Accretive Health Reports Second Quarter 2015 Results

  • Files 10-Q for the quarter ended June 30, 2015 on a timely basis; Company is now current with its SEC filings
  • Company serves 79 hospitals with collective net patient revenue of $16.5 billion
  • 2015 outlook unchanged

CHICAGO--()--Accretive Health, Inc. (OTC Pink: ACHI) today announced results for the three months ended June 30, 2015. The Company also filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, with the Securities and Exchange Commission (SEC).

Financial Summary:

  • For the second quarter of 2015, GAAP net services revenue was $22.1 million, and GAAP net loss was $26.3 million, compared with GAAP net services revenue of $59.0 million and GAAP net loss of $16.8 million reported in the second quarter of 2014.
  • Gross cash generated from customer contracting activities for the second quarter of 2015 was $47.2 million, compared to $56.5 million for the second quarter of 2014.
  • Net cash generated from customer contracting activities for the second quarter of 2015 was negative $6.6 million, compared to negative $3.8 million for the second quarter of 2014.

“Accretive Health is now current with its periodic SEC filing requirements and filed its 10-Q for the second quarter of 2015 on a timely basis. This is an important milestone, and reflects tremendous effort by many Accretive Health colleagues. We are pleased to return to the normal reporting cycle for a publicly-traded company,” said Emad Rizk, M.D., President and Chief Executive Officer of Accretive Health.

The Company currently serves 79 hospitals with collective net patient revenue (NPR) of $16.5 billion. NPR represents net revenue collected annually by the Company’s customers from their patients and is not a measure of the revenue the Company recognizes.

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 second quarter 2015 results and business outlook for 2015. To participate, please dial 866-277-1184 (617-597-5360 outside the U.S. and Canada) using conference code number 14514307, 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 888-286-8010 (617-801-6888 outside the U.S. and Canada) using conference code number 42299890. 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 June 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 June 30, 2015, filed with the SEC on August 5, 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

At Accretive Health, our mission is to partner with healthcare communities to serve as a catalyst for a healthier future for all. For more information, visit www.accretivehealth.com.

 
Table 1
Accretive Health, Inc.
Condensed Consolidated Balance Sheets
($ in thousands)
 
  June 30,   December 31,
2015 2014
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 121,897 $ 145,167
Restricted cash 5,000
Accounts receivable, net 3,382 4,438
Prepaid income taxes 5,665 6,138
Current deferred tax assets 61,030 62,322
Other current assets 11,951   7,389  
Total current assets 203,925 230,454
Property, equipment and software, net 24,347 14,594
Non-current deferred tax assets 235,817 201,163
Goodwill and other assets, net 46   162  
Total assets $ 464,135   $ 446,373  
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 10,193 $ 12,488
Current portion of customer liabilities 228,042 219,998
Accrued compensation and benefits 12,153 14,983
Other accrued expenses 11,190   15,680  
Total current liabilities 261,578 263,149
Non-current portion of customer liabilities 381,925 317,065
Other non-current liabilities 10,845   8,405  
Total liabilities 654,348   588,619  
Stockholders' equity (deficit):
Common stock, $0.01 par value, 500,000,000 shares authorized, 102,890,241
shares issued and 97,945,709 shares outstanding at June 30, 2015; 102,890,241
shares issued and 98,112,019 shares outstanding at December 31, 2014 1,029 1,029
Additional paid-in capital 316,631 307,075
Accumulated deficit (454,250 ) (397,517 )
Accumulative other comprehensive loss (2,036 ) (1,763 )
Treasury stock (51,587 ) (51,070 )
Total stockholders' equity (deficit) (190,213 ) (142,246 )
Total liabilities and stockholders’ equity (deficit) $ 464,135   $ 446,373  
 
Table 2
Accretive Health, Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except per share data)
     
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015   2014
(Unaudited) (Unaudited)
Net services revenue $ 22,085 $ 58,975 $ 33,056 $ 71,939
Operating expenses:
Costs of services 42,762 47,949 84,958 92,881
Selling, general and administrative 20,969 19,458 38,331 36,824
Restatement and other 611   18,760   1,886   54,061  
Total operating expenses 64,342   86,167   125,175   183,766  
Loss from operations (42,257 ) (27,192 ) (92,119 ) (111,827 )
Net interest income 69   52   74   152  
Loss before income tax provision (42,188 ) (27,140 ) (92,045 ) (111,675 )
Income tax benefit 15,900   10,341   35,312   40,153  
Net loss $ (26,288 ) $ (16,799 ) $ (56,733 ) $ (71,522 )
Net loss per common share:
Basic $ (0.27 ) $ (0.18 ) $ (0.59 ) $ (0.75 )
Diluted $ (0.27 ) $ (0.18 ) $ (0.59 ) $ (0.75 )
Weighted average shares used in calculating net loss per common share:
Basic 95,941,077 95,753,302 95,915,255 95,738,326
Diluted 95,941,077 95,753,302 95,915,255 95,738,326
Consolidated statements of comprehensive loss
Net loss (26,288 ) (16,799 ) (56,733 ) (71,522 )
Other comprehensive income (loss):
Foreign currency translation adjustments (221 ) 21   (273 ) 259  
Comprehensive loss $ (26,509 ) $ (16,778 ) $ (57,006 ) $ (71,263 )
 
Table 3
Accretive Health, Inc.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
 
  Six Months Ended
June 30,
2015   2014
(Unaudited)
Operating activities:
Net loss $ (56,733 ) $ (71,522 )
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization 3,818 2,876
Share-based compensation 12,576 18,081
Loss on disposal 223
Recoveries for doubtful receivables (45 ) (494 )
Deferred income taxes (36,369 ) (39,226 )
Excess tax benefits from share-based awards (176 )
Changes in operating assets and liabilities:
Accounts receivable 1,101 11,646
Prepaid income taxes 445 (54 )
Other assets (4,472 ) (2,954 )
Accounts payable (7,540 ) 1,987
Accrued compensation and benefits (2,830 ) (895 )
Other liabilities (2,038 ) (7,180 )
Customer liabilities 72,904   14,403  
Net cash used in operating activities (19,183 ) (73,285 )
Investing activities:
Purchases of property, equipment and software (8,348 ) (1,650 )
Net cash used in investing activities (8,348 ) (1,650 )
Financing activities:
Restricted cash released from letter of credit 5,000
Excess tax benefit from share-based awards 176
Purchase of treasury stock (517 ) (217 )
Net cash provided by (used in) financing activities 4,483   (41 )
Effect of exchange rate changes on cash (222 ) 205  
Net decrease in cash and cash equivalents (23,270 ) (74,771 )
Cash and cash equivalents at beginning of period 145,167   228,891  
Cash and cash equivalents at end of period $ 121,897   $ 154,120  
 
Supplemental disclosure of non-cash investing activities
Accounts payable related to purchases of property, equipment and software $ 5,250 $
 
Table 4
Accretive Health, Inc.
Reconciliation of GAAP revenue to Gross Cash Generated from Customer Contracting Activities
($ in thousands)
 
 

Three Months Ended

 

2015 vs. 2014

 

Six Months Ended

 

2015 vs. 2014

June 30,

Change

June 30,

Change

2015   2014 Amount   % 2015   2014 Amount   %
GAAP Net Services Revenue:
RCM services: net operating fee $ 9,560 $ 23,491 $ (13,931 ) (59.3)% $ 13,170 $ 24,956 $ (11,786 ) (47.2)%
RCM services: incentive fee 6,105 26,964 (20,859 ) (77.4)% 8,005 29,106 (21,101 ) (72.5)%
Other service fees 6,420   8,520   (2,100 ) (24.6)% 11,881   17,877   (5,996 ) (33.5)%
Net services revenue (GAAP basis) 22,085 58,975 (36,890 ) (62.6)% 33,056 71,939 (38,883 ) (54.0)%
Change in deferred customer billings 25,133   (2,513 ) 27,646   n.m. 69,060   42,011   27,049   64.4%
Gross cash generated from customer contracting activities $ 47,218   $ 56,462   $ (9,244 ) (16.4)% $ 102,116   $ 113,950   $ (11,834 ) (10.4)%
 

Components of Gross Cash Generated from Customer Contracting Activities:

RCM services: net operating fee $ 27,050 $ 29,455 $ (2,405 ) (8.2)% $ 57,239 $ 64,230 $ (6,991 ) (10.9)%
RCM services: incentive fee 14,511   18,487   (3,976 ) (21.5 )% 32,642   31,842   800   2.5%
Total RCM services fees 41,561 47,942 (6,381 ) (13.3 )% 89,881 96,072 (6,191 ) (6.4)%
Other service fees 5,657   8,520   (2,863 ) (33.6 )% 12,235   17,878   (5,643 ) (31.6)%
Gross cash generated from customer contracting activities $ 47,218   $ 56,462   $ (9,244 ) (16.4)% $ 102,116   $ 113,950   $ (11,834 ) (10.4)%
 

*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   Six Months Ended   2015 vs. 2014
June 30, Change June 30, Change
2015   2014 Amount   % 2015   2014 Amount   %
Net income (loss) $ (26,288 ) $ (16,799 ) $ (9,489 ) 56.5 % $ (56,733 ) $ (71,522 ) $ 14,789 (20.7 )%
Net interest income (69 ) (52 ) $ (17 ) 32.7 % (74 ) (152 ) $ 78 (51.3 )%
Income tax benefit (15,900 ) (10,341 ) $ (5,559 ) 53.8 % (35,312 ) (40,153 ) $ 4,841 (12.1 )%
Depreciation and amortization expense 2,101 1,471 $ 630 42.8 % 3,818 2,876 $ 942 32.8 %
Share-based compensation expense 7,807 5,707 $ 2,100 36.8 % 13,003 10,467 $ 2,536 24.2 %
Restatement and other 611   18,760   $ (18,149 ) (96.7 )% 1,886   54,061   $ (52,175 ) (96.5 )%
Adjusted EBITDA (31,738 ) (1,254 ) $ (30,484 ) n.m. (73,412 ) (44,423 ) $ (28,989 ) 65.3 %
Change in deferred customer billings 25,133   (2,513 ) $ 27,646   n.m. 69,060   42,011   $ 27,049   64.4 %
Net cash generated from customer contracting activities $ (6,605 ) $ (3,767 ) $ (2,838 ) 75.3 % $ (4,352 ) $ (2,412 ) $ (1,940 ) 80.4 %
 

*n.m. - not meaningful

 
Table 6
Accretive Health, Inc.
Share-Based Compensation Expense
($ in thousands)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2015   2014 2015   2014
Share-based Compensation Expense Allocation Details:
Cost of services $ 1,204 $ 2,209 $ 2,604 $ 3,878
Selling, general and administrative 6,603 3,498 10,399 6,589
Restatement and other costs   2,317     7,905
Total share-based compensation expense $ 7,807   $ 8,024   $ 13,003   $ 18,372
 
Table 7
Accretive Health, Inc.
Depreciation and Amortization Expense
($ in thousands)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2015   2014 2015   2014
Cost of services $ 1,826 $ 1,115 $ 3,308 $ 2,089
Selling, general and administration 275   356   510   787
Total depreciation and amortization $ 2,101   $ 1,471   $ 3,818   $ 2,876
 
Table 8
Accretive Health, Inc.
Condensed Consolidated Non-GAAP Financial Information
($ in thousands)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2015   2014 2015   2014
 
GAAP net services revenue $ 22,085 $ 58,975 $ 33,056 $ 71,939
Increase (decrease) in deferred customer billings   25,133     (2,513 )   69,060     42,011  
Gross cash generated from customer contracting activities 47,218 56,462 102,116 113,950
 
Operating Expenses1:
Cost of services 39,732 44,625 79,046 86,914
Selling, general and administrative   14,091     15,604     27,422     29,448  
Sub-total 53,823 60,229 106,468 116,362
 
Net cash generated from customer contracting activities $ (6,605 ) $ (3,767 ) $ (4,352 ) $ (2,412 )
 
Net cash generated margin

(14.0%

)

(6.7%

)

(4.3%

)

(2.1%

)

 

1 Excludes share-based compensation, depreciation and amortization, and restatement and other costs.

Contacts

Accretive Health, Inc.
Investor and Media Relations:
Atif Rahim, 312.324.5476
investorrelations@accretivehealth.com

Contacts

Accretive Health, Inc.
Investor and Media Relations:
Atif Rahim, 312.324.5476
investorrelations@accretivehealth.com