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PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

R1 RCM Reports First Quarter 2019 Results

May 9, 2019

CHICAGO, May 09, 2019 (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 March 31, 2019.

First Quarter 2019 Results:

-- Revenue of $275.9 million, up $128.6 million and 87.3% compared to the same period last year -- GAAP net income of $0.2 million, compared to net loss of $23.3 million in the same period last year -- Adjusted EBITDA of $33.4 million, up $33.1 million compared to the same period last year

“Our first quarter results reflect continued excellent execution by our team,” said Joe Flanagan, President and Chief Executive Officer of R1. “We remain focused on delivering high-quality results for our customers and continue to be encouraged by market demand for all three of our go-to-market models.”

“I’m pleased with the results our team delivered in the first quarter. Given this strong start to the year, we have increased confidence in delivering on our 2019 goals,” added Chris Ricaurte, Chief Financial Officer and Treasurer of R1.

2019 Outlook

For 2019, R1 expects to generate:

-- Revenue of between $1,150 million and $1,250 million -- GAAP operating income of $50 million to $80 million -- Adjusted EBITDA of $145 to $165 million

Conference Call and Webcast Details

R1’s 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 866-393-4306 (734-385-2616 outside the U.S. and Canada) using conference code number 3048987. A live webcast and replay of the call will be available at the Investor Relations section of the Company’s web site at ir.r1rcm.com.

Non-GAAP Financial Measures

In 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 performance measures, including adjusted EBITDA and net debt. Adjusted EBITDA is defined as GAAP net income before net interest income/expense, income tax provision, depreciation and amortization expense, share-based compensation expense, acquisition-related 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.

Table 4 presents a reconciliation of GAAP net income to non-GAAP adjusted EBITDA. Table 8 presents a reconciliation of GAAP operating income guidance to non-GAAP adjusted EBITDA guidance. 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 are based on management’s 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 expected timing of onboarding new business deployment, our ability to integrate the Intermedix business as planned and to realize the expected benefits from the acquisition, our ability to successfully deliver on our commitments to Intermountain and Ascension, fluctuations in our results of operations and cash flows, and the factors discussed under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2018 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 system’s revenue cycle performance across settings of care. R1’s proven and scalable operating model, the R1 Performance Stack℠, seamlessly complements a healthcare organization’s 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:

Brenda Stewart312-255-7786media@r1rcm.com

Table 1 R1 RCM Inc. Consolidated Balance Sheets (In millions) (Unaudited ) March 31, December 31, 2019 2018 --------- --------- Assets Current assets: Cash and cash equivalents $ 116.9 $ 62.8 Current portion of restricted cash equivalents 0.4 1.8 Accounts receivable, net 40.8 42.2 Accounts receivable, net - related party 23.1 55.2 Prepaid expenses and other current assets 36.2 34.8 ------- - ------- - Total current assets 217.4 196.8 Property, equipment and software, net 103.8 95.2 Operating lease right-of-use assets 69.9 — Intangible assets, net 175.2 180.5 Goodwill 253.2 254.8 Non-current deferred tax assets 63.2 57.5 Non-current portion of restricted cash equivalents 0.5 0.5 Other assets 24.6 22.2 Total assets $ 907.8 $ 807.5 - ----- - - ----- - Liabilities Current liabilities: Accounts payable $ 13.5 $ 9.9 Current portion of customer liabilities 11.2 14.7 Current portion of customer liabilities - related party 55.4 51.1 Accrued compensation and benefits 86.2 77.0 Current portion of operating lease liabilities 11.4 — Current portion of long-term debt 2.7 2.7 Other accrued expenses 52.6 40.8 ------- - ------- - Total current liabilities 233.0 196.2 Non-current portion of customer liabilities — — Non-current portion of customer liabilities - related party 18.7 17.7 Non-current portion of operating lease liabilities 74.8 — Long-term debt 250.9 251.0 Long-term debt - related party 105.0 105.0 Other non-current liabilities 8.2 22.9 Total liabilities 690.6 592.8 ------- - ------- - Preferred Stock 213.4 208.4 Stockholders’ equity: Common stock 1.2 1.2 Additional paid-in capital 360.9 361.0 Accumulated deficit (289.6 ) (289.8 ) Accumulated other comprehensive loss (2.8 ) (3.5 ) Treasury stock (65.9 ) (62.6 ) ------- - ------- - Total stockholders’ equity 3.8 6.3 Total liabilities and stockholders’ equity $ 907.8 $ 807.5 - ----- - - ----- -

Table 2 R1 RCM Inc. Consolidated Statements of Operations (Unaudited) (In millions, except share and per share data) Three Months Ended March 31, 2019 2018 --------- --------- Net operating fees $ 241.3 $ 127.6 Incentive fees 12.2 8.0 Other 22.4 11.7 Net services revenue 275.9 147.3 Operating expenses: Cost of services 237.2 138.7 Selling, general and administrative 22.5 17.0 Other expenses 8.8 2.4 ------- - ------- - Total operating expenses 268.5 158.1 ------- - ------- - Income (loss) from operations 7.4 (10.8 ) Net interest (expense) income (10.2 ) 0.2 ------- - ------- - Income (loss) before income tax provision (benefit) (2.8 ) (10.6 ) Income tax provision (benefit) (3.0 ) 12.7 Net income (loss) $ 0.2 $ (23.3 ) - ----- - - ----- - Net income (loss) per common share: Basic $ (0.04 ) $ (0.26 ) Diluted $ (0.04 ) $ (0.26 ) Weighted average shares used in calculating net income (loss) per common share: Basic 109,802, 105,831, 632 571 Diluted 109,802, 105,831, 632 571

Table 3 R1 RCM Inc. Consolidated Statements of Cash Flows (Unaudited) (In millions) Three Months Ended March 31, 2019 2018 --------- --------- Operating activities Net income (loss) $ 0.2 $ (23.3 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: Depreciation and amortization 12.9 4.9 Amortization of debt issuance costs 0.6 — Share-based compensation 4.4 3.9 Provision for doubtful receivables 1.0 — Deferred income taxes (4.1 ) 12.3 Non-cash lease expense 2.7 — Changes in operating assets and liabilities: Accounts receivable and related party accounts receivable 33.0 (15.3 ) Prepaid expenses and other assets (3.3 ) (1.3 ) Accounts payable 3.0 (1.4 ) Accrued compensation and benefits 9.1 (0.2 ) Lease liabilities (2.7 ) — Other liabilities 12.4 3.4 Customer liabilities and customer liabilities - related party 1.9 7.1 ------- - ------- - Net cash provided by (used in) operating activities 71.1 (9.9 ) ------- - ------- - Investing activities Purchases of property, equipment, and software (14.8 ) (3.4 ) Net cash used in investing activities (14.8 ) (3.4 ) ------- - ------- - Financing activities Repayment of senior secured debt (0.7 ) — Issuance of common stock and stock warrants, net of issuance costs — 19.3 Exercise of vested stock options 0.4 0.2 Shares withheld for taxes (3.3 ) (1.9 ) Finance lease payments (0.2 ) — ------- - ------- - Net cash provided by (used in) financing activities (3.8 ) 17.6 ------- - ------- - Effect of exchange rate changes in cash, cash equivalents and restricted cash 0.2 (0.2 ) ------- - ------- - Net increase in cash, cash equivalents and restricted cash 52.7 4.1 Cash, cash equivalents and restricted cash, at beginning of period 65.1 166.4 ------- - ------- - Cash, cash equivalents and restricted cash, at end of period $ 117.8 $ 170.5 - ----- - - ----- -

Table 4 R1 RCM Inc. Reconciliation of GAAP net income to Non-GAAP adjusted EBITDA (Unaudited) (In millions) Three Months Ended 2019 vs. 2018 March 31, Change 2019 2018 Amount % -------- --------- -------- ------- Net income (loss) $ 0.2 $ (23.3 ) $ 23.5 (101 )% Net interest expense (income) 10.2 (0.2 ) 10.4 n.m. Income tax provision (benefit) (3.0 ) 12.7 (15.7 ) (124 )% Depreciation and amortization expense 12.9 4.9 8.0 163 % Share-based compensation expense 4.3 3.9 0.4 10 % Other expenses 8.8 2.4 6.4 267 % Adjusted EBITDA (non-GAAP) $ 33.4 $ 0.3 $ 33.1 n.m. - ---- - - ----- - - ---- - -------

n.m. - not meaningful

Due to rounding, numbers presented in this table may not add up precisely to the totals provided.

Table 5 R1 RCM Inc. Reconciliation of GAAP Cost of Services to Non-GAAP Cost of Services (Unaudited) (In millions) Three Months Ended March 31, 2019 2018 -------- ------------------------------- Cost of services $ 237.2 $ 138.7 Less: Share-based compensation expense 1.3 1.3 Depreciation and amortization expense 12.4 4.6 Non-GAAP cost of services $ 223.5 $ 132.8 - ----- - ----- -----------------------

Table 6 R1 RCM Inc. Reconciliation of GAAP Selling, General and Administrative to Non-GAAP Selling, General and Administrative (Unaudited) (In millions) Three Months Ended March 31, 2019 2018 ------- ------------------------------------ Selling, general and administrative $ 22.5 $ 17.0 Less: Share-based compensation expense 3.0 2.6 Depreciation and amortization expense 0.5 0.3 ------ ------ ----------------------------- Non-GAAP selling, general and administrative $ 19.0 $ 14.1 - ---- - ---- -----------------------------

Table 7 R1 RCM Inc. Consolidated Non-GAAP Financial Information (Unaudited) (In millions) Three Months Ended March 31, 2019 2018 -------- -------- RCM services: net operating fees $ 241.3 $ 127.6 RCM services: incentive fees 12.2 8.0 RCM services: other 22.4 11.7 Net services revenue 275.9 147.3 Operating expenses: Cost of services (non-GAAP) 223.5 132.8 Selling, general and administrative (non-GAAP) 19.0 14.1 ------- ------- Sub-total 242.5 146.9 Adjusted EBITDA $ 33.4 $ 0.3 - ----- - -----

Due to rounding, numbers presented in this table may not add up precisely to the totals provided.

Table 8 R1 RCM Inc. Reconciliation of GAAP Operating Income Guidance to non-GAAP Adjusted EBITDA Guidance (In millions) 2019 2020 -------- -------- GAAP Operating Income Guidance $50-80 $140-170 Plus: Depreciation and amortization expense $40-50 $40-50 Share-based compensation expense $15-20 $15-20 Amortization of intangibles $10-15 $10-15 Transaction expenses, severance and other costs $15-20 $5-10 Adjusted EBITDA Guidance $145-165 $235-260 -------- --------

Table 9 R1 RCM Inc. Reconciliation of Net Debt (Unaudited) (In millions) March 31, December 31, 2019 2018 --------- ------------ Senior Term Loan $ 268.0 $ 268.7 Notes (primarily with related parties) 110.0 110.0 ------- - ------- ---- 378.0 378.7 Less: Cash and cash equivalents 116.9 62.8 Current portion of restricted cash 0.4 1.8 Non-current portion of restricted cash equivalents 0.5 0.5 Net Debt $ 260.2 $ 313.6 - ----- - - ----- ----