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 March 31, 2023.
First Quarter 2023 Results:
- Revenue of $545.6 million, up $159.9 million or 41.5% compared
to the same period last year.
- GAAP net income of $0.3 million, compared to $29.4 million in
the same period last year.
- Adjusted EBITDA of $142.2 million, up $52.9 million or 59.2%
compared to the same period last year.
“Our strong first quarter results demonstrate the
team’s focus on execution and our ability to deliver value to
stakeholders in a dynamic operating environment,” said Lee Rivas,
chief executive officer of R1. “Demand for our services remains
robust and we continue to invest in technology to enhance our value
proposition for healthcare providers.”
“We are pleased with our first quarter results,
which were driven by strong operating discipline and our commitment
to customer delivery,” added Jennifer Williams, chief financial
officer. “With the momentum generated in the first quarter, we are
confident in the balance of 2023. We remain focused on execution to
drive sustained long-term growth.”
2023 Outlook
For 2023, R1 continues to expect to generate:
- Revenue of between $2,280 million and $2,330 million
- GAAP operating income of $115 million to $140 million
- Adjusted EBITDA of $595 million to $630 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 the Company’s 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
Company’s website 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 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, CoyCo 2, L.P. (“CoyCo 2”) share-based compensation
expense, and certain other items, including business acquisition
costs, integration costs, strategic initiatives, and the global
business services center expansion project in the Philippines.
Non-GAAP cost of services is defined as GAAP cost of services less
share-based compensation expense, CoyCo 2 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, CoyCo 2 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. Adjusted EBITDA guidance is reconciled to
operating income guidance, the most closely comparable available
GAAP measure.
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. Non-GAAP cost of services and non-GAAP
selling, general and administrative expenses are used to calculate
adjusted EBITDA. Net debt is used as a supplemental measure of our
liquidity.
Tables 4 through 9 present a reconciliation of
GAAP financial measures to non-GAAP financial measures. 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 contains “forward-looking
statements” made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements generally relate to future events and
relationships, plans, future growth, and future performance. These
statements are often identified by the use of words such as
“anticipate,” “believe,” “contemplate,” “designed,” “estimate,”
“expect,” “forecast,” “goal,” “intend,” “designed,” “may,”
“outlook,” “plan,” “predict,” “project,” “see,” “seek,” “target,”
“would,” and similar expressions or variations or negatives of
these words, although not all forward-looking statements contain
these identifying words. These statements are based on various
assumptions, whether or not identified in this press release, and
on the current expectations of the Company’s management and are not
predictions of actual performance. These forward-looking statements
are provided for illustrative purposes only and are not intended to
serve as, and must not be relied on by any investor as, a
guarantee, assurance, prediction or definitive statement of fact or
probability. Actual outcomes and results may differ materially from
those contemplated by these forward-looking statements as a result
of uncertainties, risks, and changes in circumstances, including
but not limited to risk and uncertainties related to: (i) economic
downturns and market conditions beyond the Company’s control,
including periods of inflation; (ii) the quality of global
financial markets; (iii) the Company’s ability to timely and
successfully achieve the anticipated benefits and potential
synergies of the acquisition of Cloudmed; (iv) the Company’s
ability to retain existing customers or acquire new customers; (v)
the development of markets for the Company’s revenue cycle
management offering; (vi) variability in the lead time of
prospective customers; (vii) competition within the market; (viii)
breaches or failures of the Company’s information security measures
or unauthorized access to a customer’s data; (ix) delayed or
unsuccessful implementation of the Company’s technologies or
services, or unexpected implementation costs; (x) disruptions in or
damages to the Company’s global business services centers and
third-party operated data centers; (xi) the volatility of the
Company’s stock price; (xii) the Company’s substantial
indebtedness; and (xiii) the ongoing impact of the COVID-19
pandemic on the Company’s business, operating results, and
financial condition. Additional risks and uncertainties that could
cause actual outcomes and results to differ materially from those
contemplated by the forward-looking statements are included under
the heading “Risk Factors” in the Company’s annual report on Form
10-K for the year ended December 31, 2022, and any other periodic
reports that the Company may file with the United States Securities
and Exchange Commission. The foregoing list of factors is not
exhaustive. All forward-looking statements included herein are
expressly qualified in their entirety by these cautionary
statements as of the date hereof and involve many risks and
uncertainties that could cause the Company’s actual results to
differ materially from those expressed or implied in the Company’s
forward-looking statements. Subsequent events and developments,
including actual results or changes in the Company’s assumptions,
may cause the Company’s views to change. The Company assumes no
obligation and does not intend to update these forward-looking
statements, except as required by law. You are cautioned not to
place undue reliance on such forward-looking statements.
About R1 RCM
R1 is a leading provider of technology-driven
solutions that transform the patient experience and financial
performance of healthcare providers. R1’s proven and scalable
operating models seamlessly complement 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 Rahim 312-324-5476
investorrelations@r1rcm.com
Media Relations:
Allison+Partners Amanda Critelli
R1PR@allisonpr.com
Table 1 |
R1 RCM Inc. |
Consolidated Balance Sheets |
(In millions) |
|
|
(Unaudited) |
|
|
|
|
March 31, |
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
104.2 |
|
|
$ |
110.1 |
|
Accounts receivable, net of $16.0 million and $15.1 million
allowance as of March 31, 2023 and December 31, 2022,
respectively |
|
|
229.4 |
|
|
|
235.2 |
|
Accounts receivable, net of $0.1 million and $0.1 million
allowance - related party as of March 31, 2023 and
December 31, 2022, respectively |
|
|
24.9 |
|
|
|
25.0 |
|
Current portion of contract assets, net |
|
|
81.8 |
|
|
|
83.9 |
|
Prepaid expenses and other current assets |
|
|
105.2 |
|
|
|
110.3 |
|
Total current assets |
|
|
545.5 |
|
|
|
564.5 |
|
Property, equipment and software, net |
|
|
173.8 |
|
|
|
164.8 |
|
Operating lease right-of-use assets |
|
|
81.0 |
|
|
|
80.5 |
|
Non-current portion of contract assets, net |
|
|
37.3 |
|
|
|
32.0 |
|
Non-current portion of deferred contract costs |
|
|
28.2 |
|
|
|
26.7 |
|
Intangible assets, net |
|
|
1,464.4 |
|
|
|
1,514.5 |
|
Goodwill |
|
|
2,648.5 |
|
|
|
2,658.2 |
|
Deferred tax assets |
|
|
10.5 |
|
|
|
10.4 |
|
Other assets |
|
|
83.4 |
|
|
|
88.2 |
|
Total assets |
|
$ |
5,072.6 |
|
|
$ |
5,139.8 |
|
Liabilities |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
24.6 |
|
|
$ |
33.4 |
|
Current portion of customer liabilities |
|
|
45.6 |
|
|
|
57.5 |
|
Current portion of customer liabilities - related party |
|
|
9.4 |
|
|
|
7.4 |
|
Accrued compensation and benefits |
|
|
84.7 |
|
|
|
109.0 |
|
Current portion of operating lease liabilities |
|
|
18.8 |
|
|
|
18.0 |
|
Current portion of long-term debt |
|
|
58.3 |
|
|
|
53.9 |
|
Accrued expenses and other current liabilities |
|
|
76.7 |
|
|
|
70.6 |
|
Total current liabilities |
|
|
318.1 |
|
|
|
349.8 |
|
Non-current portion of customer liabilities |
|
|
5.2 |
|
|
|
5.0 |
|
Non-current portion of customer liabilities - related party |
|
|
13.2 |
|
|
|
13.7 |
|
Non-current portion of operating lease liabilities |
|
|
92.7 |
|
|
|
94.4 |
|
Long-term debt |
|
|
1,707.0 |
|
|
|
1,732.6 |
|
Deferred tax liabilities |
|
|
192.1 |
|
|
|
200.7 |
|
Other non-current liabilities |
|
|
24.9 |
|
|
|
23.1 |
|
Total liabilities |
|
|
2,353.2 |
|
|
|
2,419.3 |
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Common stock |
|
|
4.4 |
|
|
|
4.4 |
|
Additional paid-in capital |
|
|
3,136.2 |
|
|
|
3,123.2 |
|
Accumulated deficit |
|
|
(121.6 |
) |
|
|
(121.9 |
) |
Accumulated other comprehensive loss |
|
|
(4.6 |
) |
|
|
(3.4 |
) |
Treasury stock |
|
|
(295.0 |
) |
|
|
(281.8 |
) |
Total stockholders’ equity |
|
|
2,719.4 |
|
|
|
2,720.5 |
|
Total liabilities and stockholders’ equity |
|
$ |
5,072.6 |
|
|
$ |
5,139.8 |
|
|
|
|
|
|
|
|
|
|
Table 2 |
R1 RCM Inc. |
Consolidated Statements of Operations
(Unaudited) |
(In millions, except share and per share
data) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2023 |
|
2022 |
Net operating fees |
|
$ |
361.0 |
|
$ |
322.8 |
Incentive fees |
|
|
23.6 |
|
|
30.2 |
Modular and other |
|
|
161.0 |
|
|
32.7 |
Net services revenue |
|
|
545.6 |
|
|
385.7 |
Operating expenses: |
|
|
|
|
Cost of services |
|
|
434.7 |
|
|
296.5 |
Selling, general and administrative |
|
|
47.0 |
|
|
28.9 |
Other expenses |
|
|
30.2 |
|
|
17.1 |
Total operating expenses |
|
|
511.9 |
|
|
342.5 |
Income from operations |
|
|
33.7 |
|
|
43.2 |
Net interest expense |
|
|
30.7 |
|
|
4.7 |
Income before income tax provision |
|
|
3.0 |
|
|
38.5 |
Income tax provision |
|
|
2.7 |
|
|
9.1 |
Net income |
|
$ |
0.3 |
|
$ |
29.4 |
|
|
|
|
|
Net income per common share: |
|
|
|
|
Basic |
|
$ |
— |
|
$ |
0.11 |
Diluted |
|
$ |
— |
|
$ |
0.09 |
Weighted average shares used in calculating net income per common
share: |
|
|
|
|
Basic |
|
|
417,346,840 |
|
|
278,747,261 |
Diluted |
|
|
452,925,789 |
|
|
321,043,371 |
|
|
|
|
|
|
|
Table 3 |
R1 RCM Inc. |
Consolidated Statements of Cash Flows
(Unaudited) |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2023 |
|
|
|
2022 |
|
Operating activities |
|
|
|
|
Net income |
|
$ |
0.3 |
|
|
$ |
29.4 |
|
Adjustments to reconcile net income to net cash provided by
operations: |
|
|
|
|
Depreciation and amortization |
|
|
66.0 |
|
|
|
18.9 |
|
Amortization of debt issuance costs |
|
|
1.4 |
|
|
|
0.3 |
|
Share-based compensation |
|
|
10.5 |
|
|
|
10.1 |
|
CoyCo 2 share-based compensation |
|
|
1.8 |
|
|
|
— |
|
Loss on disposal and right-of-use asset write-downs |
|
|
— |
|
|
|
2.0 |
|
Provision for credit losses |
|
|
1.5 |
|
|
|
— |
|
Deferred income taxes |
|
|
1.8 |
|
|
|
7.3 |
|
Non-cash lease expense |
|
|
2.9 |
|
|
|
3.2 |
|
Other |
|
|
— |
|
|
|
1.5 |
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable and related party accounts
receivable |
|
|
4.7 |
|
|
|
22.1 |
|
Contract assets |
|
|
(4.0 |
) |
|
|
— |
|
Prepaid expenses and other assets |
|
|
8.2 |
|
|
|
(20.5 |
) |
Accounts payable |
|
|
(10.9 |
) |
|
|
3.2 |
|
Accrued compensation and benefits |
|
|
(24.5 |
) |
|
|
(27.5 |
) |
Lease liabilities |
|
|
(4.4 |
) |
|
|
(2.1 |
) |
Other liabilities |
|
|
9.7 |
|
|
|
1.7 |
|
Customer liabilities and customer liabilities -
related party |
|
|
(10.3 |
) |
|
|
(18.7 |
) |
Net cash provided by operating activities |
|
|
54.7 |
|
|
|
30.9 |
|
Investing activities |
|
|
|
|
Purchases of property, equipment, and software |
|
|
(23.4 |
) |
|
|
(10.0 |
) |
Other |
|
|
(2.2 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(25.6 |
) |
|
|
(10.0 |
) |
Financing activities |
|
|
|
|
Repayment of senior secured debt |
|
|
(12.4 |
) |
|
|
(4.4 |
) |
Repayments on revolver |
|
|
(10.0 |
) |
|
|
— |
|
Exercise of vested stock options |
|
|
0.5 |
|
|
|
0.4 |
|
Purchase of treasury stock |
|
|
— |
|
|
|
(0.6 |
) |
Shares withheld for taxes |
|
|
(13.4 |
) |
|
|
(21.5 |
) |
Other |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Net cash used in financing activities |
|
|
(35.4 |
) |
|
|
(26.2 |
) |
Effect of exchange rate changes in cash, cash equivalents and
restricted cash |
|
|
0.4 |
|
|
|
(0.9 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
|
(5.9 |
) |
|
|
(6.2 |
) |
Cash, cash equivalents and restricted cash, at beginning of
period |
|
|
110.1 |
|
|
|
130.1 |
|
Cash, cash equivalents and restricted cash, at end of period |
|
$ |
104.2 |
|
|
$ |
123.9 |
|
|
|
|
|
|
|
|
|
|
Table 4 |
R1 RCM Inc. |
Reconciliation of GAAP Net Income to Non-GAAP Adjusted
EBITDA (Unaudited) |
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
2023 vs. 2022 Change |
|
|
2023 |
|
2022 |
|
Amount |
|
% |
Net income |
|
$ |
0.3 |
|
$ |
29.4 |
|
$ |
(29.1 |
) |
|
(99 |
) |
% |
Net interest expense |
|
|
30.7 |
|
|
4.7 |
|
|
26.0 |
|
|
553 |
|
% |
Income tax provision |
|
|
2.7 |
|
|
9.1 |
|
|
(6.4 |
) |
|
(70 |
) |
% |
Depreciation and amortization expense |
|
|
66.0 |
|
|
18.9 |
|
|
47.1 |
|
|
249 |
|
% |
Share-based compensation expense |
|
|
10.5 |
|
|
10.1 |
|
|
0.4 |
|
|
4 |
|
% |
CoyCo 2 share-based compensation expense |
|
|
1.8 |
|
|
— |
|
|
1.8 |
|
|
100 |
|
% |
Other expenses |
|
|
30.2 |
|
|
17.1 |
|
|
13.1 |
|
|
77 |
|
% |
Adjusted EBITDA (non-GAAP) |
|
$ |
142.2 |
|
$ |
89.3 |
|
$ |
52.9 |
|
|
59 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
2023 |
|
2022 |
Cost of services |
|
$ |
434.7 |
|
$ |
296.5 |
Less: |
|
|
|
|
Share-based compensation expense |
|
|
6.4 |
|
|
4.3 |
CoyCo 2 share-based compensation expense |
|
|
0.5 |
|
|
— |
Depreciation and amortization expense |
|
|
65.6 |
|
|
18.6 |
Non-GAAP cost of services |
|
$ |
362.2 |
|
$ |
273.6 |
|
|
|
|
|
|
|
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, |
|
|
2023 |
|
2022 |
Selling, general and administrative |
|
$ |
47.0 |
|
$ |
28.9 |
Less: |
|
|
|
|
Share-based compensation expense |
|
|
4.1 |
|
|
5.8 |
CoyCo 2 share-based compensation expense |
|
|
1.3 |
|
|
— |
Depreciation and amortization expense |
|
|
0.4 |
|
|
0.3 |
Non-GAAP selling, general and administrative |
|
$ |
41.2 |
|
$ |
22.8 |
|
|
|
|
|
|
|
Table 7 |
R1 RCM Inc. |
Consolidated Non-GAAP Financial Information
(Unaudited) |
(In millions) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2023 |
|
2022 |
Net operating fees |
|
$ |
361.0 |
|
$ |
322.8 |
Incentive fees |
|
|
23.6 |
|
|
30.2 |
Modular and other |
|
|
161.0 |
|
|
32.7 |
Net services revenue |
|
|
545.6 |
|
|
385.7 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Cost of services (non-GAAP) |
|
|
362.2 |
|
|
273.6 |
Selling, general and administrative (non-GAAP) |
|
|
41.2 |
|
|
22.8 |
Sub-total |
|
|
403.4 |
|
|
296.4 |
|
|
|
|
|
Adjusted EBITDA |
|
$ |
142.2 |
|
$ |
89.3 |
|
|
|
|
|
|
|
Table 8 |
R1 RCM Inc. |
Reconciliation of GAAP Operating Income Guidance to
Non-GAAP Adjusted EBITDA Guidance (Unaudited) |
(In millions) |
|
|
|
2023 |
GAAP Operating Income Guidance |
$115-140 |
Plus: |
|
Depreciation and amortization expense |
$260-280 |
Share-based compensation expense |
$75-85 |
CoyCo 2 share-based compensation expense |
$10-15 |
Strategic initiatives, severance and other costs |
$110-135 |
Adjusted EBITDA Guidance |
$595-630 |
|
|
Table 9 |
R1 RCM Inc. |
Reconciliation of Total Debt to Net Debt
(Unaudited) |
(In millions) |
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2023 |
|
2022 |
Senior Revolver |
|
$ |
90.0 |
|
$ |
100.0 |
Term A Loans |
|
|
1,200.3 |
|
|
1,211.4 |
Term B Loan |
|
|
497.5 |
|
|
498.7 |
Total debt |
|
|
1,787.8 |
|
|
1,810.1 |
|
|
|
|
|
Less: |
|
|
|
|
Cash and cash equivalents |
|
|
104.2 |
|
|
110.1 |
Net Debt |
|
$ |
1,683.6 |
|
$ |
1,700.0 |
|
|
|
|
|
|
|
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