 484.6 Total debt 541.7 554.6 Less: Cash and cash equivalents 164.9 173.8 Non-current portion of restricted cash 0.5 1.0 equivalentsNet Debt $ 376.3 $ 379.8

Note: Net debt does not include effect of debt refinancing completed on 7/1/21.