GlobeNewswire Inc | Nov 2, 2021 07:00AM EDT

November 02, 2021

MURRAY, Utah, Nov. 02, 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 September30, 2021.

Third Quarter 2021 Results:

-- Revenue of $379.7 million, up $72.5 million or 23.6% compared to the same period last year -- GAAP net income of $17.0 million, up $11.8 million or 226.9% compared to the same period last year -- Adjusted EBITDA of $89.3 million, up $38.9 million or 77.2% compared to the same period last year

Our third quarter results demonstrate continued strong execution across our business, thanks to the dedication of our team members, said Joe Flanagan, president and chief executive officer of R1. We remain very optimistic about our growth prospects and continue to see a healthy progression of new business in our pipeline. With the investments weve made in technology in recent years, we believe R1 is distinctly positioned to deliver superior financial outcomes for healthcare providers, and an exceptional experience for their patients.

Third quarter results were strong across the board, and I am particularly pleased with our cash generation in the quarter, added Rachel Wilson, chief financial officer and treasurer. Our balance sheet strength gives us flexibility to make ongoing strategic investments while balancing return of capital to shareholders.

Outlook

For 2021, R1 expects to generate:

-- Revenue of between $1,460 million and $1,480 million

-- GAAP operating income of $142 million to $148 million

-- Adjusted EBITDA of $337 million to $343 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 888-330-2022 (646-960-0690 outside the U.S. and Canada) using conference code number 5681952. 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 measures, including adjusted EBITDA, non-GAAP cost of services, non-GAAP selling, general and administrative expenses, 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. Non-GAAP cost of services is defined as GAAP cost of services less share-based compensation expense and depreciation and amortization expense attributed to cost of services. Non-GAAP selling, general and administrative expenses is defined as GAAP selling, general and administrative expenses less share-based compensation expense and depreciation and amortization expense attributed to selling, general and administrative expenses. 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. Non-GAAP measures 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 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, our ability to retain existing customers or acquire new customers; our ability to manage our operations effectively; competition within the market; 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 (including as a result of supply chain interruptions, labor shortages, and inflationary pressures); 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 Rahim312-324-5476investorrelations@r1rcm.com

Media Relations:

Natalie Bennett678-585-1206media@r1rcm.com

Table 1R1 RCM Inc.Consolidated Balance Sheets(In millions) (Unaudited) September December 30, 31, 2021 2020Assets Current assets: Cash and cash equivalents $ 158.7 $ 173.8 Accounts receivable, net of $2.3 million and $3.7 113.8 91.3 million allowanceAccounts receivable, net of $0.1 million and 29.2 30.9 $0.1million allowance - related partyPrepaid expenses and other current assets 62.9 59.4 Total current assets 364.6 355.4 Property, equipment and software, net 99.3 93.7 Operating lease right-of-use assets 57.4 57.8 Intangible assets, net 272.4 171.1 Goodwill 551.9 375.3 Non-current deferred tax assets 55.8 73.7 Non-current portion of restricted cash equivalents 0.5 1.0 Other assets 81.5 61.0 Total assets $ 1,483.4 $ 1,189.0 Liabilities Current liabilities: Accounts payable $ 22.5 $ 18.2 Current portion of customer liabilities 51.7 16.7 Current portion of customer liabilities - related 7.6 15.3 partyAccrued compensation and benefits 86.6 51.9 Current portion of operating lease liabilities 11.8 12.2 Current portion of long-term debt 17.5 32.3 Other accrued expenses 59.7 59.7 Total current liabilities 257.4 206.3 Non-current portion of customer liabilities 4.4 ? Non-current portion of customer liabilities - 15.9 16.3 related partyNon-current portion of operating lease liabilities 64.0 71.0 Long-term debt 779.1 519.7 Other non-current liabilities 28.5 36.3 Total liabilities 1,149.3 849.6 Preferred Stock ? 251.5 Stockholders? equity: Common stock 3.0 1.4 Additional paid-in capital 613.7 393.7 Accumulated deficit (100.3 ) (161.5 )Accumulated other comprehensive loss (6.6 ) (6.5 )Treasury stock (175.7 ) (139.2 )Total stockholders? equity 334.1 87.9 Total liabilities and stockholders? equity $ 1,483.4 $ 1,189.0

Table 2R1 RCM Inc.Consolidated Statements of Operations (Unaudited)(In millions, except share and per share data) Three Months Ended September Nine Months Ended September 30, 30, 2021 2020 2021 2020Net operating $ 308.5 $ 253.7 $ 879.8 $ 822.4 feesIncentive fees 41.5 25.1 108.0 43.2 Other 29.7 28.4 87.9 76.8 Net services 379.7 307.2 1,075.7 942.4 revenueOperating expenses:Cost of 304.0 255.2 858.2 757.4 servicesSelling,general and 33.2 25.7 87.8 74.5 administrativeOther expenses 11.4 15.7 34.2 42.4 Total operating 348.6 296.6 980.2 874.3 expensesIncome from 31.1 10.6 95.5 68.1 operationsNet interest 6.5 4.4 13.8 13.0 expenseIncome beforeincome tax 24.6 6.2 81.7 55.1 provisionIncome tax 7.6 1.0 20.5 16.6 provisionNet income $ 17.0 $ 5.2 $ 61.2 $ 38.5 Net income(loss) per commonshare:Basic $ 0.06 $ ? $ (2.03 ) $ 0.10 Diluted $ 0.05 $ ? $ (2.03 ) $ 0.08 Weightedaverage sharesused incalculating net income (loss)per commonshare:Basic 278,655,269 115,976,377 262,209,929 115,164,631 Diluted 320,617,086 115,976,377 262,209,929 171,178,086

Basic: Net income $ 17.0 $ 5.2 $ 61.2 $ 38.5 Less dividends on preferred ? (5.6 ) (592.3 ) (16.6 )sharesLess income allocated to ? ? ? (10.9 )preferred shareholdersNet income (loss) available/allocated to common shareholders $ 17.0 $ (0.4 ) $ (531.1 ) $ 11.0 - basicDiluted: Net income $ 17.0 $ 5.2 $ 61.2 $ 38.5 Less dividends on preferred ? (5.6 ) (592.3 ) (16.6 )sharesLess income allocated to ? ? ? (8.7 )preferred shareholdersNet income (loss) available/allocated to common shareholders $ 17.0 $ (0.4 ) $ (531.1 ) $ 13.2 - diluted

Table 3R1 RCM Inc.Consolidated Statements of Cash Flows (Unaudited)(In millions) Nine Months Ended September 30, 2021 2020Operating activities Net income $ 61.2 $ 38.5 Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization 56.8 50.9 Amortization of debt issuance costs 0.8 0.8 Share-based compensation 62.0 15.9 (Gain)/loss on disposal and right-of-use asset (0.3 ) 5.1 write-downsProvision for credit losses 0.6 1.3 Deferred income taxes 18.0 16.2 Non-cash lease expense 7.4 8.7 Other 0.8 1.6 Changes in operating assets and liabilities: Accounts receivable and related party accounts (18.8 ) (47.2 )receivablePrepaid expenses and other assets (19.8 ) (11.8 )Accounts payable 4.5 1.9 Accrued compensation and benefits 34.3 (36.1 )Lease liabilities (9.9 ) (7.8 )Other liabilities (8.9 ) 22.5 Customer liabilities and customer liabilities - 30.1 (10.0 )related partyNet cash provided by operating activities 218.8 50.5 Investing activities Purchases of property, equipment, and software (33.4 ) (42.3 )Acquisition of SCI, net of cash acquired and earn-out ? (189.0 )provisionAcquisition of RevWorks, net of contingent ? (5.0 )considerationAcquisition of VisitPay, net of cash acquired (294.7 ) ? Proceeds from disposal of assets 2.6 ? Net cash used in investing activities (325.5 ) (236.3 )Financing activities Issuance of senior secured debt, net of discount 698.6 190.6 Borrowings on revolver 120.0 50.0 Payment of debt issuance costs (1.9 ) ? Repayment of senior secured debt (484.6 ) (17.0 )Repayments on revolver (90.0 ) (20.0 )Payment of contingent consideration liability (4.8 ) ?

Deferred payment related to acquisition of RevWorks (12.5 ) ? Inducement of preferred stock conversion (105.0 ) ? Exercise of vested stock options 6.3 11.0 Purchase of treasury stock (29.5 ) ? Shares withheld for taxes (4.8 ) (7.5 )Other (0.1 ) (5.8 )Net cash provided by financing activities 91.7 201.3 Effect of exchange rate changes in cash, cash (0.6 ) (0.7 )equivalents and restricted cashNet (decrease) increase in cash, cash equivalents and (15.6 ) 14.8 restricted cashCash, cash equivalents and restricted cash, at 174.8 92.5 beginning of periodCash, cash equivalents and restricted cash, at end of $ 159.2 $ 107.3 period

Table 4R1 RCM Inc.Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA (Unaudited)(In millions) Three Months Ended 2021 vs. 2020 Nine Months Ended 2021 vs. 2020 September 30, Change September 30, Change 2021 2020 Amount % 2021 2020 Amount %Net income $ 17.0 $ 5.2 $ 11.8 227 % $ 61.2 $ 38.5 $ 22.7 59 %Net interest 6.5 4.4 2.1 48 % 13.8 13.0 0.8 6 %expenseIncome tax 7.6 1.0 6.6 n.m. 20.5 16.6 3.9 23 %provisionDepreciationand 21.3 17.3 4.0 23 % 56.8 50.9 5.9 12 %amortizationexpenseShare-basedcompensation 25.5 6.8 18.7 275 % 62.0 15.9 46.1 290 %expenseOther 11.4 15.7 (4.3 ) (27 )% 34.2 42.4 (8.2 ) (19 )expenses %AdjustedEBITDA $ 89.3 $ 50.4 $ 38.9 77 % $ 248.5 $ 177.3 $ 71.2 40 %(non-GAAP)

n.m. - not meaningful

Table 5R1 RCM Inc.Reconciliation of GAAP Cost of Services to Non-GAAP Cost of Services(Unaudited)(In millions) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Cost of services $ 304.0 $ 255.2 $ 858.2 $ 757.4 Less: Share-based compensation 15.8 2.7 38.8 6.1 expenseDepreciation and 20.7 16.3 54.6 47.7 amortization expenseNon-GAAP cost of $ 267.5 $ 236.2 $ 764.8 $ 703.6 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020Selling, general and $ 33.2 $ 25.7 $ 87.8 $ 74.5 administrativeLess: Share-based compensation 9.7 4.1 23.2 9.8 expenseDepreciation and 0.6 1.0 2.2 3.2 amortization expenseNon-GAAP selling, general $ 22.9 $ 20.6 $ 62.4 $ 61.5 and administrative

Table 7R1 RCM Inc.Consolidated Non-GAAP Financial Information (Unaudited)(In millions) Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020Net operating fees $ 308.5 $ 253.7 $ 879.8 $ 822.4 Incentive fees 41.5 25.1 108.0 43.2 Other 29.7 28.4 87.9 76.8 Net services revenue 379.7 307.2 1,075.7 942.4 Operating expenses: Cost of services 267.5 236.2 764.8 703.6 (non-GAAP)Selling, general andadministrative 22.9 20.6 62.4 61.5 (non-GAAP)Sub-total 290.4 256.8 827.2 765.1 Adjusted EBITDA $ 89.3 $ 50.4 $ 248.5 $ 177.3

Table 8R1 RCM Inc.Reconciliation of GAAP Operating Income Guidance to Non-GAAP Adjusted EBITDAGuidance (Unaudited)(In millions) 2021GAAP Operating Income Guidance $142-148Plus: Depreciation and amortization expense $75-85Share-based compensation expense $75-85Strategic initiatives, severance and other costs $40-50Adjusted EBITDA Guidance $337-343

Table 9R1 RCM Inc.Reconciliation of Total Debt to Net Debt (Unaudited)(In millions) September 30, December 31, 2021 2020Senior Revolver $ 100.0 $ 70.0 Senior Term Loan 700.0 484.6 Total debt 800.0 554.6 Less: Cash and cash equivalents 158.7 173.8 Non-current portion of restricted cash 0.5 1.0 equivalentsNet Debt $ 640.8 $ 379.8