R1 RCM Inc. (Exact Name of Registrant as Specified in Charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): May 9, 2018 R1 RCM Inc. (Exact Name of Registrant as Specified in Charter) Delaware (State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.) 401 North Michigan Avenue, Suite 2700, Chicago, Illinois (Address of Principal Executive Offices) (Zip Code) Registrant s telephone number, including area code: (312) (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: o Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) o o o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR ) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR b-2). Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

2 Item 2.02 Results of Operations and Financial Condition. On May 9, 2018, R1 RCM Inc. (the Company ) announced its financial results for its fiscal quarter ended March 31, The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The slide presentation to be used in conjunction with the investor conference call referenced in the press release is furnished as Exhibit 99.2 to this Current Report on Form 8-K and will be posted on the Company s website. The information in this Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act ) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. The following exhibits are furnished as part of this Current Report on Form 8-K: Exhibit No. Description 99.1 Press Release of R1 RCM Inc., dated May 9, May 9, 2018 Slide Presentation

3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 9, 2018 R1 RCM Inc. By: /s/ Christopher S. Ricaurte Christopher S. Ricaurte Chief Financial Officer and Treasurer

4 Exhibit 99.1 R1 RCM Reports First Quarter 2018 Results CHICAGO - May 9, 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, First Quarter 2018 Results: GAAP net services revenue of $147.3 million, up $60.4 million compared to the same period last year GAAP operating loss of $10.8 million, compared to $8.5 million in the same period last year GAAP net loss of $23.3 million, compared to $8.3 million in the same period last year Adjusted EBITDA of $0.3 million, up $1.7 million compared to the same period last year GAAP cash flow from operating activities of negative $9.9 million, an improvement of $18.0 million compared to the same period last year In the first quarter of 2018, we made the early investments needed to successfully onboard new customer wins over the course of the year, said Joe Flanagan, President and Chief Executive Officer of R1. With the completion of the Intermedix acquisition, we are embarking on a new chapter to better serve our healthcare provider customers. We continue to be very optimistic about the prospects of the business given our differentiated value proposition, favorable end-market dynamics and the associated traction we are seeing with our commercial efforts. We are pleased to have generated another quarter of positive adjusted EBITDA while absorbing upfront costs for new business we plan to onboard in 2018, added Chris Ricaurte, Chief Financial Officer and Treasurer of R1. We are making the required investments to successfully onboard approximately $9 billion in expected annualized net patient revenue to our operating partner model this year, and look forward to executing on our commitments. Preliminary 2018 Outlook Subject to finalization of purchase accounting for the Intermedix acquisition, for 2018, R1 expects to generate: Revenue of between $850 million and $900 million GAAP operating loss of $30 million to $55 million Adjusted EBITDA of $50 to $55 million

5 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 ( outside the U.S. and Canada) using conference code number 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. Adjusted EBITDA is defined as GAAP net income before net interest income, income tax provision, depreciation and amortization expense, share-based compensation expense, reorganization-related expenses, transaction-related expenses and certain other items. 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 7 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 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, our ability

6 to enter into a contract to provide services to Presence Health, our ability to enter into a contract to provide services to Ascension Medical Group, 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, 2017 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 Rahim investorrelations@r1rcm.com Media Relations: Natalie Joslin media@r1rcm.com

7 Table 1 R1 RCM Inc. Condensed Consolidated Balance Sheets (In millions) March 31, December 31, (Unaudited) Assets Current assets: Cash and cash equivalents $ $ Accounts receivable, net Accounts receivable, net - related party Prepaid income taxes Prepaid expenses and other current assets Total current assets Property, equipment and software, net Non-current deferred tax asset Restricted cash Other assets Total assets $ $ Liabilities and stockholders equity (deficit) Current liabilities: Accounts payable $ 5.0 $ 7.2 Current portion of customer liabilities Current portion of customer liabilities - related party Accrued compensation and benefits Other accrued expenses Total current liabilities Non-current portion of customer liabilities Non-current portion of customer liabilities - related party Other non-current liabilities Total liabilities Preferred Stock Stockholders equity (deficit): Common stock Additional paid-in capital Accumulated deficit (267.8) (244.5) Accumulated other comprehensive loss (2.3) (1.6) Treasury stock (61.5) (59.6) Total stockholders equity (deficit) Total liabilities and stockholders equity (deficit) $ $ 336.0

8 Table 2 R1 RCM Inc. Consolidated Statements of Operations (In millions, except share and per share data) Three Months Ended March 31, (Unaudited) Net operating fees $ $ 70.7 Incentive fees Other Net services revenue Operating expenses: Cost of services Selling, general and administrative Other Total operating expenses Income (loss) from operations (10.8) (8.5) Net interest income Income (loss) before income tax provision (10.6) (8.4) Income tax provision (benefit) 12.7 (0.1) Net income (loss) $ (23.3) $ (8.3) Net income (loss) per common share: Basic $ (0.26) $ (0.12) Diluted $ (0.26) $ (0.12) Weighted average shares used in calculating net income (loss) per common share: Basic 105,831, ,364,424 Diluted 105,831, ,364,424

9 Table 3 R1 RCM Inc. Condensed Consolidated Statements of Cash Flows (In millions) Operating activities Three Months Ended March 31, (Unaudited) Net income (loss) $ (23.3) $ (8.3) Adjustments to reconcile net income (loss) to net cash used in operations: Depreciation and amortization Share-based compensation Loss on disposal Provision (recovery) for doubtful receivables Deferred income taxes 12.3 (0.5) Changes in operating assets and liabilities: Accounts receivable and related party accounts receivable (15.3) (24.2) Prepaid income taxes (0.4) 3.7 Prepaid expenses and other assets (0.9) (15.5) Accounts payable (1.4) (4.0) Accrued compensation and benefits (0.2) 3.2 Other liabilities Customer liabilities and customer liabilities - related party Net cash used in operating activities (9.9) (27.9) Investing activities Purchases of property, equipment, and software (3.4) (9.2) Proceeds from maturation of short-term investments Net cash used in investing activities (3.4) (9.2) Financing activities Series A convertible preferred stock and warrant issuance, net of issuance costs Issuance of common stock and stock warrants, net of issuance costs 19.3 Exercise of vested stock options 0.2 Purchase of treasury stock (0.6) Shares withheld for taxes (1.9) (1.5) Net cash provided (used in) by financing activities 17.6 (2.1) Effect of exchange rate changes in cash, cash equivalents and restricted cash $ (0.2) $ 0.7 Net increase (decrease) in cash, cash equivalents and restricted cash 4.1 (38.5) Cash, cash equivalents and restricted cash, at beginning of period Cash, cash equivalents and restricted cash, at end of period

10 Table 4 R1 RCM Inc. Reconciliation of GAAP net income to Non-GAAP adjusted EBITDA (In millions) Three Months Ended March 31, 2018 vs Change Amount % (Unaudited) Net income (loss) $ (23.3) $ (8.3) $ (15.0) % Net interest income (0.2) (0.1) (0.1) % Income tax provision (benefit) 12.7 (0.1) 12.8 (12,800.0)% Depreciation and amortization expense % Share-based compensation expense % Other ,100.0 % Adjusted EBITDA (non-gaap) $ 0.3 $ (1.4) $ 1.7 (121.4)% Due to rounding, numbers presented in this table may not add up precisely to the totals provided.

11 Table 5 R1 RCM Inc. Reconciliation of GAAP Cost of Services to Non-GAAP Cost of Services (In millions) Three Months Ended March 31, Cost of services $ $ 80.9 Less: Share-based compensation expense Depreciation and amortization expense Non-GAAP cost of services $ $ 76.8 Table 6 R1 RCM Inc. Reconciliation of GAAP Selling, General and Administrative to Non-GAAP Selling, General and Administrative (In millions) Three Months Ended March 31, Selling, general and administrative Less: Share-based compensation expense Depreciation and amortization expense Non-GAAP selling, general and administrative $ 14.1 $ 11.5

12 Table 7 R1 RCM Inc. Condensed Consolidated Non-GAAP Financial Information (In millions) Three Months Ended March 31, (Unaudited) RCM services: net operating fees $ $ 70.7 RCM services: incentive fees RCM services: other Net services revenue Operating expenses: Cost of services (non-gaap) Selling, general and administrative (non-gaap) Sub-total Adjusted EBITDA $ 0.3 $ (1.4) 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) 2018 GAAP Operating Income Guidance ($30)-($55) Plus: Depreciation and amortization expense $25-$30 Share-based compensation expense $15-$20 Amortization of intangibles $15-$30 Transaction expenses, severance and other costs $15-$20 Adjusted EBITDA Guidance $50-55

13 Exhibit 99.2 First Quarter 2018 Results Conference Call May 9, 2018

14 Forward-Looking Statements and Non-GAAP Financial Measures This presentation includes information that may constitute forward looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 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, including, but not limited to, our ability to enter into a contract to provide services to Presence Health, our ability to enter into a contract to provide services to Ascension Medical Group, 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, 2017 and any other periodic reports that the Company files with the Securities and Exchange Commission. This presentation includes the following non GAAP financial measure: Adjusted EBITDA. Please refer to the Appendix located at the end of this presentation for a reconciliation of the non GAAP financial measures to the most directly comparable GAAP financial measure. 2

15 Q Financial Highlights. Revenue of $147.3 million, up $60.4 million year-over-year. Driven by onboarding of Phase-1 and Phase-2 Additional Book Ministries (ABMs). GAAP net loss of $23.3 million compared to $8.3 million in Q1 17. Adjusted EBITDA of $0.3 million, up $1.7 million year-over-year. Upfront costs for onboarding new business from Intermountain and expected business from Presence Health and Ascension Medical Group in Q1 18. On track to deliver 2018 revenue of $ million, and adjusted EBITDA of $50-55 million, in line with previous guidance ranges provided 3

16 Intermedix Acquisition Extends R1 s End-to-End Platform. Closed on 5/8/18. Combined company value proposition is positioned around five provider needs:. A unified solution across physician offices and hospital settings to reduce administrative burden and improve financial performance. Services and technology infrastructure applied across all care settings and payment models. Flexibility in contracting options and contract structure. Continued innovation and investment in technology e.g. R1 Patient Experience Platform and Intermedix Analytics. Track record of strong performance, and a willingness to allow performance incentives in the contract structure. Focus areas going forward:. Investments to drive organic growth, as well as into R1 s existing channel. Coordinate resources across both companies to deploy the Ascension Medical Group contract. Realize expected synergies. Integrate technology portfolios advanced robotic process automation, analytics and data visualization capabilities 4

17 Customer Onboarding Update. Accelerated Deployment Solution. Technology initiative designed to reduce customer s implementation hours by more than 50%. Compresses cycle time from contract to onboarding in conjunction with other deployment acceleration initiatives. Intermountain Healthcare. Deployment began in early April with 2,300 employees transitioned to R1. 70 What to Expect meetings in one week across Intermountain facilities. Vendor rationalization began shortly after contract deployment. Optimization of work location expected to be at target in approximately 7 months. Presence Health. Expect a contract to be signed in Q2 18 and deployment to begin thereafter. Mobilized deployment teams to begin planning for employee transitions, technology implementation and standardization of work. Ascension Medical Group. Contract signing expected in Q2 18, and onboarding scheduled to begin in late Q3 or Q First phase of AMG (Wisconsin physician business) onboarded in Q1 18. Lessons learned from Wisconsin, and capacity/capability from Intermedix should allow for easier deployment and faster value creation 5

18 1Q 18 non-gaap Results Q/Q and Y/Y Comparison ($ in millions) 1Q 18 4Q 17 1Q 17 Key change driver(s) Q/Q: Onboarding of Wisconsin physician business Revenue $147.3 $140.3 $86.9 Y/Y: Onboarding of Phase 2 and Wisconsin Q/Q and Y/Y: Onboarding of new business, and upfront costs Cost of Services (non GAAP) $132.8 $121.9 $76.8 associated with onboarding new business in 2018 Q/Q and Y/Y: Expansion of SG&A (non GAAP) $14.1 $12.7 $11.5 commercial efforts and legal costs Q/Q: Seasonally lower Q1 Y/Y: EBITDA contribution from Adjusted EBITDA $0.3 $5.7 ($1.4) business onboarded in 2017, offset in part by upfront costs A reconciliation of non GAAP to GAAP measures is provided in the Appendix to this presentation 6

19 Additional Commentary. Cash and equivalents of $171 million as of 3/31/18, incl. restricted cash. $17.6 million in cash provided from financing activities (driven by Intermountain equity investment in January), offset by use of cash for:. Working capital. Capital Expenditures. $105 million use of cash related to close of Intermedix acquisition (5/8/18). Includes transaction related and financing fees paid out in conjunction with the close of the acquisition. Additionally, we funded a portion of the purchase price with additional indebtedness. 7

20 Preliminary Financial Outlook1 ($ in millions) 2018 Outlook 2020 Outlook Revenue $850 $900 $1,200 $1,300 GAAP Operating Income ($30) ($55) $115 $155 Adjusted EBITDA $50 $55 $225 $250 NPR2 growth assumptions $B Intermountain Health $4.6 Presence Health $2.2 Ascension Medical Group $2.0 Total $8.8 Note1: Preliminary outlook subject to changes including but not limited to adoption of ASC 606 accounting for Intermedix, depreciation of fixed assets, purchase price accounting for amortization of intangibles and signing of Ascension Medical Group and Presence Health contracts Note2: NPR (Net Patient Revenue) is a measure of customers revenue, not R1 revenue. Note: Adjusted EBITDA is a non GAAP measure, please refer to the Appendix for a reconciliation of non GAAP financial measures. 8

21 Appendix

22 Use of 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. Adjusted EBITDA is defined as GAAP net income before net interest income, income tax provision, depreciation and amortization expense, share-based compensation expense, reorganization- related expenses, transaction-related expenses and certain other items.. 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.. A reconciliation of GAAP net income to adjusted non-gaap EBITDA and GAAP operating income guidance to non-gaap adjusted EBITDA guidance is provided in this appendix.. Adjusted EBITDA should be considered in addition to, but not as a substitute for, the information presented in accordance with GAAP. 10

23 Reconciliation of Net Income (Loss) to Adjusted EBITDA Three Three Three Months Months Months Ended Ended Ended March 31, March December , , 2017 (Unaudited) Net income (loss) $(23.3) $ (8.3) $(40.2) Net interest income (0.2) (0.1) (0.1) Income tax provision (benefit) 12.7 (0.1) 36.6 Depreciation and amortization expense Share-based compensation expense Other Adjusted EBITDA (non-gaap) $0.3 $ (1.4) $5.7 11

24 Reconciliation of GAAP to non-gaap Financials Reconciliation of GAAP Cost of Services to Non GAAP Cost of Services $ in millions Three Months Three Months Three Months Ended Ended Ended March 31, March 31, December 31, Cost of services Less: Share-based compensation expense Depreciation and amortization expense Non-GAAP cost of services $ $ 76.8 $ Reconciliation of GAAP Selling, General and Administrative to Non GAAP Selling, General and Administrative $ in millions Three Months Three Months Three Months Ended Ended Ended March 31, March 31, December 31, Selling, general and administrative Less: Share-based compensation expense Depreciation and amortization expense Non-GAAP selling, general and $ 14.1 $ 11.5 $ 12.7 administrative 12

25 Reconciliation GAAP Operating Income Guidance to non-gaap Adjusted EBITDA Guidance Preliminary 2018 and 2020 Outlook $ in millions GAAP Operating Income Guidance ($30) ($55) $115 $155 Plus: Depreciation and amortization expense $25 $30 $30 $40 Share based compensation expense $15 $20 $20 $25 Amortization of intangibles $15 $30 $25 $40 Transaction expenses, severance and other $15 $20 $5 $10 Adjusted EBITDA Guidance $50 $55 $225 $250 13

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