CHICAGO, March 10, 2016 (GLOBE NEWSWIRE) -- Accretive Health, Inc. (OTC Pink:ACHI), a leading provider of revenue cycle services and physician advisory services to healthcare providers, today announced results for the quarter and year ended December 31, 2015.

Fourth Quarter 2015 Results:

  • GAAP  net services revenue of $68.3 million, compared to $47.5 million for the fourth quarter of 2014 
  • GAAP  net income of $5.4 million, compared to a net loss of $17.7 million for the fourth quarter of 2014 
  • Gross cash generated from customer contracting activities of $72.7 million, compared to $60.7 million for the fourth quarter of 2014 
  • Net cash generated from customer contracting activities of $27.0 million, compared to $6.8 million for the fourth quarter of 2014

Calendar Year 2015 Results:

  • GAAP  net services revenue of $117.2 million, compared to $210.1 million for 2014
  • GAAP  net loss of $84.3 million, compared to a net loss of $79.6 million for 2014
  • Gross cash generated from customer contracting activities of $230.2 million, compared to $233.6 million for 2014
  • Net cash generated from customer contracting activities of $26.4 million, compared to $7.8 million for 2014

Emad Rizk, M.D., President and Chief Executive Officer of Accretive Health, commented, “Over the last year we have transformed our organization, with focus on scalable infrastructure and applications, operational excellence, and expanding shared services capacity. I am confident in our team’s ability to execute over the next few years on the anticipated addition of more than $8 billion in net patient revenue under management from Ascension.”

Peter Csapo, Chief Financial Officer and Treasurer, added, “The strategic review process impacted our ability to realize some projected opportunities at the end of the year, and our results were consequently below our expectations. However, despite this, we delivered significant sequential improvement in the fourth quarter and over the prior year.”

The Company currently serves 77 hospitals with collective net patient revenue (NPR) of $16.5 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.

2016 Outlook

The Company at this time is not providing financial guidance for 2016 since its annual planning process is still ongoing as a result of the recent signing of the new master professional services agreement (MPSA) with Ascension. The Company expects to begin to transition Ascension hospitals currently served by the Company to the new MPSA terms in the second quarter of 2016, and anticipates Ascension hospitals not currently served by Accretive to begin to transition to the Company’s platform in the third quarter of 2016.  The Company expects to fund infrastructure investments and growth initiatives with capital raised in the recently completed transaction with Ascension and TowerBrook Capital Partners.

Conference Call and Webcast Details

Accretive Health’s management team will host a conference call today at 4:30 p.m. Eastern Time to discuss the results and business outlook. To participate, please dial 888-822-6508 (440-996-5712 outside the U.S. and Canada) using conference code number 57301868. 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.

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) 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 Annual Report on Form 10-K for the year ended December 31, 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 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 the benefits, expectations and financial impact of the strategic relationship and renewed master professional services agreement with Ascension and our 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/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 per share data)
 
  December 31,
  2015 2014
Assets    
Current assets:    
Cash and cash equivalents $103,497  $145,167 
Short-term investments 1,023  — 
Restricted cash —  5,000 
Accounts receivable, net 10,194  4,438 
Prepaid income taxes 1,102  6,138 
Current deferred tax assets —  62,322 
Other current assets 10,924  7,389 
Total current assets 126,740  230,454 
Property, equipment and software, net 27,217  14,594 
Non-current deferred tax asset 300,825  201,163 
Restricted cash equivalents 1,500  — 
Goodwill and other assets, net 4,007  162 
Total assets $460,289  $446,373 
Liabilities and stockholders’ equity (deficit)    
Current liabilities:    
Accounts payable 5,306  12,488 
Current portion of customer liabilities 202,516  219,998 
Accrued compensation and benefits 9,062  14,983 
Other accrued expenses 15,743  15,680 
Total current liabilities 232,627  263,149 
Non-current portion of customer liabilities 432,477  317,065 
Other non-current liabilities 8,498  8,405 
Total liabilities $673,602  $588,619 
Stockholders’ equity (deficit):    
Common stock, $0.01 par value, 500,000,000 shares authorized, 113,259,408 shares issued and 107,715,436 shares outstanding at December 31, 2015; 102,890,241 shares issued and 98,112,019 shares outstanding at December 31, 2014 1,133  1,029 
Additional paid-in capital 322,492  307,075 
Accumulated deficit (481,773) (397,517)
Accumulated other comprehensive loss (2,488) (1,763)
Treasury stock (52,677) (51,070)
Total stockholders’ equity (deficit) (213,313) (142,246)
Total liabilities and stockholders’ equity (deficit) $460,289  $446,373 


 
Table 2
Accretive Health, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
(In thousands, except per share data)
 
 Three Months Ended
December 31,		 Year Ended
December 31,
  2015   2014   2015   2014 
Net services revenue$68,341  $47,456  $117,239  $210,140 
Operating expenses:       
Cost of services 38,693   43,893   168,977   182,144 
Selling, general and administrative 15,237   16,274   74,963   69,883 
Restatement and other  3,493   18,859   9,343   86,766 
Total operating expenses 57,423   79,026   253,283   338,793 
Income (loss) from operations 10,918   (31,570)  (136,044)  (128,653)
Net interest income 84   50   231   302 
Income (loss) before income tax provision 11,002   (31,520)  (135,813)  (128,351)
Income tax provision (benefit) 5,555   (13,869)  (51,557)  (48,731)
Net income (loss)$5,447   $(17,651) $(84,256) $(79,620)
Net income (loss) per common share:       
Basic$0.06  $(0.18) $(0.87) $(0.83)
Diluted$0.06  $(0.18) $(0.87) $(0.83)
Weighted average shares used in calculating net income (loss) per common share:  
Basic 98,137,885   95,790,065    96,806,885    95,760,762 
Diluted 98,751,254    95,790,065    96,806,885    95,760,762 
Consolidated statements of comprehensive income (loss)    
Net income (loss)  5,447    (17,651)   (84,256)   (79,620)
Other comprehensive loss:       
Foreign currency translation adjustments (23)  (310)  (725)  (304)
Comprehensive income (loss)$5,424  $(17,961) $(84,981) $(79,924)


 
Table 3
Accretive Health, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
 
  Year Ended December 31,
  2015 2014 2013
Operating activities      
Net income (loss) $(84,256) $(79,620) $130,083 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:    
Depreciation and amortization 8,462  6,047  6,823 
Share-based compensation 29,236  27,181  25,025 
Loss on disposal —  1,604  — 
Provision (recovery) for doubtful receivables (46) (430) 634 
Deferred income taxes (52,690) (49,227) 79,356 
Excess tax benefit from share-based awards —  (176) (15)
Changes in operating assets and liabilities:      
Accounts receivable (5,709) 20,548  658 
Restricted cash equivalents (1,500) —  — 
Prepaid income taxes 5,058  3,794  (4,836)
Other assets (7,465) (47) 14,434 
Accounts payable (7,162) 8,251  3,378 
Accrued compensation and benefits (5,918) 3,174  3,813 
Other liabilities 248  (3,312) (2,955)
Customer liabilities 97,930  (15,023) (201,975)
Net cash provided by (used in) operating activities (23,812) (77,236) 54,423 
Investing activities      
Purchase of short-term investments (1,023) —  — 
Purchases of property, equipment, and software (21,275) (6,034) (1,877)
Net cash used in investing activities (22,298) (6,034) (1,877)
Financing activities      
Excess tax benefit from share-based awards —  176  15 
Exercise of vested stock options 1,547  —  46 
Purchase of treasury stock (1,607) (370) (161)
Restricted cash release from letter of credit 5,000  —  — 
Net cash provided by (used in) financing activities 4,940  (194) (100)
Effect of exchange rate changes in cash (500) (260) (511)
Net increase (decrease) in cash and cash equivalents (41,670) (83,724) 51,935 
Cash and cash equivalents, at beginning of year 145,167  228,891  176,956 
Cash and cash equivalents, at end of year $103,497  $145,167  $228,891 
Supplemental disclosures of cash flow information      
Income taxes paid $(1,088) $(801) $(1,742)
Income taxes refunded $1,441  $3,014  $754 


 
Table 4
Accretive Health, Inc.
Reconciliation of GAAP Revenue to Non-GAAP Gross Cash Generated from Customer Contracting Activities
(In thousands)
 
 Three Months Ended
December 31,		 2015 vs. 2014
Change		 Year Ended
December 31,		 2015 vs. 2014
Change
  2015   2014  Amount%  2015   2014  Amount%
              
Consolidated Statement of Operations Data:            
RCM services: net operating fees$46,832  $14,639  $32,193  n.m.  $66,234  $77,456  $(11,222) (14.5)%
RCM services: incentive fees 11,289    24,858   (13,569) (54.6)%  20,311   99,934   (79,623) (79.7)%
RCM services: other 6,790   2,316   4,474  n.m.   16,381   8,103    8,278  n.m. 
Other services fees 3,430   5,643   (2,213) (39.2)%  14,313   24,647   (10,334) (41.9)%
Total net services revenue 68,341   47,456   20,885  44.0%  117,239   210,140   (92,901) (44.2)%
Change in deferred customer billings  4,337   13,238   (8,901) (67.2)%  112,938   23,427   89,511  n.m. 
Gross cash generated from customer contracting activities$72,678   $60,694   $11,984   19.7% $230,177   $233,567   $(3,390) (1.5)%
Components of Gross Cash Generated from Customer Contracting Activities:        
RCM services: net operating fee$34,424  $31,046  $3,378  10.9% $123,185  $121,730  $1,455  1.2%
RCM services: incentive fee 20,155   19,841   314  1.6%  67,656   77,239   (9,583) (12.4)%
RCM services: other 14,669   5,805   8,864  n.m.   25,023   9,952   15,071  n.m. 
Total RCM services fees 69,248   56,692   12,556  22.1%  215,864   208,921   6,943  3.3%
Other services fees 3,430   4,002   (572) (14.3)%  14,313   24,646    (10,333) (41.9)%
Gross cash generated from customer contracting activities$72,678   $60,694   $11,984   19.7% $230,177   $233,567   $(3,390) (1.5)%
 

*n.m. – not meaningful

 
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
December 31,		 2015 vs. 2014
Change		 Year Ended
December 31,		 2015 vs. 2014
Change
  2015   2014  Amount%  2015   2014  Amount%
              
Net income (loss)$5,447  $(17,651) $23,098  n.m.  $(84,256) $(79,620) $(4,636) 5.8%
Net interest income  (84)   (50)   (34) 68.0%   (231)   (302)    71  (23.5)%
Income tax provision (benefit) 5,555    (13,869)  19,424  n.m.   (51,557)  (48,731)    (2,826) 5.8%
Depreciation and amortization expense  1,906    1,768    138  7.8%   8,462   6,047    2,415  39.9%
Share-based compensation expense 6,353    4,481    1,872  41.8%   31,671    20,172    11,499  57.0%
Restatement and other  3,493    18,859     (15,366) (81.5)%    9,343    86,766    (77,423) (89.2)%
Adjusted EBITDA 22,670   (6,462)  29,132  n.m.   (86,568)  (15,668)  (70,900) n.m. 
Change in deferred customer billings  4,337   13,238   (8,901) (67.2)%  112,938   23,427    89,511  n.m. 
Net cash generated from customer contracting activities$27,007   $6,776   $20,231   n.m.  $26,370   $7,759   $18,611   n.m. 
 

*n.m. – not meaningful

 
Table 6
Accretive Health, Inc.
Share-Based Compensation Expense Allocation Details
(In thousands)
 
 Three Months Ended
December 31,		 Year Ended
December 31,
  2015   2014   2015   2014 
        
Cost of services$1,452  $1,054  $7,208  $6,668 
Selling, general and administrative   4,901     3,426     24,463     13,503 
Restatement and other —     712   —     8,761 
Total share-based compensation expense$6,353   $5,192   $31,671   $28,932  


 
Table 7
Accretive Health, Inc.
Depreciation and Amortization Expense Allocation Details
(In thousands)
 
 Three Months Ended
December 31,		 Year Ended
December 31,
  2015   2014   2015   2014 
        
Cost of services$1,737  $1,461  $7,536  $4,603 
Selling, general and administrative   169     307     926     1,444 
Total depreciation and amortization$1,906   $1,768   $8,462   $6,047  


 
Table 8
Accretive Health, Inc.
Condensed Consolidated Non-GAAP Financial Information
(In thousands)
 
 Three Months Ended
December 31,		 Year ended
December 31,
  2015   2014   2015   2014 
        
GAAP net services revenue$68,341  $47,456  $117,239  $210,140 
Increase in deferred customer billings   4,337     13,238    112,938     23,427 
Gross cash generated from customer contracting activities (non-GAAP)   72,678      60,694     230,177      233,567  
Operating Expenses1:       
Cost of services 35,504     41,377    154,233    170,872 
Selling, general and administrative   10,167     12,541     49,574     54,936 
Sub-total   45,671      53,918     203,807      225,808  
        
Net cash generated from customer contracting activities (non-GAAP)$27,007   $6,776   $26,370   $7,759  
        
Net cash generated margin (non-GAAP) 37.2%  11.2%  11.5%  3.3%
                

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

 

Contact:

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

Media Relations:
Michael Chernoff
312.496.7606
marketing@accretivehealth.com