R1 RCM Inc. (NASDAQ: RCM) (“R1”), a leading provider of
technology-driven solutions that transform the patient experience
and financial performance of healthcare providers, today announced
its decision to restate its previously issued financial statements
for the years ended December 31, 2022 and 2021 and interim periods,
as well as for the first two quarters of 2023.
Immediately prior to the scheduled filing of its Form 10-Q for
the third quarter 2023, R1 identified errors related to the
accounting for certain acquiree compensation costs (e.g.,
transaction bonuses and accelerated equity award vesting) incurred
as a result of historical acquisitions. These expenses should have
been recorded as “Other expenses” within the consolidated
statements of operations and comprehensive income and instead were
included in the purchase price allocations and ultimately recorded
as goodwill in the consolidated balance sheets. R1 has determined
that the drivers of the corrections are acquiree compensation
expenses equal to approximately $7.8 million for 2022 and $8.4
million for 2021. As part of the restatement process, other less
significant previously identified immaterial adjustments that were
not recorded in the proper period will also be adjusted. Based on
information currently available, R1 does not expect a material
impact to 2022 and 2021 revenue or Adjusted EBITDA.
No Material Impact on 2023 Financial Results or Outlook;
No Impact on Cash or Business Operations
The accounting errors are not expected to have a material impact
on R1’s previously reported results of operations for the first
three quarters of 2023, or on its 2023 outlook. R1 continues to
expect to achieve its 2023 targets, including delivering revenue of
$2,255 million to $2,275 million, GAAP operating income of $130
million to $140 million and Adjusted EBITDA of $600 million to $615
million. In addition, this matter has no impact on R1’s cash or
business operations. It is important to note that the accounting
errors did not result from any override of controls or misconduct,
nor has the Audit Committee been informed of any issues related to
an override of controls or misconduct.
“This technical accounting issue was proactively identified by
R1’s internal team, at which time we immediately took action to
identify any potential impact on past financial statements in
conjunction with our auditors, Ernst & Young,” said Lee Rivas,
chief executive officer of R1. “At this time there is no expected
material impact on our 2023 results of operations or outlook. As we
look ahead, we remain confident in our ability to deliver on our
2023 outlook and drive long-term value through our excellent
provider relationships, commitment to innovation and continued
customer growth.”
Additional information relating to the restatement is available
in the Company's Current Report on Form 8-K filed today.
Forward-Looking Statements
This press release contains “forward-looking statements” made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking
statements generally relate to future events, including among other
things statements regarding the Company’s intent to restate its
prior consolidated financial statements for the applicable
non-reliance periods, the estimated impact of adjustments to the
financial statements for the applicable non-reliance periods, the
impact of the Company’s material weakness in internal control over
financial reporting and the Company’s disclosure controls and
procedures on its financial statements and other public
disclosures, the anticipated timing for filing the Company’s
restated reports and the Form 10-Q for the third quarter
of 2023 and related matters. These statements are often identified
by the use of words such as “anticipate,” “believe,” “contemplate,”
“designed,” “estimate,” “expect,” “forecast,” “goal,” “intend,”
“may,” “outlook,” “plan,” “predict,” “project,” “see,” “seek,”
“target,” “would” and similar expressions or variations or
negatives of these words, although not all forward-looking
statements contain these identifying words. These statements are
based on various assumptions, whether or not identified in this
press release, and on the current expectations of the Company’s
management and are not predictions of actual performance. Actual
outcomes and results may differ materially from those contemplated
by these forward-looking statements as a result of uncertainties,
risks and changes in circumstances, including but not limited to
risk and uncertainties related to: (i) our failure to promptly
restate the financial statements for the applicable non-reliance
periods and file the required reports with the Securities and
Exchange Commission (the “SEC”) and (ii) the impact of the
restatements of the financial statements on the price of our common
stock, our reputation, our relationships with our investors,
suppliers, customers, employees and other parties. Additional risks
and uncertainties that could cause actual outcomes and results to
differ materially from those contemplated by the forward-looking
statements are included under the heading “Risk Factors” in the
Company’s annual report on Form 10-K for the year ended December
31, 2022 and any other periodic reports that the Company may file
with the SEC. Subsequent events and developments, including actual
results or changes in the Company’s assumptions, may cause the
Company’s views to change. The Company assumes no obligation and
does not intend to update these forward-looking statements, except
as required by law. You are cautioned not to place undue reliance
on such forward-looking statements.
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
measures, including adjusted EBITDA. Adjusted EBITDA is defined as
GAAP net income (loss) before net interest income/expense, income
tax provision/benefit, depreciation and amortization expense,
share-based compensation expense, CoyCo 2, L.P. share-based
compensation expense, and certain other items, including business
acquisition costs, integration costs, technology transformation,
strategic initiatives, the global business services center
expansion project in the Philippines and facility-exit charges.
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 1 presents a reconciliation of Adjusted EBITDA guidance to
GAAP operating income guidance. Non-GAAP measures should be
considered in addition to, but not as a substitute for, the
information prepared in accordance with GAAP.
About R1 RCMR1 is a leading provider of
technology-driven solutions that transform the patient experience
and financial performance of healthcare providers. R1’s proven and
scalable operating models seamlessly complement 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:Evan Smith,
CFA516-743-5184investorrelations@r1rcm.com
Media Relations:Allison+PartnersAmanda
CritelliR1PR@allisonpr.com
Table 1 |
R1 RCM Inc. |
Reconciliation of GAAP Operating Income Guidance to
Non-GAAP Adjusted EBITDA Guidance (Unaudited) |
(In millions) |
|
|
|
2023E |
GAAP Operating Income
Guidance |
$130-140 |
Plus: |
|
Depreciation and amortization
expense |
$275-285 |
Share-based compensation
expense |
$65-70 |
CoyCo 2 share-based
compensation expense |
$7-8 |
Strategic initiatives,
severance and other costs |
$115-120 |
Adjusted EBITDA
Guidance |
$600-615 |
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