Accretive Health, Inc. (OTC Pink: ACHI) today announced results for the three months ended September 30, 2015.
Financial Summary:
- For the third quarter of 2015, GAAP net services revenue was $15.8 million, and GAAP net loss was $33.0 million, compared with GAAP net services revenue of $90.7 million and GAAP net income of $9.6 million reported in the third quarter of 2014.
- Gross cash generated from customer contracting activities for the third quarter of 2015 was $55.4 million, compared to $58.9 million for the third quarter of 2014.
- Net cash generated from customer contracting activities for the third quarter of 2015 was $3.7 million, compared $3.4 million for the third quarter of 2014.
“In the third quarter of 2015, we continued to make progress in turning the corner on some of the headwinds we have faced. I am pleased to announce we signed on a health system with close to $700 million in net patient revenue during the quarter, and began deployment of our services and capabilities to this customer in the fourth quarter. This win underscores the traction we are building in the market,” said Emad Rizk, M.D., President and Chief Executive Officer of Accretive Health.
The Company currently serves 83 hospitals with collective net patient revenue (NPR) of $17.2 billion. NPR represents net revenue collected annually by the Company’s customers for patient services and is not a measure of the revenue the Company recognizes.
“Our business demonstrated sequential improvement in financial metrics in the third quarter, which provides us with positive momentum going into the fourth quarter,” said Peter Csapo, Chief Financial Officer and Treasurer.
2015 Outlook
Accretive Health continues to expect gross cash generated from customer contracting activities of $230 million to $240 million for 2015. The Company also continues to expect net cash generated from customer contracting activities to be at the lower end of the $30 million to $40 million previously communicated guidance range.
Conference Call and Webcast Details
Accretive Health’s management team will host a conference call today at 3:30 p.m. CT (4:30 p.m. ET) to discuss the third quarter 2015 results and business outlook for 2015. To participate, please dial 888-822-6508 (440-996-5712 outside the U.S. and Canada) using conference code number 65611096, or visit the Investor Relations section of Accretive Health’s web site at www.accretivehealth.com to access the live webcast. A replay will be available for one week following the conference call at 855-859-2056 (404-537-3406 outside the U.S. and Canada) using conference code number 65611096. A replay of the conference call will also be available online at www.accretivehealth.com.
Accompanying slides will be posted to the Investor Relations section of Accretive Health’s web site at www.accretivehealth.com.
Non-GAAP Financial Measures
In order to provide a more comprehensive understanding of the information used by Accretive Health’s management team in financial and operational decision making, the Company supplements its GAAP consolidated financial statements with certain non-GAAP financial measures, which are included in this press release. These include gross and net cash generated from customer contracting activities, and adjusted EBITDA. Our Board and management team use these non-GAAP measures as (i) one of the primary methods for planning and forecasting overall expectations and for evaluating actual results against such expectations; and (ii) as a performance evaluation metric in determining achievement of certain executive incentive compensation programs, as well as for incentive compensation plans for employees.
Gross cash generated from customer contracting activities is defined as GAAP net services revenue, plus the change in deferred customer billings. Accordingly, gross cash generated from customer contracting activities is the sum of (i) invoiced or accrued net operating fees, (ii) cash collections on incentive fees and (iii) other services fees. Net cash generated from customer contracting activities reflects non-GAAP adjusted EBITDA and the change in deferred customer billings.
Adjusted EBITDA is defined as net income before net interest income (expense), income tax provision, depreciation and amortization expense, share-based compensation expense, restatement-related expense, reorganization-related expense and certain non-recurring items. The use of adjusted EBITDA to measure operating and financial performance is limited by our revenue recognition criteria, pursuant to which GAAP net services revenue is recognized at the end of a contract or other contractual agreement event. Adjusted EBITDA does not adequately match corresponding cash flows from customer contracting activities. As a result, the Company uses gross cash and net cash generated from customer contracting activities to better compare cash flows to operating performance.
Deferred customer billings include the portion of both (i) invoiced or accrued net operating fees and (ii) cash collections of incentive fees, in each case, that have not met our revenue recognition criteria. Deferred customer billings are included in the detail of our customer liabilities balance in the consolidated balance sheet available in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015.
Table 4 presents a reconciliation of GAAP revenue to gross cash generated from customer contracting activities, and Table 5 presents a reconciliation of GAAP net loss, the most comparable GAAP measure, to adjusted EBITDA and net cash generated from customer contracting activities, in each case, for each of the periods indicated. These adjusted measures are non-GAAP and should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP.
Safe Harbor
This press release contains forward-looking statements, including the Company’s ability to generate specified levels of cash from contracting activities. All forward-looking statements contained in this press release involve risks and uncertainties. The Company’s actual results and outcomes could differ materially from those anticipated in these forward-looking statements as a result of various factors, including the factors set forth under the heading, “Risk Factors” in its Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on June 23, 2015, and its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, filed with the SEC on November 9, 2015. The words “strive,” “objective,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “vision,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. The Company has based these forward-looking statements on its current expectations and projections about future events. Although the Company believes that the expectations underlying any of its forward-looking statements are reasonable, these expectations may prove to be incorrect and all of these statements are subject to risks and uncertainties. Should one or more of these risks and uncertainties materialize, or should underlying assumptions, projections, or expectations prove incorrect, actual results, performance, financial condition, or events may vary materially and adversely from those anticipated, estimated, or expected.
All forward-looking statements included in this press release are expressly qualified in their entirety by these cautionary statements. The Company cautions readers not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the uncertainties and factors described above, as well as others that the Company may consider immaterial or does not anticipate at this time. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, the Company does not know whether its expectations may prove correct. The Company’s expectations reflected in its forward-looking statements can be affected by inaccurate assumptions it might make or by known or unknown uncertainties and factors, including those described above. The risks and uncertainties described above are not exclusive, and further information concerning the Company and its business, including factors that potentially could materially affect its financial results or condition or relationships with customers and potential customers, may emerge from time to time. The Company assumes no, and it specifically disclaims any, obligation to update, amend, or clarify forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. The Company advises investors, however, to consult any further disclosures it makes on related subjects in our periodic reports that it files with or furnishes to the SEC.
About Accretive Health
Accretive Health partners with hospitals and health systems to reduce their administrative costs related to revenue cycle operations, enabling providers to focus on their core mission: delivering high quality care. For more information, visit www.accretivehealth.com.
| Table 1 | ||||||||||
| Accretive Health, Inc. | ||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||
| ($ in thousands) | ||||||||||
| September 30, 2015 | December 31, 2014 | |||||||||
| (Unaudited) | ||||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 137,716 | $ | 145,167 | ||||||
| Restricted cash | — | 5,000 | ||||||||
| Accounts receivable, net | 5,137 | 4,438 | ||||||||
| Prepaid income taxes | 5,425 | 6,138 | ||||||||
| Current deferred tax assets | 99,987 | 62,322 | ||||||||
| Other current assets | 7,798 | 7,389 | ||||||||
| Total current assets | 256,063 | 230,454 | ||||||||
| Property, equipment and software, net | 26,579 | 14,594 | ||||||||
| Non-current deferred tax assets | 208,278 | 201,163 | ||||||||
| Goodwill and other assets, net | 6 | 162 | ||||||||
| Total assets | $ | 490,926 | $ | 446,373 | ||||||
| Liabilities and stockholders' equity (deficit) | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 6,340 | $ | 12,488 | ||||||
| Current portion of customer liabilities | 348,828 | 219,998 | ||||||||
| Accrued compensation and benefits | 15,290 | 14,983 | ||||||||
| Other accrued expenses | 12,261 | 15,680 | ||||||||
| Total current liabilities | 382,719 | 263,149 | ||||||||
| Non-current portion of customer liabilities | 323,293 | 317,065 | ||||||||
| Other non-current liabilities | 8,421 | 8,405 | ||||||||
| Total liabilities | 714,433 | 588,619 | ||||||||
| Stockholders' equity (deficit): | ||||||||||
| Common stock, $0.01 par value, 500,000,000 shares authorized,108,673,951 shares issued and 103,387,953 shares outstanding at September 30, 2015; 102,890,241 shares issued and 98,112,019 shares outstanding at December 31, 2014 | 1,087 | 1,029 | ||||||||
| Additional paid-in capital | 317,543 | 307,075 | ||||||||
| Accumulated deficit | (487,220 | ) | (397,517 | ) | ||||||
| Accumulative other comprehensive loss | (2,465 | ) | (1,763 | ) | ||||||
| Treasury stock | (52,452 | ) | (51,070 | ) | ||||||
| Total stockholders' equity (deficit) | (223,507 | ) | (142,246 | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | 490,926 | $ | 446,373 | ||||||
Table 2 Accretive Health, Inc. Condensed Consolidated Statements of Operations ($ in thousands, except per share data) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||||||
| Net services revenue | $ | 15,842 | $ | 90,745 | $ | 48,898 | $ | 162,684 | |||||||||||
| Operating expenses: | |||||||||||||||||||
| Costs of services | 45,326 | 45,370 | 130,284 | 138,251 | |||||||||||||||
| Selling, general and administrative | 21,395 | 16,785 | 59,726 | 53,609 | |||||||||||||||
| Restatement and other | 3,964 | 13,846 | 5,850 | 67,907 | |||||||||||||||
| Total operating expenses | 70,685 | 76,001 | 195,860 | 259,767 | |||||||||||||||
| Income (loss) from operations | (54,843 | ) | 14,744 | (146,962 | ) | (97,083 | ) | ||||||||||||
| Net interest income | 73 | 100 | 147 | 252 | |||||||||||||||
| Income (loss) before income tax provision | (54,770 | ) | 14,844 | (146,815 | ) | (96,831 | ) | ||||||||||||
| Income tax provision (benefit) | (21,800 | ) | 5,291 | (57,112 | ) | (34,862 | ) | ||||||||||||
| Net income (loss) | $ | (32,970 | ) | $ | 9,553 | $ | (89,703 | ) | $ | (61,969 | ) | ||||||||
| Net Income (loss) per common share: | |||||||||||||||||||
| Basic | $ | (0.34 | ) | $ | 0.10 | $ | (0.93 | ) | $ | (0.65 | ) | ||||||||
| Diluted | $ | (0.34 | ) | $ | 0.10 | $ | (0.93 | ) | $ | (0.65 | ) | ||||||||
| Weighted average shares used in calculating net income (loss) per common share: | |||||||||||||||||||
| Basic | 97,230,069 | 95,775,597 | 96,358,342 | 95,750,887 | |||||||||||||||
| Diluted | 97,230,069 | 97,250,282 | 96,358,342 | 95,750,887 | |||||||||||||||
| Consolidated statements of comprehensive income (loss): | |||||||||||||||||||
| Net income (loss) | (32,970 | ) | 9,553 | (89,703 | ) | (61,969 | ) | ||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||
| Foreign currency translation adjustments | (429 | ) | (253 | ) | (702 | ) | 6 | ||||||||||||
| Comprehensive income (loss) | $ | (33,399 | ) | $ | 9,300 | $ | (90,405 | ) | $ | (61,963 | ) | ||||||||
Table 3 Accretive Health, Inc. Condensed Consolidated Statements of Cash Flows ($ in thousands) | |||||||||||
| Nine Months Ended September 30, | |||||||||||
| 2015 | 2014 | ||||||||||
| (Unaudited) | |||||||||||
| Operating activities: | |||||||||||
| Net loss | $ | (89,703 | ) | $ | (61,969 | ) | |||||
| Adjustments to reconcile net loss to net cash provided by (used in) operations: | |||||||||||
| Depreciation and amortization | 6,556 | 4,279 | |||||||||
| Share-based compensation | 22,974 | 22,992 | |||||||||
| Loss on disposal | — | 234 | |||||||||
| Recoveries for doubtful receivables | (79 | ) | (455 | ) | |||||||
| Deferred income taxes | (58,567 | ) | (33,869 | ) | |||||||
| Excess tax benefits from share-based awards | — | (176 | ) | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | (621 | ) | 16,539 | ||||||||
| Prepaid income taxes | 632 | 2,646 | |||||||||
| Other assets | (334 | ) | (2,328 | ) | |||||||
| Accounts payable | (6,108 | ) | 685 | ||||||||
| Accrued compensation and benefits | 311 | 1,960 | |||||||||
| Other liabilities | (3,648 | ) | (4,228 | ) | |||||||
| Customer liabilities | 135,058 | 21,840 | |||||||||
| Net cash provided by (used in) operating activities | 6,471 | (31,850 | ) | ||||||||
| Investing activities: | |||||||||||
| Purchases of property, equipment and software | (18,304 | ) | (3,206 | ) | |||||||
| Net cash used in investing activities | (18,304 | ) | (3,206 | ) | |||||||
| Financing activities: | |||||||||||
| Exercise of vested options | 1,331 | — | |||||||||
| Restricted cash released from letter of credit | 5,000 | — | |||||||||
| Excess tax benefit from share-based awards | — | 176 | |||||||||
| Purchase of treasury stock | (1,382 | ) | (280 | ) | |||||||
| Net cash provided by (used in) financing activities | 4,949 | (104 | ) | ||||||||
| Effect of exchange rate changes on cash | (567 | ) | 18 | ||||||||
| Net decrease in cash and cash equivalents | (7,451 | ) | (35,142 | ) | |||||||
| Cash and cash equivalents at beginning of period | 145,167 | 228,891 | |||||||||
| Cash and cash equivalents at end of period | $ | 137,716 | $ | 193,749 | |||||||
| Supplemental disclosure of non-cash investing activities | |||||||||||
| Other liabilities related to purchases of property, equipment and software | $ | 348 | $ | — | |||||||
Table 4 Accretive Health, Inc. Reconciliation of GAAP revenue to Gross Cash Generated from Customer Contracting Activities ($ in thousands) | ||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | 2015 vs. 2014 Change | September 30, | 2015 vs. 2014 Change | |||||||||||||||||||||||
| 2015 | 2014 | Amount | % | 2015 | 2014 | Amount | % | |||||||||||||||||||
| GAAP Net Services Revenue: | ||||||||||||||||||||||||||
| RCM services: net operating fees | $ | 6,232 | $ | 37,861 | $ | (31,629) | (83.5)% | $ | 19,402 | $ | 62,817 | $ | (43,415) | (69.1)% | ||||||||||||
| RCM services: incentive fees | 1,017 | 45,970 | (44,953) | (97.8)% | 9,022 | 75,076 | (66,054) | (88.0)% | ||||||||||||||||||
| RCM services: other | 5,359 | 1,858 | 3,501 | n.m. | 9,591 | 5,787 | 3,804 | 65.7% | ||||||||||||||||||
| Other service fees | 3,234 | 5,056 | (1,822) | (36.0)% | 10,883 | 19,004 | (8,121) | (42.7)% | ||||||||||||||||||
| Net services revenue (GAAP basis) | 15,842 | 90,745 | (74,903) | (82.5)% | 48,898 | 162,684 | (113,786) | (69.9)% | ||||||||||||||||||
| Change in deferred customer billings | 39,541 | (31,821) | 71,362 | n.m | 108,601 | 10,189 | 98,412 | n.m | ||||||||||||||||||
| Gross cash generated from customer contracting activities | $ | 55,383 | 58,924 | (3,541) | (6.0)% | 157,499 | 172,873 | (15,374) | (8.9)% | |||||||||||||||||
Components of Gross Cash Generated from Customer Contracting Activities: | ||||||||||||||||||||||||||
| RCM services: net operating fees | $ | 31,522 | $ | 26,454 | $ | 5,068 | 19.2% | $ | 88,761 | $ | 90,684 | $ | (1,923) | (2.1)% | ||||||||||||
| RCM services: incentive fees | 14,859 | 25,556 | (10,697) | (41.9)% | 47,501 | 57,398 | (9,897) | (17.2)% | ||||||||||||||||||
| RCM services: other | 5,768 | 1,218 | 4,550 | n.m | 10,354 | 4,147 | 6,207 | n.m. | ||||||||||||||||||
| Total RCM services fees | 52,149 | 53,228 | (1,079) | (2.0)% | 146,616 | 152,229 | (5,613) | (3.7)% | ||||||||||||||||||
| Other service fees | 3,234 | 5,696 | (2,462) | (43.2)% | 10,883 | 20,644 | (9,761) | (47.3)% | ||||||||||||||||||
| Gross cash generated from customer contracting activities | $ | 55,383 | 58,924 | (3,541) | (6.0)% | 157,499 | 172,873 | (15,374) | (8.9)% | |||||||||||||||||
*n.m. – not meaningful | ||||||||||||||||||||||||||
Table 5 Accretive Health, Inc. Reconciliation of GAAP Net Loss to Net Cash Generated from Customer Contracting Activities ($ in thousands) | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended | 2015 vs. 2014 | Nine Months Ended | 2015 vs. 2014 | |||||||||||||||||||||||||||||||||||
| September 30, | Change | September 30, | Change | |||||||||||||||||||||||||||||||||||
| 2015 | 2014 | Amount | % | 2015 | 2014 | Amount | % | |||||||||||||||||||||||||||||||
| Net income (loss) | $ | (32,970 | ) | $ | 9,553 | $ | (42,523 | ) | n.m | $ | (89,703 | ) | $ | (61,969 | ) | $ | (27,734 | ) | 44.8 | % | ||||||||||||||||||
| Net interest income | (73 | ) | (100 | ) | $ | 27 | (27.0 | )% | (147 | ) | (252 | ) | $ | 105 | (41.7 | )% | ||||||||||||||||||||||
| Income tax provision (benefit) | (21,800 | ) | 5,291 | $ | (27,091 | ) | n.m | (57,112 | ) | (34,862 | ) | $ | (22,250 | ) | 63.8 | % | ||||||||||||||||||||||
| Depreciation and amortization expense | 2,738 | 1,403 | $ | 1,335 | 95.2 | % | 6,556 | 4,279 | $ | 2,277 | 53.2 | % | ||||||||||||||||||||||||||
| Share-based compensation expense | 12,315 | 5,224 | $ | 7,091 | n.m. | 25,318 | 15,691 | $ | 9,627 | 61.4 | % | |||||||||||||||||||||||||||
| Restatement and other | 3,964 | 13,846 | $ | (9,882 | ) | (71.4 | )% | 5,850 | 67,907 | $ | (62,057 | ) | (91.4 | )% | ||||||||||||||||||||||||
| Adjusted EBITDA | (35,826 | ) | 35,217 | $ | (71,043 | ) | n.m | (109,238 | ) | (9,206 | ) | $ | (100,032 | ) | n.m | |||||||||||||||||||||||
| Change in deferred customer billings | 39,541 | (31,821 | ) | $ | 71,362 | n.m | 108,601 | 10,189 | $ | 98,412 | n.m | |||||||||||||||||||||||||||
| Net cash generated from customer contracting activities | $ | 3,715 | $ | 3,396 | $ | 319 | 9.4 | % | $ | (637 | ) | $ | 983 | $ | (1,620 | ) | n.m. | |||||||||||||||||||||
*n.m. – not meaningful | ||||||||||||||||||||||||||||||||||||||
Table 6 Accretive Health, Inc. Share-Based Compensation Expense ($ in thousands) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||
| Share-based Compensation Expense Allocation Details: | |||||||||||||||
| Cost of services | $ | 3,152 | $ | 1,736 | $ | 5,756 | $ | 5,614 | |||||||
| Selling, general and administrative | 9,163 | 3,488 | 19,562 | 10,077 | |||||||||||
| Restatement and other | — | 144 | — | 8,049 | |||||||||||
| Total share-based compensation expense | $ | 12,315 | $ | 5,368 | $ | 25,318 | $ | 23,740 | |||||||
Table 7 Accretive Health, Inc. Depreciation and Amortization Expense ($ in thousands) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||
| Cost of services | $ | 2,491 | $ | 1,053 | $ | 5,799 | $ | 3,142 | ||||||||||
| Selling, general and administration | 247 | 350 | 757 | 1,137 | ||||||||||||||
| Total depreciation and amortization expense | $ | 2,738 | $ | 1,403 | $ | 6,556 | $ | 4,279 | ||||||||||
Table 8 Accretive Health, Inc. Condensed Consolidated Non-GAAP Financial Information ($ in thousands) | |||||||||||
| Three Months ended | Nine Months ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||
| GAAP net services revenue | 15,842 | 90,745 | 48,898 | 162,684 | |||||||
| Increase (decrease) in deferred customer billings | 39,541 | (31,821) | 108,601 | 10,189 | |||||||
| Gross cash generated from customer contracting activities | 55,383 | 58,924 | 157,499 | 172,873 | |||||||
| Operating Expenses1: | |||||||||||
| Cost of services | 39,683 | 42,581 | 118,729 | 129,495 | |||||||
| Selling, general and administrative | 11,985 | 12,947 | 39,407 | 42,395 | |||||||
| Sub-total | 51,668 | 55,528 | 158,136 | 171,890 | |||||||
| Net cash generated from customer contracting activities | 3,715 | 3,396 | (637) | 983 | |||||||
| Net cash generated margin | 6.7% | 5.8% | -0.4% | 0.6% | |||||||
1Excludes share-based compensation, depreciation and amortization, and restatement and other costs | |||||||||||
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Contacts:
Investor Relations:
Atif Rahim,
312.324.5476
investorrelations@accretivehealth.com
or
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Relations:
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