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Accretive Health Reports Second Quarter 2016 Results

CHICAGO, Aug. 04, 2016 (GLOBE NEWSWIRE) -- Accretive Health, Inc. (the “Company”) (OTC Pink:ACHI), a leading provider of revenue cycle services and physician advisory services to healthcare providers, today announced results for the quarter ended June 30, 2016.

Second Quarter 2016 Results:

  • GAAP net services revenue of $8.7 million, compared to $22.1 million for the second quarter of 2015

  • GAAP net loss of $40.8 million, compared to a net loss of $26.3 million for the second quarter of 2015

  • Non-GAAP gross cash generated from customer contracting activities of $38.3 million, compared to $47.2 million for the second quarter of 2015

  • Non-GAAP net cash generated from customer contracting activities of negative $17.4 million, compared to negative $6.6 million for the second quarter of 2015

“In the second quarter, we made progress in aligning our cost structure to our current business needs while investing in our organizational capabilities to drive future growth. We are firmly committed to making the right investments to enable the company to succeed over the long term. I am pleased with the pace of execution against our near term objectives and our clarity of strategic focus going forward,” said Joe Flanagan, President and Chief Executive Officer of Accretive Health.

“The actions we took in the second quarter are an important step in placing us on a path back to profitability. We now have a more efficient company cost structure which provides us with better operating leverage as we grow,” added Chris Ricaurte, Chief Financial Officer and Treasurer.

Conference Call and Webcast Details
Accretive Health’s management team will host a conference call today at 5:00 p.m. Eastern Time to discuss the results and business outlook. To participate, please dial 877-880-5884 (631-601-2894 outside the U.S. and Canada) using conference code number 50457674. A live webcast and replay of the call will be available at the Investor Relations section of the Company’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) a performance evaluation metric in determining achievement of certain executive incentive compensation programs, as well as for incentive compensation programs 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, reorganization-related expense and certain other 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 and customer liabilities – related party balance in the condensed consolidated balance sheets available in the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2016.

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 income (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, and in particular, any statements about future growth, plans and performance are forward-looking statements. 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, 2015, filed with the SEC on March 10, 2016. 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 is a leading provider of revenue cycle services and physician advisory services to healthcare providers. Accretive Health’s mission is to help healthcare providers strengthen their financial stability so they can deliver better care at a more affordable cost to the communities they serve, increasing healthcare access for all. Accretive Health’s distinctive operating model includes people, processes, and sophisticated integrated technology and analytics that help customers realize sustainable improvements in their operating margins and improve the satisfaction of their patients, physicians, and staff. Accretive Health’s customers typically are multi-hospital systems, including faith-based or community healthcare systems, academic medical centers and independent ambulatory clinics, and their affiliated physician practice groups.


Table 1
Accretive Health, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30,
2016
December 31,
2015
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$221,673 $103,497
Short-term investments 1,023
Accounts receivable, net6,575 10,194
Prepaid income taxes534 1,102
Other current assets13,392 10,924
Total current assets242,174 126,740
Property, equipment and software, net30,447 27,217
Non-current deferred tax assets213,908 300,825
Restricted cash equivalents1,500 1,500
Other assets4,902 4,007
Total assets$492,931 $460,289
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable$3,735 $5,306
Current portion of customer liabilities144,619 202,516
Current portion of customer liabilities - related party141,089
Accrued compensation and benefits16,273 9,062
Other accrued expenses20,434 15,743
Total current liabilities326,150 232,627
Non-current portion of customer liabilities24,667 432,477
Non-current portion of customer liabilities - related party26,554
Other non-current liabilities9,810 8,498
Total liabilities387,181 673,602
8.00% Series A convertible preferred stock: par value $0.01 per share, 200,000 shares issued and outstanding as of June 30, 2016; no shares authorized or issued as of December 31, 2015 (aggregate liquidation value of $206,040 as of June 30, 2016)163,269
Stockholders' equity (deficit):
Common stock, $0.01 par value, 500,000,000 shares authorized,116,378,064 shares issued and 107,222,530 shares outstanding at June 30, 2016; 113,259,408 shares issued and 107,715,436 shares outstanding at December 31, 20151,164 1,133
Additional paid-in capital353,856 322,492
Accumulated deficit(355,161) (481,773)
Accumulative other comprehensive loss(2,732) (2,488)
Treasury stock(54,646) (52,677)
Total stockholders’ equity (deficit)(57,519) (213,313)
Total liabilities and stockholders’ equity (deficit)$492,931 $460,289


Table 2
Accretive Health, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except share and per share data)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
(unaudited) (unaudited)
Net services revenue$8,672 $22,085 $360,865 $33,056
Operating expenses:
Cost of services 45,112 42,762 90,242 84,958
Selling, general and administrative 24,660 20,969 42,196 38,331
Other 8,651 611 19,457 1,886
Total operating expenses 78,423 64,342 151,895 125,175
Income (loss) from operations (69,751) (42,257) 208,970 (92,119)
Net interest income 46 69 130 74
Income (loss) before income tax provision (69,705) (42,188) 209,100 (92,045)
Income tax provision (benefit) (28,914) (15,900) 82,488 (35,312)
Net income (loss)$(40,791) $(26,288) $126,612 $(56,733)
Net income (loss) per common share:
Basic$(0.45) $(0.27) $0.45 $(0.59)
Diluted$(0.45) $(0.27) $0.45 $(0.59)
Weighted average shares used in calculating net income (loss) per common share:
Basic 99,414,066 95,941,077 98,851,934 95,915,255
Diluted 99,414,066 95,941,077 99,951,394 95,915,255
Consolidated statements of comprehensive income (loss)
Net income (loss) (40,791) (26,288) 126,612 (56,733)
Other comprehensive loss:
Foreign currency translation adjustments (304) (221) (244) (273)
Comprehensive income (loss)$(41,095) $(26,509) $126,368 $(57,006)


Table 3
Accretive Health, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
2016 2015
(Unaudited)
Operating activities:
Net income (loss)$126,612 $(56,733)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Depreciation and amortization4,632 3,818
Share-based compensation20,413 12,576
Provision/(Recoveries) for doubtful receivables(27) (45)
Deferred income taxes82,420 (36,369)
Excess tax benefits from share-based awards
Changes in operating assets and liabilities:
Accounts receivable3,646 1,101
Prepaid income taxes503 445
Other assets(3,394) (4,472)
Accounts payable(1,565) (7,540)
Accrued compensation and benefits7,213 (2,830)
Other liabilities5,079 (2,038)
Customer liabilities and customer liabilities - related party(298,064) 72,904
Net cash provided by (used in) operating activities(52,532) (19,183)
Investing activities:
Purchases of property, equipment and software(7,097) (8,348)
Proceeds from maturation of short-term investments1,023
Net cash used in investing activities(6,074) (8,348)
Financing activities:
Series A convertible preferred stock and warrant issuance, net of issuance costs178,669
Exercise of vested options88
Restricted cash released from letter of credit 5,000
Excess tax benefit from share-based awards
Purchase of treasury stock(1,969) (517)
Net cash provided by financing activities176,788 4,483
Effect of exchange rate changes on cash(6) (222)
Net increase (decrease) in cash and cash equivalents118,176 (23,270)
Cash and cash equivalents at beginning of period103,497 145,167
Cash and cash equivalents at end of period$221,673 $121,897
Supplemental disclosure of non-cash financing activities
Accrued dividends payable to Preferred Stockholders$(4,040) $
Accrued liabilities related to purchases of property, equipment and software991
Accounts payable related to purchases of property, equipment and software 5,250


Table 4
Accretive Health, Inc.
Reconciliation of GAAP Revenue to Non-GAAP Gross Cash Generated from Customer Contracting Activities
(In thousands)
Three Months Ended June 30, 2016 vs. 2015 Change Six Months Ended June 30, 2016 vs. 2015 Change
2016 2015 Amount% 2016 2015 Amount%
Consolidated Statement of Operations Data:
RCM services: net operating fees$2,608 $9,560 $(6,952) -72.7% $251,309 $13,170 $238,139 fav.
RCM services: incentive fees - 6,105 (6,105) -100.0% 97,999 8,005 89,994 fav.
RCM services: other 2,061 2,958 (897) -30.3% 4,462 4,092 370 9.0%
Other services fees 4,003 3,462 541 15.6% 7,095 7,789 (694) -8.9%
Total net services revenue 8,672 22,085 (13,413) -60.7% 360,865 33,056 327,809 fav.
Change in deferred customer billings 29,602 25,133 4,469 17.8% (281,737) 69,060 (350,797) fav.
Gross cash generated from customer contracting activities$38,274 $47,218 $(8,944) -18.9% $79,128 $102,116 $(22,988) -22.5%
Components of Gross Cash Generated from Customer Contracting Activities:
RCM services: net operating fee$23,886 $27,050 $(3,164) -11.7% $48,690 $57,239 $(8,549) -14.9%
RCM services: incentive fee 7,368 14,511 (7,143) -49.2% 16,235 32,642 (16,407) -50.3%
RCM services: other 3,016 2,196 820 37.3% 7,108 4,447 2,661 59.8%
Total RCM services fees 34,270 43,757 (9,487) -21.7% 72,033 94,328 (22,295) -23.6%
Other services fees 4,004 3,461 543 15.7% 7,095 7,788 (693) -8.9%
Gross cash generated from customer contracting activities$38,274 $47,218 $(8,944) -18.9% $79,128 $102,116 $(22,988) -22.5%

* fav. - Favorable

unfav. - Unfavorable


Table 5
Accretive Health, Inc.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Cash Generated from Customer Contracting Activities
(In thousands)
Three Months Ended
June 30,
2016 vs. 2015
Change
Six Months Ended
June 30,
2016 vs. 2015
Change
2016 2015 Amount% 2016 2015 Amount%
Net income (loss)$(40,791) $(26,288) $(14,503) unfav. $126,612 $(56,733) $183,345 fav.
Net interest income (46) (69) 23 -33.3% (130) (74) (56) 75.7%
Income tax provision (benefit) (28,914) (15,900) (13,014) 81.8% 82,488 (35,312) 117,800 unfav.
Depreciation and amortization expense 2,361 2,101 260 12.4% 4,632 3,818 814 21.3%
Share-based compensation expense 11,785 7,807 3,978 51.0% 18,683 13,003 5,680 43.7%
Other 8,651 611 8,040 unfav. 19,457 1,886 17,571 unfav.
Adjusted EBITDA (46,954) (31,738) (15,216) 47.9% 251,742 (73,412) 325,154 fav.
Change in deferred customer billings 29,602 25,133 4,469 17.8% (281,737) 69,060 (350,797) fav.
Net cash generated from customer contracting activities$(17,352) $(6,605) $(10,747) unfav. $(29,995) $(4,352) $(25,643) unfav.

* fav. - Favorable

unfav. - Unfavorable


Table 6
Accretive Health, Inc.
Share-Based Compensation Expense Allocation Details
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
(unaudited) (unaudited)
Cost of services$1,520 $1,204 $3,523 $2,604
Selling, general and administrative 10,265 6,603 15,160 10,399
Other 1,828 - 1,828 -
Total share-based compensation expense$13,613 $7,807 $20,511 $13,003


Table 7
Accretive Health, Inc.
Depreciation and Amortization Expense Allocation Details
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
(unaudited) (unaudited)
Cost of services$2,229 $1,826 $4,327 $3,308
Selling, general and administrative 132 275 305 510
Total depreciation and amortization$2,361 $2,101 $4,632 $3,818


Table 8
Accretive Health, Inc.
Condensed Consolidated Non-GAAP Financial Information
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
GAAP net services revenue$8,672 $22,085 $360,865 $33,056
Increase (decrease) in deferred customer billings 29,602 25,133 (281,737) 69,060
Gross cash generated from customer contracting activities 38,274 47,218 79,128 102,116
Operating Expenses1:
Cost of services 41,363 39,732 82,392 79,046
Selling, general and administrative 14,263 14,091 26,731 27,422
Sub-total 55,626 53,823 109,123 106,468
Net cash generated from customer contracting activities$(17,352) $(6,605) $(29,995) $(4,352)
Net cash generated margin -45.3% -14.0% -37.9% -4.3%
1Excludes share-based compensation, depreciation and amortization, and other costs


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

Source:Accretive Health, Inc