ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 02-0698101 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
401 North Michigan Avenue, Suite 2700 Chicago, Illinois | 60611 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class: | Name of each exchange on which registered: | |
Common Stock, $0.01 par Value | The NASDAQ Global Select Market |
Large accelerated filer | ý | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company | o | Emerging growth company | o |
Page | ||
PART I | ||
PART II | ||
PART III | ||
PART IV | ||
• | our ability to achieve or maintain profitability; |
• | our ability to manage our operations effectively; |
• | our ability to retain existing customers or acquire new customers; |
• | disruptions in or damages to our shared services centers or third-party operated data centers; |
• | delayed or unsuccessful implementation of our technologies or services, or unexpected implementation costs; |
• | breaches or failures of our information technologies security measures or unauthorized access to a customer’s data; |
• | our exposure to risks related to our growing international operations; |
• | the development of markets for our RCM service offering; |
• | competition within the market; |
• | variability in the lead time of prospective customers; |
• | fluctuations in our results of operations or cash flows; |
• | the loss of key personnel; |
• | our ability to integrate our customers’ revenue cycle management employees; |
• | our potential liability resulting from future errors; |
• | negative perceptions of the collection of medical co-pays and other payments from patients; |
• | negative perceptions of offshore outsourcing and proposed legislation related thereto; |
• | our ability to recognize the benefits of acquisitions and strategic plans; |
• | risks related to our indebtedness; |
• | the impact of litigation; |
• | our legal responsibility for obligations related to our employees or our customers’ employees; |
• | our ability to use our net operating loss carryforwards; |
• | changes in tax laws and unanticipated tax liabilities; |
• | our dependence on the A&R MPSA with Ascension; |
• | our ability to realize the anticipated benefits of the Intermedix Acquisition; |
• | our ability to comply with healthcare laws and regulations; |
• | developments in the healthcare industry, including national healthcare reform; |
• | our ability to comply with information privacy laws; |
• | our ability to comply with debt collection and other consumer protection laws and regulations; |
• | our ability to protect our intellectual property; and |
• | other factors set forth in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. |
Item 1. | Business |
• | Gathering Complete Patient and Payer Information. We focus on gathering complete patient information and validating insurance eligibility and benefits so patient care services can be recorded and billed to the appropriate parties. For scheduled healthcare services, we educate patients as to their potential financial responsibilities before receiving care. Through our systems, we maintain an automated electronic scorecard which measures the efficiency of up-front data capture, authorization, billing and collections throughout the life cycle of any given patient account. These scorecards are analyzed in the aggregate, and the results are used to help improve work flow processes and operational decisions for our customers. |
• | Improving Claims Filing and Payer Collections. Through our proprietary technology and process expertise, we identify, for each patient encounter, the amount our customer should receive from a payer if terms of the applicable contract with the payer and patient policies are followed. Over time, we compare these amounts with the actual payments collected to help identify which payers, types of medical treatments and patients represent various levels of payment risk for a customer. Using proprietary algorithms and analytics, we consider actual reimbursement patterns to predict the payment risk associated with a customer’s claims to its payers, and we then direct increased attention and time to the riskiest accounts. |
• | Identifying Alternative Payment Sources. We use various methods to find payment sources for uninsured patients and reimbursement for services not covered by payers. Our patient financial screening technology and methodologies often identify federal, state or private grant sources to help pay for healthcare services. These techniques are designed to ease the financial burden on uninsured or underinsured patients, increase the percentage of patient bills that are actually paid and improve the total amount of reimbursement received by our customers. |
• | Employing Proprietary Technology and Algorithms. We employ a variety of proprietary data analytics and algorithms. For example, we identify patient accounts with financial risk by applying proprietary analysis techniques to the data we have collected. Our systems are designed to streamline work processes through the use of proprietary algorithms that focus revenue cycle staff effort on those accounts deemed to have the greatest potential for improving net revenue yield or charge capture. We adjust our proprietary predictive algorithms to reflect changes in payer and patient behavior based upon the knowledge we obtain from our entire customer base. As new customers are added and payer and patient behavior changes, the information we use to create our algorithms expands, increasing the accuracy, reliability and value of such algorithms. |
• | Using Analytical Capabilities and Operational Excellence. We draw on the experience that we have gained from working with some of the best healthcare provider systems in the United States to train our customers’ staff about new and innovative RCM practices. We use sophisticated analytical procedures to identify specific opportunities to improve business processes. |
• | Increasing Charge Capture. We are able to help our customers increase their charge capture by implementing optimization techniques and related processes. We use sophisticated analytics software to help improve the accuracy of claims filings and the resolution of disputed claims from payers. We also overlay a range of capabilities designed to reduce missed charges, improve the clinical/reimbursement interface and produce bills that comply with payer requirements and applicable healthcare regulations. |
• | Leveraging our Shared Services Centers. We help our customers increase their revenue cycle efficiency by implementing improved practices, streamlining work flow processes and outsourcing aspects of their revenue cycle operations to our shared services centers. Examples of services that can be completed at our shared services centers in the United States and India include pre-registration, medical transcription, cash posting, reconciliation of payments to billing records and patient and payer follow-up. By leveraging the economies of scale and experience of our shared services centers, we believe that we offer our customers better quality services at a lower cost. |
• | we are required to staff a sufficient number of our own employees commensurate with the service offering and provide the technology necessary to implement and manage our services; |
• | in our operating partner relationship model, we are responsible for providing all revenue cycle personnel, technology and process workflow; |
• | a portion of our fees are tied to the achievement of certain financial or operating metrics; and |
• | the parties provide representations and indemnities to each other. |
• | "R1 Access" powers workflow in customer central business offices and at our scaled shared service centers for pre-registration, financial clearance and financial counseling. The platform processes patient accounts through proprietary rules engines tuned to identify defects in demographic data, authorization processes, insurance benefits and eligibility and medical necessity. Our rules engines in R1 Access are also used to calculate patient cost estimates and prior balance accounts receivables. For the uninsured, the platform helps staff triage |
• | "R1 Link" delivers all of the insight and defect detection capabilities of our proprietary rules engines in real-time to point of service emergency department and registration areas within healthcare organizations. When defects or inconsistent data are detected in the data entry or registration process, users receive targeted messages alerting them to resolve the issue while the patient is still in front of them. |
• | "R1 Contact," our patient contact application, provides the workflow and data for patient contact center representatives. It enables effective financial discussions with patients on outstanding balances. The platform is integrated into our call center, call-routing and auto-dialer capabilities and facilitates improved outcomes through propriety process and technology approaches. |
• | "R1 Insight," our proprietary contract modeling platform, is used to accurately calculate the maximum allowed reimbursement for each claim based upon models of our customer's contract with each payer. This platform is used to provide insight into the health of payer contracts and to power portions of the workflow tools described above. |
• | "R1 Analytics," our web-based reporting and analytics platform, produces over 300 proprietary reports derived from the financial, process and productivity data that we accumulate as a result of our services, which enable us to monitor and identify areas for improvement in the efficacy of our RCM services. |
• | "R1 Decision," classifies defects in a proprietary nomenclature and distributes data to back end teams for follow up and resolution according to standard operating processes. Defects are identified and noted on accounts as they occur. The platform, along with our "Yield-Based Follow Up" application, is designed to power customer patient financial services departments and our shared services. |
• | "R1 Physician Advisor," assists our customers in the initiation of a service request by our PAS team. Our platform allows for the electronic submission, tracking, reviewing and auditing of patient cases referred to us. The PAS portal environment is established as a secure site that enables us to receive patient records from customer case managers and route them to our physicians for review. This workflow is supported by an analytics engine within the web portal that provides our customers the ability to improve their compliance and workflow with our real time reporting, dashboards and worklists. |
• | "R1 Patient Experience," streamlines the interface for patients and physicians with the revenue cycle across all settings of care. It includes self-service appointment management, patient out-of-pocket estimation, online pre-registration and financial clearance. The technology includes web-based, mobile, tablet, kiosk and other access points, which are all connected to R1’s proprietary rules engines to reduce revenue cycle defects. |
• | "R1 Automate," provides robotic process automation, data aggregation from disparate sources, desktop automation and other technologies to automate work. With this technology, repetitive transactional processes are automated, delivering operating efficiency and freeing up staff members to focus no higher-order problem solving and higher value-added work. The solutions target a wide range of functions including prior authorization, coding, accounts receivable follow-up, payment posting and credit balances, among others. |
• | “R1 Chart Manager,” supports patient medical record deficiency management, by evaluating record completeness and optimizing the chart completion work flow. The application creates an intuitive user experience, queuing work by defect and providing visibility to work in process. It allows hand-offs across departments, and tracking of accountability for chart completion, in order to drive velocity and accuracy of the medical record management and coding processes. Customers generally experience improved unbilled AR days and faster cash collection by utilizing the technology. |
• | knowledge and understanding of the complex healthcare payment and reimbursement system in the United States; |
• | a track record of delivering revenue improvements and efficiency gains for healthcare organizations; |
• | predictable and measurable results; |
• | the ability to deliver a solution that is fully-integrated along each step of a healthcare organization's revenue cycle operations; |
• | cost-effectiveness, including the breakdown between up-front costs and pay-for-performance incentive compensation; |
• | reliability, simplicity and flexibility of technology platforms; |
• | understanding of the healthcare industry’s regulatory environment; and |
• | sufficient and scalable infrastructure and financial stability. |
• | software vendors and other technology-supported RCM business process outsourcing companies; |
• | traditional consultants; and |
• | information technology outsourcers. |
• | as to how we will use and disclose the PHI; |
• | that we will implement reasonable administrative, physical and technical safeguards to protect such information from misuse; |
• | that we will enter into similar agreements with our agents and subcontractors that have access to the information; |
• | that we will report security incidents and other inappropriate uses or disclosures of the information; and |
• | that we will assist the customer with certain of its duties under HIPAA. |
Item 1A. | Risk Factors |
• | our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms, or at all; |
• | negative financial covenants contained in the debt agreements require us to meet financial tests that may affect our flexibility in planning for, and reacting to, changes in our business, including possible acquisition opportunities; |
• | we will need a substantial portion of our cash flow to make principal and interest payments on our indebtedness, reducing the funds that would otherwise be available for operations and future business opportunities; and |
• | our debt level will make us more vulnerable than our less leveraged competitors to competitive pressures or a downturn in our business or the economy generally. |
• | we may fail to realize the anticipated synergies and cost savings we expect from the acquisition; |
• | the incurrence of substantial indebtedness in connection with the financing of the acquisition may have an adverse effect on our liquidity; |
• | we may fail to retain key employees of Intermedix; |
• | we may be unable to successfully integrate personnel from the two companies, while at the same time attempting to provide consistent, high quality services; |
• | future developments may impair the value of our purchased goodwill or intangible assets; |
• | we may face difficulties establishing, integrating or combining operations and systems; |
• | we may face challenges retaining the customers of the acquired businesses; |
• | we may encounter unforeseen internal control, regulatory or compliance issues; and |
• | we may face other additional risks relating to regulatory matters, legal proceedings, tax laws or positions. |
• | be time-consuming and expensive to defend, whether meritorious or not; |
• | require us to stop providing the services that use the technology that infringes the other party’s intellectual property; |
• | divert the attention of our technical and managerial resources; |
• | require us to enter into royalty or licensing agreements with third parties, which may not be available on terms that we deem acceptable, if at all; |
• | prevent us from operating all or a portion of our business or force us to redesign our services and technology platforms, which could be difficult and expensive and may make the performance or value of our service offerings less attractive; |
• | subject us to significant liability for damages or result in significant settlement payments; or |
• | require us to indemnify our customers, as we are required by contract to indemnify some of our customers for certain claims based upon the infringement or alleged infringement of any third party’s intellectual property rights resulting from our customers’ use of our intellectual property. |
• | fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; |
• | changes in estimates of our financial results; |
• | failure to meet expectations of securities analysts; |
• | the loss of service agreements with customers; |
• | lawsuits filed against us by governmental authorities or stockholders; |
• | unfavorable publicity concerning our operations or business practices; |
• | investors’ general perception of us; and |
• | changes in general economic, industry, regulatory and market conditions. |
• | authorize the issuance of "blank check" preferred stock that could be issued by our Board to thwart a takeover attempt; |
• | require that directors only be removed from office upon a supermajority stockholder vote; |
• | provide that vacancies on our Board, including newly created directorships, may be filled only by a majority vote of directors then in office; |
• | limit who may call special meetings of stockholders; prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and |
• | require supermajority stockholder voting to effect certain amendments to our restated certificate of incorporation and amended and restated bylaws. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Period | Number of Shares Purchased (1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Plans or Programs (in millions) (2) | |||||||||||
October 1, 2018 through October 31, 2018 | — | $ | — | — | $ | 49.0 | |||||||||
November 1, 2018 through November 30, 2018 | — | $ | — | — | $ | 49.0 | |||||||||
December 1, 2018 through December 31, 2018 | 677 | $ | 8.92 | — | $ | 49.0 |
(1) | Repurchases of our stock related to employees’ tax withholding upon vesting of restricted stock. See Note 14, Share-Based Compensation, to our consolidated financial statements included in this Annual Report on Form 10-K. |
(2) | On November 13, 2013, the Board authorized, subject to the completion of the restatement of our financial statements, the repurchase of up to $50.0 million of our common stock from time to time in the open market or in privately negotiated transactions (the "2013 Repurchase Program"). The timing and amount of any shares repurchased under the 2013 Repurchase Program will be determined by our management based on its evaluation of market conditions and other factors. The 2013 Repurchase Program may be suspended or discontinued at any time. See Note 13, Stockholders' Equity (Deficit), to our consolidated financial statements included in this Annual Report on Form 10-K. |
12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | |
R1 RCM Inc. | $100 | 74.89 | 34.93 | 24.56 | 48.14 | 86.79 |
NYSE Composite Index | $100 | 104.22 | 97.53 | 106.31 | 123.16 | 109.37 |
NASDAQ Health Care Index | $100 | 128.47 | 137.28 | 114.06 | 138.36 | 132.59 |
Item 6. | Selected Consolidated Financial Data |
Year Ended December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||
Consolidated Statement of Operations Data: | ||||||||||||||||||||
Net services revenue | $ | 868.5 | $ | 449.8 | $ | 592.6 | $ | 117.2 | $ | 210.1 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of services | 770.6 | 416.3 | 199.7 | 169.0 | 182.1 | |||||||||||||||
Selling, general and administrative | 97.9 | 56.3 | 74.1 | 75.0 | 69.9 | |||||||||||||||
Other | 30.4 | 4.7 | 20.8 | 9.3 | 86.7 | |||||||||||||||
Total operating expenses | 898.9 | 477.3 | 294.7 | 253.3 | 338.8 | |||||||||||||||
Income (loss) from operations | (30.4 | ) | (27.5 | ) | 297.9 | (136.0 | ) | (128.7 | ) | |||||||||||
Net interest income (expense) | (26.3 | ) | 0.2 | 0.3 | 0.2 | 0.3 | ||||||||||||||
Net income (loss) before income tax provision | (56.7 | ) | (27.3 | ) | 298.2 | (135.8 | ) | (128.4 | ) | |||||||||||
Income tax provision (benefit) | (11.4 | ) | 31.5 | 121.1 | (51.6 | ) | (48.7 | ) | ||||||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | $ | (84.3 | ) | $ | (79.7 | ) | ||||||
Net income (loss) per common share | ||||||||||||||||||||
Basic | $ | (0.60 | ) | $ | (0.75 | ) | $ | 0.65 | $ | (0.87 | ) | $ | (0.83 | ) | ||||||
Diluted | $ | (0.60 | ) | $ | (0.75 | ) | $ | 0.65 | $ | (0.87 | ) | $ | (0.83 | ) |
As of December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 62.8 | $ | 164.9 | $ | 181.2 | $ | 103.5 | $ | 145.2 | ||||||||||
Working capital (1) | $ | 0.6 | $ | 112.4 | $ | 137.7 | $ | 24.2 | $ | 41.6 | ||||||||||
Total assets | $ | 807.5 | $ | 336.0 | $ | 415.1 | $ | 460.3 | $ | 446.4 | ||||||||||
Non-current liabilities | $ | 396.6 | $ | 23.4 | $ | 120.7 | $ | 441.0 | $ | 325.5 | ||||||||||
Total stockholders’ equity (deficit) | $ | 6.3 | $ | 33.4 | $ | (12.3 | ) | $ | (213.3 | ) | $ | (142.2 | ) |
(1) | We define working capital as total current assets excluding the current portion of deferred tax assets pertaining to the current portion of deferred customer billings, less total current liabilities excluding the current portion of deferred customer billings (prior to the adoption of Topic 606, Revenue from Contracts with Customers). We excluded the current portion of deferred customer billings and related deferred tax assets, prior to the adoption of Topic 606, Revenue from Contracts with Customers, from the definition of working capital due to the nature of these balances. We adopted the provisions of Accounting Standards Update 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (Topic 740) ("ASU 2015-17"), on a prospective basis for the reporting period ended December 31, 2015. Consequently, under the guidance of ASU 2015-17, deferred tax assets were classified as non-current in the consolidated balance sheet for the reporting period ended December 31, 2015, 2016, 2017, and 2018. As permitted by ASU 2015-17, the current and non-current deferred tax assets were not retroactively adjusted for the prior reporting period ended December 31, 2014. |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect share-based compensation expense; |
• | Adjusted EBITDA does not reflect income tax expenses or cash requirements to pay taxes; |
• | Adjusted EBITDA does not reflect certain other expenses which may require cash payments; |
• | Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect cash requirements for such replacements or other purchase commitments, including lease commitments; and |
• | Other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Year End December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Non-GAAP Measure: | ||||||||||||||||||||
Adjusted EBITDA | $ | 57.0 | $ | 4.1 | $ | 357.0 | $ | (86.6 | ) | $ | (15.7 | ) |
Year End December 31, | ||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net income (loss) (GAAP) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | $ | (84.3 | ) | $ | (79.6 | ) | ||||||
Net interest (income) expense | 26.3 | (0.2 | ) | (0.3 | ) | (0.2 | ) | (0.3 | ) | |||||||||||
Income tax provision (benefit) | (11.4 | ) | 31.5 | 121.1 | (51.6 | ) | (48.7 | ) | ||||||||||||
Depreciation and amortization expense | 38.8 | 16.3 | 10.2 | 8.5 | 6.0 | |||||||||||||||
Share-based compensation expense (1) | 18.2 | 10.7 | 28.1 | 31.7 | 20.2 | |||||||||||||||
Other (2) | 30.4 | 4.7 | 20.8 | 9.3 | 86.8 | |||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 57.0 | $ | 4.1 | $ | 357.0 | $ | (86.6 | ) | $ | (15.7 | ) |
(1) | Share-based compensation expense represents the expense associated with stock options, RSAs, RSUs, and PBRSU's granted, as reflected in our Consolidated Statements of Operations. See Note 14, Share-Based Compensation, to the consolidated financial statements included in this Annual Report on Form 10-K for the detail of the amounts of share-based compensation expense. |
(2) | Other costs consist of the following (in millions): |
Year Ended December 31, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Severance and employee benefits | $ | 2.3 | $ | 0.3 | $ | 3.5 | $ | 0.6 | $ | 9.2 | |||||||||
Facility charges | 0.1 | — | 1.1 | 2.6 | 5.0 | ||||||||||||||
Non-cash share based compensation | — | 0.1 | 1.8 | — | 7.9 | ||||||||||||||
Transaction fees (1) | — | — | 12.7 | — | 57.3 | ||||||||||||||
Restatement costs | — | — | 1.2 | 2.5 | — | ||||||||||||||
Acquisition related costs (2) | 19.7 | 3.1 | — | — | — | ||||||||||||||
Transitioned employees restructuring expense (3) | 4.3 | 1.2 | — | — | — | ||||||||||||||
Strategic Alternative Exploration | — | — | — | 3.8 | — | ||||||||||||||
Prior year employment tax expense | — | — | — | (0.2 | ) | 0.9 | |||||||||||||
Office Transformation | — | — | — | — | 6.5 | ||||||||||||||
Digital Transformation Office (4) | 3.6 | — | — | — | — | ||||||||||||||
Other | 0.4 | — | 0.5 | — | — | ||||||||||||||
Total other | $ | 30.4 | $ | 4.7 | $ | 20.8 | $ | 9.3 | $ | 86.8 |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | In January, we entered into an Amended and Restated Services Agreement with Intermountain Healthcare for a ten-year term. The expanded relationship centers on providing end-to-end RCM under an operating partner relationship for fully managed revenue cycle operations across inpatient and preventative care settings. |
• | In February, we announced that Presence Health has selected the Company to provide its end-to-end RCM services across the Presence Health system’s acute care hospitals and physician care settings. |
• | In May, we completed the acquisition of Intermedix. The acquisition of Intermedix expands our service offering to non-acute settings to include physicians in addition to hospitals, and allows us to advance our vision to be the one revenue cycle partner for healthcare providers. The Intermedix Acquisition not only expands our total addressable market, but also enables us to better serve healthcare providers and compete more effectively as healthcare providers continue to consolidate and acquire physician networks. |
• | In June, we announced that AMITA selected us to provide its end-to-end RCM services across all of AMITA's acute care hospitals and physician care settings. |
• | In June, we entered into the Supplement to the A&R MPSA to provide certain revenue cycle management services for physician groups that receive services from Ascension’s National Revenue Service Center and other groups associated with Ascension hospital systems (the “Medical Group RCM Services”). The Supplement provides a deployment schedule to service providers, which began implementation in the fourth quarter of 2018 and extends through the third quarter of 2020. |
• | In November 2018, we launched the DTO to systematically automate our transactional environment on an end-to-end basis. We anticipate that the DTO will have three principal objectives: (1) digitization of the patient and physician interface with the revenue cycle; (2) automation of manual tasks using robotic process automation technology; and (3) using advanced data analysis methods to improve complex revenue cycle processes such as denials via machine learning and predictive modeling. We intend to automate several hundred transactional processes over the next several quarters. |
Year Ended December 31, | |||||||||||||||||||||
2018 | 2017 | 2016 | |||||||||||||||||||
(In millions) | |||||||||||||||||||||
Net operating fees | $ | 760.2 | 87.5 | % | $ | 374.8 | 83.3 | % | $ | 368.8 | 62.2 | % | |||||||||
Incentive fees | 38.3 | 4.4 | % | 29.0 | 6.4 | % | 191.3 | 32.3 | % | ||||||||||||
Other | 70.0 | 8.1 | % | 46.0 | 10.2 | % | 32.4 | 5.5 | % | ||||||||||||
Total net services revenue | $ | 868.5 | 100.0 | % | $ | 449.8 | 100.0 | % | $ | 592.6 | 100.0 | % |
• | Infused management and technology expenses. We incur costs related to our management and staff employees who are devoted to customer operations. These expenses consist primarily of the wages, bonuses, benefits, share-based compensation, travel and other costs associated with our employees who are assigned to specific customer sites related to our customers’ revenue cycle operations. The employees assigned to customer sites typically have significant experience in revenue cycle operations, care coordination, technology, quality control or other management disciplines. Included in these expenses is an allocation of the costs associated with maintaining, improving and deploying our integrated proprietary technology suite. |
• | Shared services center costs. We incur expenses related to salaries and benefits of employees in our shared services centers, as well as non-payroll costs associated with operating our shared services centers. |
• | Other expenses. We incur expenses related to our employees who manage PAS and other services. These expenses consist primarily of wages, bonuses, benefits, share-based compensation and other costs. |
Year Ended December 31, | 2018 vs. 2017 Change | ||||||||||||||
2018 | 2017 | Amount | % | ||||||||||||
(In millions) | |||||||||||||||
Consolidated statement of operations Data: | |||||||||||||||
Net operating fees | $ | 760.2 | $ | 374.8 | $ | 385.4 | 102.8 | % | |||||||
Incentive fees | 38.3 | 29.0 | 9.3 | 32.1 | % | ||||||||||
Other | 70.0 | 46.0 | 24.0 | 52.2 | % | ||||||||||
Total net services revenue | 868.5 | 449.8 | 418.7 | 93.1 | % | ||||||||||
Operating expenses: | |||||||||||||||
Cost of services | 770.6 | 416.3 | 354.3 | 85.1 | % | ||||||||||
Selling, general and administrative | 97.9 | 56.3 | 41.6 | 73.9 | % | ||||||||||
Other | 30.4 | 4.7 | 25.7 | 546.8 | % | ||||||||||
Total operating expenses | 898.9 | 477.3 | 421.6 | 88.3 | % | ||||||||||
Income (loss) from operations | (30.4 | ) | (27.5 | ) | (2.9 | ) | 10.5 | % | |||||||
Net interest income | (26.3 | ) | 0.2 | (26.5 | ) | (13,250 | )% | ||||||||
Net income (loss) before income tax provision | (56.7 | ) | (27.3 | ) | (29.4 | ) | 107.7 | % | |||||||
Income tax provision (benefit) | (11.4 | ) | 31.5 | (42.9 | ) | (136.2 | )% | ||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 13.5 | (23.0 | )% |
Year Ended December 31, | 2018 vs. 2017 Change | ||||||||||||||
2018 | 2017 | Amount | % | ||||||||||||
(In millions) | |||||||||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 13.5 | (23.0 | )% | |||||
Net interest expense (income) | 26.3 | (0.2 | ) | 26.5 | (13,250 | )% | |||||||||
Income tax provision (benefit) | (11.4 | ) | 31.5 | (42.9 | ) | (136.2 | )% | ||||||||
Depreciation and amortization expense | 38.8 | 16.3 | 22.5 | 138.0 | % | ||||||||||
Share-based compensation expense (1) | 18.2 | 10.7 | 7.5 | 70.1 | % | ||||||||||
Other (2) | 30.4 | 4.7 | 25.7 | 546.8 | % | ||||||||||
Adjusted EBITDA (non-GAAP) | $ | 57.0 | $ | 4.1 | $ | 52.9 | 1,290.2 | % |
(1) | Share-based compensation expense represents the expense associated with stock options, restricted stock units, restricted stock awards and performance based restricted stock units granted, as reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 14, Share-Based Compensation, to the Consolidated Financial Statements included in this Annual Report on Form 10-K for the detail of the amounts of share-based compensation expense. |
(2) | Other costs consist of the following (in millions): |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Severance and employee benefits | $ | 2.3 | $ | 0.3 | |||
Facility charges | 0.1 | — | |||||
Non-cash share based compensation | — | 0.1 | |||||
Acquisition related costs (1) | 19.7 | 3.1 | |||||
Transitioned employees restructuring expense (2) | 4.3 | 1.2 | |||||
Digital Transformation Office (3) | 3.6 | — | |||||
Other | 0.4 | — | |||||
Total other | $ | 30.4 | $ | 4.7 |
Year Ended December 31, | 2017 vs. 2016 Change | ||||||||||||||
2017 | 2016 | Amount | % | ||||||||||||
(In millions) | |||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||
Net operating fees | $ | 374.8 | $ | 368.8 | $ | 6.0 | 1.6 | % | |||||||
Incentive fees | 29.0 | 191.3 | (162.3 | ) | (84.8 | )% | |||||||||
Other | 46.0 | 32.4 | 13.6 | 42.0 | % | ||||||||||
Total net services revenue | 449.8 | 592.6 | (142.8 | ) | (24.1 | )% | |||||||||
Operating expenses: | |||||||||||||||
Cost of services | 416.3 | 199.7 | 216.6 | 108.5 | % | ||||||||||
Selling, general and administrative | 56.3 | 74.1 | (17.8 | ) | (24.0 | )% | |||||||||
Other | 4.7 | 20.8 | (16.1 | ) | (77.4 | )% | |||||||||
Total operating expenses | 477.3 | 294.7 | 182.6 | 62.0 | % | ||||||||||
Income (loss) from operations | (27.5 | ) | 297.9 | (325.4 | ) | (109.2 | )% | ||||||||
Net interest income | 0.2 | 0.3 | (0.1 | ) | (33.3 | )% | |||||||||
Net income (loss) before income tax provision | (27.3 | ) | 298.2 | (325.5 | ) | (109.2 | )% | ||||||||
Income tax provision (benefit) | 31.5 | 121.1 | (89.6 | ) | (74.0 | )% | |||||||||
Net income (loss) | $ | (58.8 | ) | $ | 177.1 | $ | (235.9 | ) | (133.2 | )% |
Year Ended December 31, | 2017 vs. 2016 Change | ||||||||||||||
2017 | 2016 | Amount | % | ||||||||||||
(In millions) | |||||||||||||||
Net income (loss) | $ | (58.8 | ) | $ | 177.1 | $ | (235.9 | ) | (133.2 | )% | |||||
Net interest expense (income) | (0.2 | ) | (0.3 | ) | 0.1 | (33.3 | )% | ||||||||
Income tax provision (benefit) | 31.5 | 121.1 | (89.6 | ) | (74.0 | )% | |||||||||
Depreciation and amortization expense | 16.3 | 10.2 | 6.1 | 59.8 | % | ||||||||||
Share-based compensation expense (1) | 10.7 | 28.1 | (17.4 | ) | (61.9 | )% | |||||||||
Other (2) | 4.7 | 20.8 | (16.1 | ) | (77.4 | )% | |||||||||
Adjusted EBITDA (non-GAAP) | $ | 4.1 | $ | 357.0 | $ | (352.9 | ) | (98.9 | )% |
(1) | Share-based compensation expense represents the expense associated with stock options, restricted stock units, restricted stock awards and performance based restricted stock units granted, as reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 14, Share-Based Compensation, to the Consolidated Financial Statements included in this Annual Report on Form 10-K for the detail of the amounts of share-based compensation expense. |
(2) | Other costs consist of the following (in millions) |
Year Ended December 31, | |||||||
2017 | 2016 | ||||||
Severance and employee benefits | $ | 0.3 | $ | 3.5 | |||
Facility charges | — | 1.1 | |||||
Non-cash share based compensation | 0.1 | 1.8 | |||||
Transaction fees (1) | — | 12.7 | |||||
Restatement costs | — | 1.2 | |||||
Acquisition related costs (2) | 3.1 | — | |||||
Transitioned employees restructuring expense (3) | 1.2 | — | |||||
Other | — | 0.5 | |||||
Total other | $ | 4.7 | $ | 20.8 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(In millions) | ||||||||||||
Net cash provided by (used in) operating activities | $ | 18.3 | $ | 20.9 | $ | (86.9 | ) | |||||
Net cash used in investing activities | (496.3 | ) | (33.6 | ) | (11.6 | ) | ||||||
Net cash provided by (used in) financing activities | 377.4 | (4.2 | ) | 176.5 | ||||||||
Effect of exchange rate changes in cash | (0.7 | ) | 0.6 | (0.3 | ) | |||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (101.3 | ) | (16.3 | ) | 77.7 |
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||||||||||||||||||
Operating Leases (1) | $ | 18.1 | $ | 16.5 | $ | 15.6 | $ | 12.7 | $ | 11.3 | $ | 34.5 | $ | 108.7 | ||||||||||||||
Purchase Obligations (2) | $ | 12.2 | $ | 5.7 | $ | 1.5 | $ | — | $ | — | $ | — | $ | 19.4 | ||||||||||||||
Debt obligations | $ | 2.7 | $ | 2.7 | $ | 2.7 | $ | 2.7 | $ | 2.7 | $ | 365.2 | $ | 378.7 | ||||||||||||||
Interest on debt | $ | 36.6 | $ | 36.4 | $ | 36.9 | $ | 37.8 | $ | 38.6 | $ | 74.3 | $ | 260.6 | ||||||||||||||
Total | $ | 69.6 | $ | 61.3 | $ | 56.7 | $ | 53.2 | $ | 52.6 | $ | 474.0 | $ | 767.4 |
Item 7A. | Qualitative and Quantitative Disclosures about Market Risk |
Item 8. | Consolidated Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
(a) | (b) | (c) | ||||||||
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options and Restricted Stock Units | Weighted- Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities reflected in Column (a)) | |||||||
Equity compensation plans approved by stockholders (1)(2) | 24,630,217 | $ | 5.36 | 8,548,545 | ||||||
Equity compensation plans not approved by stockholders (3) | 2,903,801 | $ | 9.56 | — | ||||||
Total | 27,534,018 | 8,548,545 |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
Item 16. | Form 10-K Summary |
R1 RCM INC. | |
By: | /s/ Joseph Flanagan |
Joseph Flanagan | |
President and Chief Executive Officer | |
By: | /s/ Christopher Ricaurte |
Christopher Ricaurte | |
Chief Financial Officer and Treasurer |
Signature | Title | Date | ||
/s/ Joseph Flanagan Joseph Flanagan | President and Chief Executive Officer (Principal Executive Officer) | February 22, 2019 | ||
/s/ Christopher Ricaurte Christopher Ricaurte | Chief Financial Officer and Treasurer (Principal Financial Officer) | February 22, 2019 | ||
/s/ Richard Evans Richard Evans | Principal Accounting Officer | February 22, 2019 | ||
/s/ Charles J. Ditkoff Charles J. Ditkoff | Director | February 22, 2019 | ||
/s/ Michael C. Feiner Michael C. Feiner | Director | February 22, 2019 | ||
/s/ John B. Henneman III John B. Henneman III | Director | February 22, 2019 | ||
/s/ Joseph R. Impicciche Joseph R. Impicciche | Director | February 22, 2019 | ||
/s/ Alex J. Mandl Alex J. Mandl | Lead Director | February 22, 2019 | ||
/s/ Neal Moszkowski Neal Moszkowski | Director | February 22, 2019 | ||
/s/ Ian Sacks Ian Sacks | Director | February 22, 2019 | ||
/s/ Anthony J. Speranzo Anthony J. Speranzo | Director | February 22, 2019 | ||
/s/ Albert R. Zimmerli Albert R. Zimmerli | Director | February 22, 2019 |
Page | |||
Audited Consolidated Financial Statements | |||
Report of Independent Registered Public Accounting Firm | |||
Consolidated Balance Sheets | |||
Consolidated Statements of Operations and Comprehensive Income (Loss) | |||
Consolidated Statements of Stockholders’ Equity (Deficit) | |||
Consolidated Statements of Cash Flows | |||
Notes to Consolidated Financial Statements |
December 31, | ||||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 62.8 | $ | 164.9 | ||||
Current portion of restricted cash equivalents | 1.8 | — | ||||||
Accounts receivable, net | 42.2 | 8.2 | ||||||
Accounts receivable, net - related party | 55.2 | 15.4 | ||||||
Prepaid expenses and other current assets | 34.8 | 13.8 | ||||||
Total current assets | 196.8 | 202.3 | ||||||
Property, equipment and software, net | 95.2 | 48.3 | ||||||
Intangible assets, net | 180.5 | — | ||||||
Goodwill | 254.8 | — | ||||||
Non-current deferred tax assets | 57.5 | 70.5 | ||||||
Non-current portion of restricted cash equivalents | 0.5 | 1.5 | ||||||
Other assets | 22.2 | 13.4 | ||||||
Total assets | $ | 807.5 | $ | 336.0 | ||||
Liabilities | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 9.9 | $ | 7.2 | ||||
Current portion of customer liabilities | 14.7 | 1.1 | ||||||
Current portion of customer liabilities - related party | 51.1 | 27.1 | ||||||
Accrued compensation and benefits | 77.0 | 37.8 | ||||||
Current portion of long-term debt | 2.7 | — | ||||||
Other current liabilities and accrued expenses | 40.8 | 16.7 | ||||||
Total current liabilities | 196.2 | 89.9 | ||||||
Non-current portion of customer liabilities - related party | 17.7 | 11.5 | ||||||
Long-term debt | 251.0 | — | ||||||
Long-term debt - related party | 105.0 | — | ||||||
Other non-current liabilities | 22.9 | 11.9 | ||||||
Total liabilities | 592.8 | 113.3 | ||||||
8.00% Series A convertible preferred stock, par value $0.01, 370,000 shares authorized, 246,233 shares issued and outstanding as of December 31, 2018 (aggregate liquidation value of $251.2); 370,000 shares authorized, 227,483 shares issued and outstanding as of December 31, 2017 (aggregate liquidation value of $232.0) | 208.4 | 189.3 | ||||||
Stockholders’ equity (deficit): | ||||||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 123,353,656 shares issued and 110,541,901 shares outstanding at December 31, 2018; 116,650,388 shares issued and 104,409,961 shares outstanding at December 31, 2017 | 1.2 | 1.2 | ||||||
Additional paid-in capital | 361.0 | 337.9 | ||||||
Accumulated deficit | (289.8 | ) | (244.5 | ) | ||||
Accumulated other comprehensive loss | (3.5 | ) | (1.6 | ) | ||||
Treasury stock, at cost, 12,811,755 shares as of December 31, 2018; 12,240,427 shares as of December 31, 2017 | (62.6 | ) | (59.6 | ) | ||||
Total stockholders’ equity (deficit) | 6.3 | 33.4 | ||||||
Total liabilities and stockholders’ equity (deficit) | $ | 807.5 | $ | 336.0 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net services revenue ($600.1 million, $404.4 million and $461.4 million from related party for the year ended December 31, 2018, 2017 and 2016, respectively) | $ | 868.5 | $ | 449.8 | $ | 592.6 | ||||||
Operating expenses: | ||||||||||||
Cost of services | 770.6 | 416.3 | 199.7 | |||||||||
Selling, general and administrative | 97.9 | 56.3 | 74.1 | |||||||||
Other | 30.4 | 4.7 | 20.8 | |||||||||
Total operating expenses | 898.9 | 477.3 | 294.7 | |||||||||
Income (loss) from operations | (30.4 | ) | (27.5 | ) | 297.9 | |||||||
Net interest (expense) income | (26.3 | ) | 0.2 | 0.3 | ||||||||
Income (loss) before income tax provision (benefit) | (56.7 | ) | (27.3 | ) | 298.2 | |||||||
Income tax provision (benefit) | (11.4 | ) | 31.5 | 121.1 | ||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | ||||
Net income (loss) per common share: | ||||||||||||
Basic | $ | (0.60 | ) | $ | (0.75 | ) | $ | 0.65 | ||||
Diluted | $ | (0.60 | ) | $ | (0.75 | ) | $ | 0.65 | ||||
Weighted average shares used in calculating net income (loss) per common share: | ||||||||||||
Basic | 108,175,159 | 102,062,051 | 100,160,206 | |||||||||
Diluted | 108,175,159 | 102,062,051 | 100,160,206 | |||||||||
Consolidated statements of comprehensive income (loss) | ||||||||||||
Net income (loss) | (45.3 | ) | (58.8 | ) | 177.1 | |||||||
Other comprehensive loss: | ||||||||||||
Net change on derivatives designated as cash flow hedges, net of tax | 0.5 | — | — | |||||||||
Foreign currency translation adjustments | (2.4 | ) | 1.2 | (0.4 | ) | |||||||
Comprehensive income (loss) | $ | (47.2 | ) | $ | (57.6 | ) | $ | 176.7 |
Basic: | ||||||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | ||||
Less dividends on preferred shares | (19.1 | ) | (17.7 | ) | (62.7 | ) | ||||||
Less income allocated to preferred shareholders | — | — | (49.0 | ) | ||||||||
Net income (loss) available/allocated to common shareholders - basic | $ | (64.4 | ) | $ | (76.5 | ) | $ | 65.4 | ||||
Diluted: | ||||||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | ||||
Less dividends on preferred shares | (19.1 | ) | (17.7 | ) | (62.7 | ) | ||||||
Less income allocated to preferred shareholders | — | — | (49.0 | ) | ||||||||
Net income (loss) available/allocated to common shareholders - diluted | $ | (64.4 | ) | $ | (76.5 | ) | $ | 65.4 |
Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated other comprehensive (loss) | Total | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance at January 1, 2016 | 113,259,408 | $ | 1.1 | (5,543,972 | ) | $ | (52.7 | ) | $ | 322.5 | $ | (481.8 | ) | $ | (2.5 | ) | $ | (213.3 | ) | |||||||||||
Share-based compensation expense | — | — | — | — | 30.2 | — | — | 30.2 | ||||||||||||||||||||||
Deferred tax asset write off including shortfall of $3.5 million | — | — | — | — | (10.6 | ) | — | — | (10.6 | ) | ||||||||||||||||||||
Issuance of common stock related to share-based compensation plans | 3,071,876 | 0.1 | — | — | (0.1 | ) | — | — | — | |||||||||||||||||||||
Exercise of vested stock options | 94,240 | — | — | — | 0.2 | — | — | 0.2 | ||||||||||||||||||||||
Beneficial conversion feature | — | — | — | — | 48.3 | — | — | 48.3 | ||||||||||||||||||||||
Issuance of stock warrants | — | — | — | — | 21.4 | — | — | 21.4 | ||||||||||||||||||||||
Dividends paid/accrued dividends | — | — | — | — | (14.4 | ) | — | — | (14.4 | ) | ||||||||||||||||||||
Deemed preferred stock dividend | — | — | — | — | (48.3 | ) | — | — | (48.3 | ) | ||||||||||||||||||||
Treasury stock purchases | — | — | (4,222,010 | ) | (2.5 | ) | — | — | — | (2.5 | ) | |||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | (0.4 | ) | (0.4 | ) | ||||||||||||||||||||
Net income | — | — | — | — | — | 177.1 | — | 177.1 | ||||||||||||||||||||||
Balance at December 31, 2016 | 116,425,524 | 1.2 | (9,765,982 | ) | (55.2 | ) | 349.2 | (304.7 | ) | (2.8 | ) | (12.3 | ) | |||||||||||||||||
Impact of adoption of Topic 606 | — | — | — | — | — | 113.4 | — | 113.4 | ||||||||||||||||||||||
Impact of adoption of ASU 2016-09 | — | — | — | — | 1.5 | (0.9 | ) | — | 0.6 | |||||||||||||||||||||
Adjusted balance at January 1, 2017 | 116,425,524 | 1.2 | (9,765,982 | ) | (55.2 | ) | 350.7 | (192.2 | ) | (2.8 | ) | 101.7 | ||||||||||||||||||
Share-based compensation expense | — | — | — | — | 11.2 | — | — | 11.2 | ||||||||||||||||||||||
Issuance of common stock related to share-based compensation plans | 155,535 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Exercise of vested stock options | 69,329 | — | — | — | 0.2 | — | — | 0.2 | ||||||||||||||||||||||
Dividends paid/accrued on preferred stock | — | — | — | — | (17.7 | ) | — | — | (17.7 | ) | ||||||||||||||||||||
Acquisition of treasury stock related to equity award plans | — | — | (1,640,005 | ) | (4.4 | ) | — | — | — | (4.4 | ) | |||||||||||||||||||
Treasury stock purchases and forfeitures | — | — | (834,440 | ) | — | — | — | — | — | |||||||||||||||||||||
Reclassification of excess share-based compensation | — | — | — | — | (6.5 | ) | 6.5 | — | — | |||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | — | 1.2 | 1.2 | ||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | (58.8 | ) | — | (58.8 | ) | ||||||||||||||||||||
Balance at December 31, 2017 | 116,650,388 | 1.2 | (12,240,427 | ) | (59.6 | ) | 337.9 | (244.5 | ) | (1.6 | ) | 33.4 | ||||||||||||||||||
Share-based compensation expense | — | — | — | — | 17.4 | — | — | 17.4 | ||||||||||||||||||||||
Reclassification of equity award | — | — | — | — | 1.3 | — | — | 1.3 | ||||||||||||||||||||||
Issuance of common stock related to share-based compensation plans | 323,964 | — | — | — | — | — | — | — | ||||||||||||||||||||||
Issuance of common stock and stock warrants | 4,665,594 | — | — | — | 19.2 | — | — | 19.2 | ||||||||||||||||||||||
Exercise of vested stock options | 1,713,710 | — | — | — | 4.3 | — | — | 4.3 | ||||||||||||||||||||||
Dividends paid/accrued on preferred stock | — | — | — | — | (19.1 | ) | — | — | (19.1 | ) | ||||||||||||||||||||
Acquisition of treasury stock related to equity award plans | — | — | (499,069 | ) | (3.0 | ) | — | — | — | (3.0 | ) | |||||||||||||||||||
Forfeitures | — | — | (72,259 | ) | — | — | — | — | — | |||||||||||||||||||||
Net change on derivatives designated as cash flow hedges, net of tax of $0.2 | — | — | — | — | — | — | 0.5 | 0.5 | ||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | — | — | (2.4 | ) | (2.4 | ) | ||||||||||||||||||||
Net (loss) income | — | — | — | — | — | (45.3 | ) | — | (45.3 | ) | ||||||||||||||||||||
Balance at December 31, 2018 | 123,353,656 | $ | 1.2 | (12,811,755 | ) | $ | (62.6 | ) | $ | 361.0 | $ | (289.8 | ) | $ | (3.5 | ) | $ | 6.3 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Operating activities | ||||||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | ||||
Adjustments to reconcile net income (loss) to net cash used in operations: | ||||||||||||
Depreciation and amortization | 38.8 | 16.3 | 10.2 | |||||||||
Amortization of debt issuance costs | 1.5 | — | — | |||||||||
Share-based compensation | 18.4 | 10.7 | 29.8 | |||||||||
Loss on disposal | 0.4 | 0.2 | 0.2 | |||||||||
Provision for doubtful accounts | 0.8 | 0.3 | — | |||||||||
Deferred income taxes | (14.0 | ) | 29.7 | 121.8 | ||||||||
Reimbursed tenant improvements | — | — | 1.4 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable and related party accounts receivable | (39.1 | ) | (13.0 | ) | 4.4 | |||||||
Prepaid expenses and other assets | (17.0 | ) | (2.6 | ) | (9.7 | ) | ||||||
Accounts payable | (3.0 | ) | (0.3 | ) | 1.2 | |||||||
Accrued compensation and benefits | 31.9 | 12.9 | 15.7 | |||||||||
Other liabilities | 9.8 | 1.5 | 1.1 | |||||||||
Customer liabilities and customer liabilities - related party | 35.1 | 24.0 | (440.1 | ) | ||||||||
Net cash provided by (used in) operating activities | 18.3 | 20.9 | (86.9 | ) | ||||||||
Investing activities | ||||||||||||
Purchases of property, equipment, and software | (33.5 | ) | (33.6 | ) | (12.6 | ) | ||||||
Proceeds from maturation of short-term investments | — | — | 1.0 | |||||||||
Acquisition of Intermedix, net of cash acquired | (462.8 | ) | — | — | ||||||||
Net cash used in investing activities | (496.3 | ) | (33.6 | ) | (11.6 | ) | ||||||
Financing activities | ||||||||||||
Series A convertible preferred stock and warrant issuance, net of issuance costs | — | — | 178.7 | |||||||||
Issuance of senior secured debt, net of discount and issuance costs | 253.1 | — | — | |||||||||
Issuance of subordinated notes, net of discount and issuance costs | 105.5 | — | — | |||||||||
Payment of debt principal | (1.3 | ) | — | — | ||||||||
Payment of debt issuance costs related to the Senior Revolver | (0.4 | ) | — | — | ||||||||
Issuance of common stock and stock warrants, net of issuance costs | 19.2 | — | — | |||||||||
Exercise of vested stock options | 4.3 | 0.2 | 0.2 | |||||||||
Purchase of treasury stock | — | (2.5 | ) | (0.4 | ) | |||||||
Shares withheld for taxes | (3.0 | ) | (1.9 | ) | (2.0 | ) | ||||||
Net cash provided by (used in) financing activities | 377.4 | (4.2 | ) | 176.5 | ||||||||
Effect of exchange rate changes in cash | (0.7 | ) | 0.6 | (0.3 | ) | |||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (101.3 | ) | (16.3 | ) | 77.7 | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 166.4 | 182.7 | 105.0 | |||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 65.1 | $ | 166.4 | $ | 182.7 | ||||||
Supplemental disclosures of cash flow information | ||||||||||||
Accrued dividends payable to Preferred Stockholders | $ | 4.9 | $ | 4.5 | $ | 4.2 | ||||||
Accrued and other liabilities related to purchases of property, equipment and software | $ | 19.6 | $ | 1.1 | $ | 2.5 | ||||||
Accounts payable related to purchases of property, equipment and software | $ | 0.9 | $ | 1.4 | $ | 2.0 | ||||||
Interest paid | $ | 23.4 | $ | — | $ | — | ||||||
Income taxes paid | $ | (3.3 | ) | $ | (1.6 | ) | $ | (1.2 | ) | |||
Income taxes refunded | $ | 0.5 | $ | 3.5 | $ | 0.7 |
Buildings and land | 39 years and indefinite | |
Computers and other equipment | 3 to 5 years | |
Leasehold improvements | Shorter of 10 years or lease term | |
Office furniture | 5 years | |
Software | 3 to 5 years |
• | Level 1: Observable inputs such as quoted prices in active markets for identical assets and liabilities; |
• | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and |
• | Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
December 31, 2018 | ||||||||||||||||||||
Book Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
Liabilities: | ||||||||||||||||||||
Senior Term Loan (1) | $ | 253.0 | $ | 264.6 | $ | — | $ | 264.6 | $ | — | ||||||||||
Notes (2) | $ | 105.7 | $ | 109.6 | $ | — | $ | 109.6 | $ | — |
Purchase Price Allocation | ||||
Total purchase consideration | $ | 469.2 | ||
Allocation of consideration to assets acquired and liabilities assumed: | ||||
Cash, cash equivalents, and restricted cash | $ | 6.4 | ||
Accounts receivable | 35.5 | |||
Prepaid expenses and other current assets | 11.6 | |||
Property, equipment and software | 25.4 | |||
Intangible assets | 191.1 | |||
Goodwill | 254.8 | |||
Other assets | 0.3 | |||
Accounts payable | (6.4 | ) | ||
Current portion of customer liabilities | (8.6 | ) | ||
Accrued compensation and benefits | (7.7 | ) | ||
Other accrued expenses | (6.2 | ) | ||
Deferred income tax liabilities | (27.0 | ) | ||
Net assets acquired | $ | 469.2 |
Year Ended December 31, | ||||||||
2018 | 2017 | |||||||
Net services revenue | $ | 938.5 | $ | 642.8 | ||||
Net income (loss) | $ | (57.8 | ) | $ | (74.7 | ) |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Beginning balance | $ | 363 | $ | 66 | |||
Provision (recoveries) | 754 | 304 | |||||
Write-offs | (3 | ) | (7 | ) | |||
Ending balance | $ | 1,114 | $ | 363 |
December 31, 2018 | December 31, 2017 | |||||||
Buildings and land | $ | 4.6 | $ | — | ||||
Computer and other equipment | 48.6 | 28.7 | ||||||
Leasehold improvements | 27.9 | 22.3 | ||||||
Software | 85.9 | 44.5 | ||||||
Office furniture | 9.7 | 7.4 | ||||||
Property, equipment and software, gross | 176.7 | 102.9 | ||||||
Less accumulated depreciation and amortization | (81.5 | ) | (54.6 | ) | ||||
Property, equipment and software, net | $ | 95.2 | $ | 48.3 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cost of services | $ | 23.9 | $ | 14.5 | $ | 9.5 | ||||||
Selling, general and administrative | 4.3 | 1.8 | 0.7 | |||||||||
Total depreciation and amortization | $ | 28.2 | $ | 16.3 | $ | 10.2 |
December 31, 2018 | ||||||||||||||
Weighted Average Useful Life | Gross Carrying Value | Accumulated Amortization | Net Book Value | |||||||||||
Customer relationships | 17 years | $ | 160.9 | $ | (6.1 | ) | $ | 154.8 | ||||||
Tradename | 1 year | 1.1 | (1.1 | ) | — | |||||||||
Technology | 6 years | 26.8 | (2.9 | ) | 23.9 | |||||||||
Favorable leasehold interests | Life of lease | 2.3 | (0.5 | ) | 1.8 | |||||||||
Total intangible assets | $ | 191.1 | $ | (10.6 | ) | $ | 180.5 |
Valuation Methodology | ||
Customer relationships | Income approach to derive the present value of future cash flows from customer relationship. | |
Tradename | Relief from royalty method was utilized to determine the present value of savings from owning the asset. | |
Technology | The cost, market, and income approaches were used. • Cost approach - value is based on the current technology cost. • Market approach - value is based on sales of similar technologies. • Income approach - value based on identifiable discrete cash flows related to the technology. | |
Favorable leasehold interests | Income approach to derive the present value of the market versus contractual rent. |
2019 | $ | 14.3 | ||
2020 | 14.2 | |||
2021 | 14.2 | |||
2022 | 14.2 | |||
2023 | 14.2 | |||
Thereafter | 109.4 | |||
Total | $ | 180.5 |
Goodwill | ||||
Balance as of December 31, 2017 | $ | — | ||
Acquisitions | 254.8 | |||
Balance as of December 31, 2018 | $ | 254.8 |
Year Ended December 31, | ||||||||
2018 | 2017 | |||||||
Net operating fees | $ | 760.2 | $ | 374.8 | ||||
Incentive fees | 38.3 | 29.0 | ||||||
Other | 70.0 | 46.0 | ||||||
Net services revenue | $ | 868.5 | $ | 449.8 |
December 31, 2018 | December 31, 2017 | |||||
Receivables (1) | $ | 97.4 | $ | 23.6 | ||
Contract assets | 1.2 | — | ||||
Contract liabilities | 22.3 | 15.5 |
December 31, 2018 | ||||||||
Contract assets | Contract liabilities | |||||||
Revenue recognized that was included in the contract liability balance at the beginning of the period | $ | — | $ | 51.8 | ||||
Increases due to cash received, excluding amounts recognized as revenue during the period | — | 5.8 | ||||||
Acquisitions | 1.2 | 2.1 |
Net operating fees | Incentive fees | Other | |||||||||
2019 | $ | 58.1 | $ | 14.6 | $ | 4.0 | |||||
2020 | 15.1 | — | 3.8 | ||||||||
2021 | 8.7 | — | 3.8 | ||||||||
2022 | 4.2 | — | 3.8 | ||||||||
Thereafter | 2.9 | — | 11.9 | ||||||||
Total | $ | 89.0 | $ | 14.6 | $ | 27.3 |
December 31, | December 31, | ||||||
2018 | 2017 | ||||||
Accrued service costs, current (1) | $ | 51.0 | $ | 23.7 | |||
Collections payable to clients, current | 9.1 | — | |||||
Refund liabilities, current | 0.6 | 0.5 | |||||
Deferred revenue (contract liabilities), current | 5.1 | 4.0 | |||||
Current portion of customer liabilities (1) | 65.8 | 28.2 | |||||
Refund liabilities, non-current | 0.4 | — | |||||
Deferred revenue (contract liabilities), non-current | 17.3 | 11.5 | |||||
Non current portion of customer liabilities (1) | 17.7 | 11.5 | |||||
Total customer liabilities | $ | 83.5 | $ | 39.7 |
December 31, 2018 | ||||
Senior Revolver | $ | — | ||
Senior Term Loan | 268.7 | |||
Notes (primarily with related parties) | 110.0 | |||
Unamortized discount and issuance costs | (20.0 | ) | ||
Total debt | 358.7 | |||
Less: Current maturities | (2.7 | ) | ||
Total long-term debt | $ | 356.0 |
Scheduled Maturities | ||||
2019 | $ | 2.7 | ||
2020 | 2.7 | |||
2021 | 2.7 | |||
2022 | 2.7 | |||
2023 | 2.7 | |||
Thereafter | 365.2 | |||
Total | $ | 378.7 |
Year Ended December 31, | ||||||
2018 | 2017 | 2016 | ||||
Expected dividend yield | —% | —% | —% | |||
Risk-free interest rate | 2.3% to 2.98% | 1.8% to 2.38% | 1.2% to 2.06% | |||
Expected volatility | 40% to 45% | 40% to 45% | 45% to 50% | |||
Expected term (in years) | 2.59 to 6.25 | 2.34 to 6.29 | 5.96 to 6.30 | |||
Forfeitures | —% | —% | 5.68% annually |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Share-Based Compensation Expense Allocation Details: | ||||||||||||
Cost of services | $ | 5.8 | $ | 4.5 | $ | 6.1 | ||||||
Selling, general and administrative | 12.4 | 6.1 | 22.0 | |||||||||
Other | 0.2 | 0.1 | 1.8 | |||||||||
Total share-based compensation expense (1) | $ | 18.4 | $ | 10.7 | $ | 29.9 |
Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in millions) | ||||||||||
Outstanding at January 1, 2016 | 15,260,266 | $ | 10.23 | 7.0 | $ | 0.3 | |||||||
Granted | 11,186,107 | 2.39 | |||||||||||
Exercised | (94,240 | ) | 1.93 | ||||||||||
Canceled/forfeited | (5,933,526 | ) | 9.22 | ||||||||||
Outstanding at December 31, 2016 | 20,418,607 | 6.26 | 7.9 | $ | 0.3 | ||||||||
Granted | 3,683,406 | 3.34 | |||||||||||
Exercised | (69,329 | ) | 2.38 | ||||||||||
Canceled/forfeited | (6,289,718 | ) | 9.01 | ||||||||||
Outstanding at December 31, 2017 | 17,742,966 | 4.70 | 7.9 | $ | 23.7 | ||||||||
Granted | 274,162 | 6.51 | |||||||||||
Exercised | (1,713,710 | ) | 2.54 | ||||||||||
Canceled/forfeited | (2,418,948 | ) | 2.60 | ||||||||||
Outstanding at December 31, 2018 | 13,884,470 | 5.36 | 6.6 | $ | 49.2 | ||||||||
Outstanding, vested and exercisable at December 31, 2016 | 7,993,168 | $ | 11.34 | 5.3 | $ | — | |||||||
Outstanding, vested and exercisable at December 31, 2017 | 5,778,376 | $ | 8.87 | 5.5 | $ | 17.7 | |||||||
Outstanding, vested and exercisable at December 31, 2018 | 7,712,264 | $ | 7.37 | 5.4 | $ | 17.7 |
Shares | Weighted- Average Grant Date Fair Value | ||||||
Outstanding and unvested at January 1, 2016 | 9,255,932 | $ | 4.24 | ||||
Granted | 3,071,876 | 2.58 | |||||
Vested | (3,361,336 | ) | 4.37 | ||||
Forfeited | (3,103,760 | ) | 4.69 | ||||
Outstanding and unvested at December 31, 2016 | 5,862,712 | $ | 3.01 | ||||
Granted | — | — | |||||
Vested | (2,675,782 | ) | 3.50 | ||||
Forfeited | (834,440 | ) | 1.52 | ||||
Outstanding and unvested at December 31, 2017 | 2,352,490 | $ | 3.03 | ||||
Granted | — | — | |||||
Vested | (1,184,687 | ) | 3.07 | ||||
Forfeited | (72,259 | ) | 3.24 | ||||
Outstanding and unvested at December 31, 2018 | 1,095,544 | $ | 3.02 |
Shares | Weighted- Average Grant Date Fair Value | ||||||
Outstanding and unvested at January 1, 2016 | — | $ | — | ||||
Granted | 1,361,794 | 2.35 | |||||
Vested | — | — | |||||
Forfeited | (15,020 | ) | 2.35 | ||||
Outstanding and unvested at December 31, 2016 | 1,346,774 | $ | 2.35 | ||||
Granted | 285,527 | 2.96 | |||||
Vested | (155,535 | ) | 2.35 | ||||
Forfeited | (293,266 | ) | 2.35 | ||||
Outstanding and unvested at December 31, 2017 | 1,183,500 | $ | 2.50 | ||||
Granted | 441,849 | 7.99 | |||||
Vested | (323,964 | ) | 2.48 | ||||
Forfeited | (174,704 | ) | 3.49 | ||||
Outstanding and unvested at December 31, 2018 | 1,126,681 | $ | 4.50 |
Shares | Weighted- Average Grant Date Fair Value | ||||||
Outstanding and unvested at January 1, 2017 | — | $ | — | ||||
Granted | 4,894,817 | 3.35 | |||||
Vested | — | — | |||||
Forfeited | (108,917 | ) | 2.38 | ||||
Outstanding and unvested at December 31, 2017 | 4,785,900 | $ | 3.37 | ||||
Granted | 1,472,677 | 8.30 | |||||
Vested | — | — | |||||
Forfeited | (1,648,129 | ) | 3.91 | ||||
Outstanding and unvested at December 31, 2018 | 4,610,448 | $ | 4.72 |
Year Ended December 31, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Severance and employee benefits | $ | 2.3 | $ | 0.3 | $ | 3.5 | |||||
Facility charges | 0.1 | — | 1.1 | ||||||||
Non-cash share based compensation | — | 0.1 | 1.8 | ||||||||
Transaction fees (1) | — | — | 12.7 | ||||||||
Restatement costs | — | — | 1.2 | ||||||||
Acquisition related costs (2) | 19.7 | 3.1 | — | ||||||||
Transitioned employees restructuring expense (3) | 4.3 | 1.2 | — | ||||||||
Digital Transformation Office (4) | 3.6 | — | — | ||||||||
Other | 0.4 | — | 0.5 | ||||||||
Total other | $ | 30.4 | $ | 4.7 | $ | 20.8 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Domestic | $ | (65.5 | ) | $ | (33.9 | ) | $ | 292.4 | ||||
Foreign | 8.8 | 6.6 | 5.8 | |||||||||
Total income (loss) before income taxes | $ | (56.7 | ) | $ | (27.3 | ) | $ | 298.2 |
Current | Deferred | Total | ||||||||||
Year Ended December 31, 2016 | ||||||||||||
U.S. Federal | $ | (0.2 | ) | $ | 95.6 | $ | 95.4 | |||||
State & Local | — | 25.0 | 25.0 | |||||||||
Foreign | 1.1 | (0.4 | ) | 0.7 | ||||||||
$ | 0.9 | $ | 120.2 | $ | 121.1 | |||||||
Year Ended December 31, 2017 | ||||||||||||
U.S. Federal | $ | 0.1 | $ | 32.4 | $ | 32.5 | ||||||
State & Local | 0.2 | (2.3 | ) | (2.1 | ) | |||||||
Foreign | 1.5 | (0.4 | ) | 1.1 | ||||||||
$ | 1.8 | $ | 29.7 | $ | 31.5 | |||||||
Year Ended December 31, 2018 | ||||||||||||
U.S. Federal | $ | — | $ | (10.3 | ) | $ | (10.3 | ) | ||||
State & Local | 0.9 | (2.6 | ) | (1.7 | ) | |||||||
Foreign | 1.9 | (1.3 | ) | 0.6 | ||||||||
$ | 2.8 | $ | (14.2 | ) | $ | (11.4 | ) |
Year Ended December 31, | |||||||||
2018 | 2017 | 2016 | |||||||
Federal statutory tax rate | 21 | % | 35 | % | 35 | % | |||
Increase in income tax rate resulting from: | |||||||||
State and local income taxes, net of federal tax benefits | 2 | % | 5 | % | 5 | % | |||
U.S. Tax Reform | (3 | )% | (140 | )% | — | % | |||
Stock-based Compensation | 3 | % | (17 | )% | — | % | |||
Other | (3 | )% | 2 | % | 1 | % | |||
Actual tax rate | 20 | % | (115 | )% | 41 | % |
As of December 31, | ||||||||
2018 | 2017 | |||||||
Deferred Tax assets: | ||||||||
Net operating loss carryforwards | $ | 60.5 | $ | 47.9 | ||||
Share-based compensation | 13.3 | 13.0 | ||||||
Accrued bonus | 8.6 | 4.0 | ||||||
Advanced billing revenue | 5.3 | 4.0 | ||||||
Other reserves | 0.7 | 0.4 | ||||||
Alternative minimum tax | 3.1 | 2.4 | ||||||
Interest expense limitation | 5.3 | — | ||||||
Other | 3.8 | 4.0 | ||||||
Deferred Rent | 4.3 | 2.9 | ||||||
Total gross deferred tax assets | 104.9 | 78.6 | ||||||
Intangible assets | (36.1 | ) | — | |||||
Fixed assets | (4.1 | ) | (1.7 | ) | ||||
Contract implementation costs | (5.1 | ) | (3.3 | ) | ||||
Less valuation allowance | (2.1 | ) | (3.1 | ) | ||||
Net deferred tax asset | $ | 57.5 | $ | 70.5 |
Preferred Stock | |||||||
Shares Issued and Outstanding | Carrying Value | ||||||
Balance at January 1, 2016 | — | $ | — | ||||
Issuance of preferred stock | 200,000 | 108.9 | |||||
Beneficial conversion feature deemed dividend | — | 48.3 | |||||
Dividends paid/accrued dividends | 10,160 | 14.4 | |||||
Balance at December 31, 2016 | 210,160 | $ | 171.6 | ||||
Dividends paid/accrued dividends | 17,323 | 17.7 | |||||
Balance at December 31, 2017 | 227,483 | $ | 189.3 | ||||
Dividends paid/accrued dividends | 18,750 | 19.1 | |||||
Balance at December 31, 2018 | 246,233 | $ | 208.4 |
Year Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Basic EPS: | ||||||||||||
Net income (loss) | $ | (45.3 | ) | $ | (58.8 | ) | $ | 177.1 | ||||
Less dividends on preferred shares | (19.1 | ) | (17.7 | ) | (62.7 | ) | ||||||
Less income allocated to preferred shareholders | — | — | (49.0 | ) | ||||||||
Net income (loss) available/(allocated) to common shareholders - basic | $ | (64.4 | ) | $ | (76.5 | ) | $ | 65.4 | ||||
Diluted EPS: | ||||||||||||
Net income (loss) | (45.3 | ) | (58.8 | ) | 177.1 | |||||||
Less dividends on preferred shares | (19.1 | ) | (17.7 | ) | (62.7 | ) | ||||||
Less income allocated to preferred shareholders | — | — | (49.0 | ) | ||||||||
Net income (loss) available/(allocated) to common shareholders - diluted | $ | (64.4 | ) | $ | (76.5 | ) | $ | 65.4 | ||||
Basic weighted-average common shares | 108,175,159 | 102,062,051 | 100,160,206 | |||||||||
Add: Effect of dilutive securities | — | — | — | |||||||||
Diluted weighted average common shares | 108,175,159 | 102,062,051 | 100,160,206 | |||||||||
Net income (loss) per common share (basic) | $ | (0.60 | ) | $ | (0.75 | ) | $ | 0.65 | ||||
Net income (loss) per common share (diluted) | $ | (0.60 | ) | $ | (0.75 | ) | $ | 0.65 |
2019 | $ | 18.1 | |
2020 | 16.5 | ||
2021 | 15.6 | ||
2022 | 12.7 | ||
2023 | 11.3 | ||
Thereafter | 34.5 | ||
Total | $ | 108.7 |
Year Ended December 31, | ||||||||||
2018 | 2017 | 2016 | ||||||||
$ | 600.1 | $ | 404.4 | $ | 461.4 |
December 31, 2018 | December 31, 2017 | ||||||
Accounts receivable, net - related party | $ | 55.2 | $ | 15.4 | |||
Accrued service costs, current | $ | 47.7 | $ | 23.7 | |||
Refund liabilities, current | 0.6 | 0.5 | |||||
Deferred revenue (contract liabilities), current | 2.8 | 2.9 | |||||
Current portion of customer liabilities | 51.1 | 27.1 | |||||
Refund liabilities, non-current | 0.4 | — | |||||
Deferred revenue (contract liabilities), non-current | 17.3 | 11.5 | |||||
Non-current portion of customer liabilities | 17.7 | 11.5 | |||||
Total customer liabilities | $ | 68.8 | $ | 38.6 |
December 31, 2018 | December 31, 2017 | |||||||
Prepaid expenses and other current assets | $ | 2.8 | $ | 1.6 | ||||
Other assets | 17.4 | 11.6 | ||||||
Total deferred contract costs | $ | 20.2 | $ | 13.2 |
Year Ended December 31, | ||||||||
2018 | 2017 | |||||||
Amount of gain (loss) recognized in other comprehensive income | $ | (0.6 | ) | $ | — | |||
Amount of gain (loss) reclassified from accumulated other comprehensive income to other income | (1.3 | ) | — |
December 31, | ||||||||||
Balance sheet location | 2018 | 2017 | ||||||||
Cash Flow Hedges: | ||||||||||
Foreign currency forward contracts | Prepaid expenses and other current assets | $ | 0.7 | $ | — | |||||
Foreign currency forward contracts | Other accrued expenses | $ | — | $ | — |
December 31, | ||||||||
2018 | 2017 | |||||||
Net assets | $ | 0.7 | $ | — | ||||
Net liabilities | — | — | ||||||
Total Fair Value | $ | 0.7 | $ | — |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Prepaid expenses | $ | 13.6 | $ | 6.6 | |||
Notes receivable | 4.0 | — | |||||
Security deposits | 4.8 | 3.3 | |||||
Other current assets | 12.4 | 3.9 | |||||
Ending balance | $ | 34.8 | $ | 13.8 |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
Accrued expenses | $ | 22.4 | $ | 14.9 | |||
Notes payable | 14.5 | — | |||||
Other | 3.9 | 1.8 | |||||
Ending balance | $ | 40.8 | $ | 16.7 |
1st Quarter Ended March 31, | 2nd Quarter Ended June 30, | 3rd Quarter Ended September, 30 | 4th Quarter Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||
Net services revenue | $ | 147.3 | $ | 86.9 | $ | 207.9 | $ | 99.4 | $ | 250.4 | $ | 123.2 | $ | 262.9 | $ | 140.3 | ||||||||||||
Total operating expenses | 158.1 | 95.4 | 225.6 | 109.6 | 256.2 | 128.3 | 259.0 | 144.0 | ||||||||||||||||||||
Income (loss) from operations | (10.8 | ) | (8.5 | ) | (17.7 | ) | (10.2 | ) | (5.8 | ) | (5.1 | ) | 3.9 | (3.7 | ) | |||||||||||||
Net income (loss) | $ | (23.3 | ) | $ | (8.3 | ) | $ | (2.9 | ) | $ | (6.7 | ) | $ | (13.4 | ) | $ | (3.6 | ) | $ | (5.7 | ) | $ | (40.2 | ) | ||||
Net income (loss) per common share | ||||||||||||||||||||||||||||
Basic | $ | (0.26 | ) | $ | (0.12 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.17 | ) | $ | (0.08 | ) | $ | (0.10 | ) | $ | (0.44 | ) | ||||
Diluted | $ | (0.26 | ) | $ | (0.12 | ) | $ | (0.07 | ) | $ | (0.11 | ) | $ | (0.17 | ) | $ | (0.08 | ) | $ | (0.10 | ) | $ | (0.44 | ) |
Exhibit Number | Description |
101 | The following materials from the R1 RCM Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018, formatted in eXtensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Income (Loss), (iii) the Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes. |
* | Management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of Form 10-K. |
+ | Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission. |
1. | Purpose |
2. | Definitions |
3. | Base Fee |
3.1 | In accordance with Section 4.8 of Addendum No. 2, the Parties have calculated the "one-time adjustment" and they agree that R1 will provide Intermountain with a one-time credit in the amount of [**] to account for the difference between (i) the total costs of operations at the Leased Spaces (as defined in Addendum No. 2), including, but not limited to, base rent, furniture fees, utilities and operating expenses, and (ii) the baseline costs and expenses associated with the Leased Spaces that were included in the Cost to Collect Numerator for the Initial Cost to Collect Factor for the period beginning April 8, 2018 through September 30, 2018. |
3.2 | Effective as of October 1, 2018, the Parties agreed that the [**] shall be [**] and the [**] shall be [**]. The new total Cost to Collect Factor shall be [**]. |
3.3 | Effective as of the Addendum Effective Date, Addendum No. 2 is hereby amended as follows: |
(a) | The Parties agree to delete Section 4.10 in its entirety and replaced it with the following: |
(b) | The Parties agree to delete Section 4.11 in its entirety and replace it with the following: |
IHC HEALTH SERVICES, INC. | R1 RCM INC. |
By: /s/Todd E Craghead Name: Todd E Craghead Title: Vice President Revenue Cycle | By: /s/ H. Jeffrey Brownwell Name: H. Jeffrey Brownwell Title: SVP |
10/8/18 | |
Subsidiary | Jurisdiction of Organization |
Accretive Health Mauritius, Inc. | Mauritius |
Advanced Data Processing, Inc. | Delaware |
Intermedix Analytics, LLC | Delaware |
Intermedix ARM, LLC | Delaware |
Intermedix Corporation | Delaware |
Intermedix Holdings, Inc. | Delaware |
Intermedix Lietuva, UAB | Lithuania |
Intermedix Midco, Inc. | Delaware |
Intermedix Office Based, LLC | Delaware |
Intermedix Physician Services, LLC | Delaware |
Intermedix Staffing, Inc. | Delaware |
Med Media, Inc. | Delaware |
Medical Consultants, Inc. | Oklahoma |
Optima (NZ) Limited | New Zealand |
Optima (US) LTD | Delaware |
Practice Support Resources, LLC | Texas |
Project Links Parent, Inc. | Delaware |
R1 RCM Global Private Limited | India |
R1 RCM India Private Limited | India |
Rover16, Inc. | Delaware |
The DeZonia Group, Inc. | Delaware |
The Optima Corporation (International) LTD | United Kingdom |
The Optima Corporation Limited | New Zealand |
The Optima Corporation PTY LTD | Australia |
1. | Registration Statement (Form S-8 No. 333-170718) pertaining to the Amended and Restated Stock Option Plan, as amended and the 2010 Stock Incentive Plan of R1 RCM Inc.; |
2. | Registration Statement (Form S-8 No. 333-206482) pertaining to the Amended and Restated 2010 Stock Incentive Plan and the Inducement Stock Option Awards of R1 RCM Inc.; and |
3. | Registration Statement (Form S-8 No. 333-215094) pertaining to the Second Amended and Restated 2010 Stock Incentive Plan of R1 RCM Inc. |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Feb. 18, 2019 |
Jun. 29, 2018 |
|
Document and Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | R1 RCM INC. | ||
Entity Central Index Key | 0001472595 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding (in shares) | 110,220,449 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 954,539,609 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 123,353,656 | 116,650,388 |
Common stock, shares outstanding (in shares) | 110,541,901 | 104,409,961 |
Treasury stock, shares (in shares) | 12,811,755 | 12,240,427 |
Redeemable Convertible Preferred Stock | ||
Preferred stock, dividend rate | 8.00% | 8.00% |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares issued (in shares) | 246,233 | 227,483 |
Preferred stock, shares outstanding (in shares) | 246,233 | 227,483 |
Preferred stock, shares authorized (in shares) | 370,000 | 370,000 |
Preferred stock, aggregate liquidation value | $ 232.0 | $ 232.0 |
Consolidated Statements of Operations and Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Statement [Abstract] | |||
Net services revenue, from related party | $ 600.1 | $ 404.4 | $ 461.4 |
Consolidated Statements of Stockholders' Equity (Deficit) (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2016 |
|
Shortfall included in deferred tax asset write-off | $ 3,500 | |
AOCI Attributable to Parent | ||
Net change on derivatives designated as cash flow hedges, tax | $ 200 |
Description of Business |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business R1 RCM Inc. (the "Company") is a leading provider of technology-enabled revenue cycle management ("RCM") services to healthcare providers, including hospitals, physicians groups, and municipal and private emergency medical service ("EMS") providers. The Company helps healthcare providers generate sustainable improvements in their operating margins and cash flows while also enhancing patient, physician and staff satisfaction for its customers. The Company achieves these results for its customers by managing healthcare providers’ revenue cycle operations, which encompass processes including patient registration, insurance and benefit verification, medical treatment documentation and coding, bill preparation and collections from patients and payers. The Company does so by deploying a unique operating model that leverages its extensive healthcare site experience, innovative technology and process excellence. The Company assists its RCM customers in managing their revenue cycle operating costs while simultaneously increasing the portion of the maximum potential services revenue they receive. Together, these benefits can generate significant and sustainable improvements in operating margins and cash flows for the Company's customers. The Company's primary service offering consists of end-to-end RCM services for integrated healthcare delivery networks, which the Company deploys through an operating partner relationship or a co-managed relationship. Under an operating partner relationship, the Company provides comprehensive revenue cycle infrastructure to providers, including all revenue cycle personnel, technology solutions and process workflow. Under a co-managed relationship, the Company leverages its customers’ existing RCM staff and processes, and supplements them with the Company's infused management, subject matter specialists, proprietary technology solutions and other resources. Under the operating partner model, the Company records higher revenue and expenses due to the fact that almost all of the revenue cycle personnel are employees of the Company and more third-party vendor contracts are controlled by the Company. Under the co-managed model, the majority of the revenue cycle personnel and more third-party vendor contracts remain with the customer and those costs are netted against the Company's co-managed revenue. For the years ended December 31, 2018 and 2017, substantially all of the Company's net operating and incentive fees from end-to-end RCM were generated under the operating partner model. The Company also offers modular services, allowing customers to engage the Company for only specific components of its end-to-end RCM service offering, such as physician advisory services ("PAS"), practice management ("PM"), and revenue capture services ("RCS"). The Company's PAS offering assists healthcare organizations in complying with payer requirements regarding whether to classify a hospital visit as an in-patient or an out-patient observation case for billing purposes. The Company's PM services offer administrative and operational support to allow healthcare providers to focus on delivering high quality patient care and outsource non-core functions to the Company. The Company's RCS offering includes charge capture, charge description master ("CDM") maintenance and pricing services that help providers ensure they are capturing the maximum net compliant revenue for services delivered. In conjunction with the acquisition of Intermedix, the Company expanded its service offering to physician groups and EMS providers. Intermedix provides RCM and PM services to primary care physician groups and hospital-based physicians in a variety of specialties including emergency medicine, hospitals, anesthesia, and others. Intermedix also provides RCM services to emergency-service providers including municipalities, private providers of emergency service as well as hospital-based emergency-services providers. Once implemented, the Company's technology solutions, processes and services are deeply embedded in its customers’ day-to-day revenue cycle operations. The Company believes its service offerings are adaptable to meet an evolving healthcare regulatory environment, technology standards and market trends. Ascension On February 16, 2016, the Company entered into a long-term strategic partnership with Ascension Health Alliance, the parent of the Company's largest customer and the nation’s largest Catholic and non-profit health system, and TowerBrook Capital Partners ("TowerBrook"), an investment management firm (the "Transaction"). As part of the Transaction, the Company amended and restated its Master Professional Services Agreement ("A&R MPSA") with Ascension Health ("Ascension") effective February 16, 2016 with a term of ten years. Pursuant to the A&R MPSA and with certain limited exceptions, the Company is the exclusive provider of RCM services and PAS with respect to acute care services provided by the hospitals affiliated with Ascension that execute supplement agreements with the Company. Intermountain On January 23, 2018, the Company entered into an Amended and Restated Services Agreement (the “Intermountain Services Agreement”) with IHC Health Services, Inc. (“Intermountain”) having a 10-year term. Pursuant to the Intermountain Services Agreement, the Company provides revenue cycle management services to Intermountain hospitals and medical group providers under the operating partner model. In addition, the Company provides revenue cycle management services to Intermountain’s homecare, hospice and palliative care, durable medical equipment and infusion therapy business. In conjunction with the execution of the Intermountain Services Agreement, the Company entered into a Securities Purchase Agreement (the “Intermountain Purchase Agreement”) with Intermountain, pursuant to which the Company sold to Intermountain, in private placements under the Securities Act of 1933, as amended (the "Securities Act"), (i) 4,665,594 shares of common stock and (ii) a warrant to acquire up to 1,500,000 shares of Common Stock at an initial exercise price of $6.00 per share, on the terms and subject to the conditions set forth in the warrant, for an aggregate purchase price of $20 million. Intermedix On May 8, 2018, the Company completed the acquisition of Intermedix Holdings, Inc. ("Intermedix") through the merger of Project Links Merger Sub, Inc. (“Merger Sub”), a wholly-owned indirect subsidiary of the Company, with and into Intermedix, with Intermedix surviving the merger as a wholly-owned indirect subsidiary of the Company (the “Acquisition”). The purchase price for the Acquisition was $460 million, subject to customary adjustments for cash, debt, transaction expenses, and normalized working capital. The Company funded the purchase price for the Acquisition and the Company’s associated transaction expenses with a combination of cash on hand and the incurrence of indebtedness. Intermedix is one of the largest providers of RCM and PM services to physician groups and EMS providers in the United States ("U.S."). Intermedix has a diverse customer base of approximately 700 customers and 2,200 employees located in offices within the U.S., Lithuania, the United Kingdom, and New Zealand. Refer to Note 5, Acquisition, and Note 12, Debt, for further discussion on the Intermedix Acquisition and related financing. |
Summary of Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements include the assets, liabilities and results of operations of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with the United States generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results can differ from those estimates. Beginning in 2017, the Company changed the presentation in its financial statements to be stated in millions instead of thousands. Therefore, previously reported amounts may differ due to rounding. Segments Reporting segments are identified as components of an enterprise about which separate discrete financial information is available and is evaluated by the chief operating decision maker, or decision-making group, relating to resource allocation and performance assessments. All of the Company’s significant operations are organized around the single business of providing revenue cycle operations for healthcare providers. The Company views its operations and manages its business as one operating and reporting segment. The Company acquired Intermedix on May 8, 2018 with the intent to integrate Intermedix into the Company's primary service offering consisting of end-to-end RCM. The integration of the operations of Intermedix into the Company's end-to-end RCM operations is on-going as of December 31, 2018. Revenue Recognition Periods commencing January 1, 2017 The Company's primary source of revenue is its end-to-end RCM services fees. The Company also generates revenue through modular RCM services, where customers will engage the Company for only specific components of its end-to-end RCM service offering on a fixed-fee or transactional basis. Revenue Cycle Management RCM services fees are primarily variable and performance related, and are generally viewed as the consideration earned in satisfaction of a single performance obligation which is considered a series. Variable consideration for end-to-end RCM services are allocated to and recognized over the related time period as the amounts reflect the consideration the Company is entitled to and relate specifically to the Company’s efforts to satisfy its performance obligation. Fees for physician group and EMS provider RCM services are variable consideration contingent on customer collections, and inputs to the Company’s revenue estimates typically include historical service fees and historical customer collection amounts. RCM services fees consist of net operating fees, incentive fees, and other fees. Net Operating Fees The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; plus iii) fees accrued for physician group and EMS providers' RCM services. The Company recognizes revenue related to net operating fees ratably as the performance obligation for the RCM services is satisfied. Base fees are typically billed in advance of the quarter and paid in three monthly payments as the entity performs and the customer simultaneously receives and consumes the benefits of the services provided. The costs of customers’ revenue cycle operations, which the Company pays pursuant to its RCM agreements, are accrued based on the service period. RCM services fees for physician groups and EMS providers are invoiced on a monthly basis and payment terms are typically 30 days. Incentive Fees The Company recognizes revenue related to incentive fees ratably as the performance obligation for RCM services is satisfied, to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Incentive fees are structured to reflect quarterly or annual performance and are evaluated on a contract-by-contract basis. Incentive fees are typically billed and paid on a quarterly basis. RCM Other The Company recognizes revenue related to other RCM fees as RCM services are provided. These services typically consist of the Company's modular RCM services offering, which consists of an obligation to provide services for a specific component of its end-to-end RCM service offering. Fees are typically variable in nature with the entire amount being included in revenue in the month of service. The customer simultaneously receives and consumes the benefits provided by the services and the fees are typically billed on a monthly basis with payment terms of up to 30 days. To the extent that certain service fees are fixed and not subject to refund, adjustment, or concession, these fees are generally recognized into revenue ratably as the performance obligation is satisfied. The Company recognizes revenue from PAS in the period in which the service is performed. The Company’s PAS arrangements typically consist of an obligation to provide specific services to customers on an if and when needed basis. These services are provided under a fixed price per unit arrangement. These contracts are evaluated on a contract-by-contract basis. Fees for the Company's PAS arrangements are typically billed on a monthly basis with 30 to 60 day payment terms. PM services arrangements include a single performance obligation, constituting a series, to manage and administer various non-clinical aspects of a customer's physician practice, which may be comprised of numerous physical office locations. Consideration for PM services is typically variable in nature and allocated to and recognized over the related time period as the amounts reflect the consideration the Company is entitled to and relate specifically to the Company’s effort to satisfy its performance obligation. PM services fees are invoiced on a monthly basis and payment terms are typically 30 days. Bundled Services Modular RCM services may be sold separately or bundled in a contract. End-to-end RCM services are typically sold separately but may be bundled with PAS. PAS are commonly sold separately. The typical length of an end-to-end RCM contract is two to ten years (subject to the parties' respective termination rights) but varies from customer to customer. PAS and modular RCM agreements generally vary in length between one and three years. For bundled arrangements, the Company accounts for individual services as a separate performance obligation if a service is separately identifiable from other items in the bundled arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The transaction price is allocated between separate services in a bundle based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells its RCM, PAS, PM, or other modular services. PAS are provided at a customer’s election but do not represent material rights as the services are priced at standalone selling price throughout the life of the agreement. Periods prior to January 1, 2017 Revenue is generally recognized when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Net service fees, as reported in the consolidated statement of operations and comprehensive income (loss), consist of: (a) RCM services fees and (b) professional service fees earned on a fixed fee, transactional fee or time and materials basis. The Company’s primary source of revenue is RCM services fees. RCM services fees are primarily contingent, but along with fixed fees are generally viewed as one deliverable. To the extent that certain RCM services fees are fixed and not subject to refund, adjustment or concession, such fees are generally recognized as revenue on a straight-line basis over the term of the contract. On a limited basis, the Company enters into contracts with multiple accounting elements which may include a combination of fixed fee or transactional fee elements. The selling price of each element is determined by using management's best estimate of selling price. Revenues are recognized in accordance with the accounting policies for the separate elements. RCM services fees that are contingent in nature are recognized as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or other contractual agreement event. Revenue is recognized for RCM services fees upon the contract reaching the end of its stated term (such that the contractual relationship will not continue in its current form) to the extent that: (i) cash has been received for invoiced fees and (ii) there are no disputes at the conclusion of the term of the contract. If fees or services are disputed by a customer at the end of a contract, a settlement agreement entered into with the customer triggers revenue recognition. An other "contractual agreement event" occurs when a renewal, amendment to an existing contract, or other settlement agreement is executed in which the parties reach agreement on prior fees. Revenue is recognized up to the amount covered by such agreements. RCM services fees consist of the following contingent fees: (i) Net Operating Fees and (ii) Incentive Fees. Net Operating Fees The Company generates net operating fees to the extent the Company is able to assist customers in reducing the cost of revenue cycle operations. In limited cases, the Company earns a fixed fee instead of a fee based on the mechanics described below. The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; less iii) any cost savings the Company shares with customers. Net operating fees are recorded as deferred customer billings until the Company recognizes revenue for a customer contract at the end of a contract or reaches an "other contractual agreement event". The amount of unpaid costs of customers’ revenue cycle operations and shared cost savings are reported as accrued service costs within customer liabilities in the consolidated balance sheets. Incentive Fees The Company generates revenue in the form of performance-based fees when the Company improves the customers’ financial or operational metrics. These performance metrics vary by customer contract. However, certain contracts contain a contract-to-date performance metric that is not resolved until the end of the term of the contract. Cost of Services Costs associated with generating the Company’s net services revenue, including the cost of operating its shared services centers, are expensed as incurred, with the exception of deferred contract costs, which are discussed further in Note 21. Cost of services consist of (i) infused management, on-site revenue cycle employees and technology costs, (ii) shared services costs and (iii) other costs to perform physician advisory services. Infused management, on-site revenue cycle employees and technology costs consist primarily of wages, bonuses, benefits, share-based compensation, travel and other costs associated with employees who are assigned to customer sites to help manage the Company’s customers’ revenue cycle operations. The other significant portion of such expenses is an allocation of the costs associated with maintaining, improving and deploying our integrated proprietary technology suite. Shared services costs relate to the Company’s shared services centers in the U.S. and internationally that perform patient scheduling and pre-registration, medical transcription, cash posting, reconciliation of payments to billing records, patient follow-up and Medicaid eligibility determination for our customers. The Company incurs expenses related to salaries and benefits for employees in its shared services centers and non-payroll costs associated with operating its shared services centers. Other expenses consist of costs related to managing other services. These expenses consist primarily of wages, bonuses, benefits, share-based compensation and facilities costs. Comprehensive Income (Loss) Comprehensive income (loss) is the net income (loss) of the Company combined with other changes in stockholders’ equity (deficit) not involving ownership interest changes. For the Company, such changes are foreign currency translation adjustments and changes in derivatives designated as cash flow hedges. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Restricted Cash Equivalents In 2018 and 2017, restricted cash equivalents represent the amount of cash or certificate of deposits ("CDs") that the Company is unable to access for operational purposes as it collateralizes certain Company expenses or derivatives. At December 31, 2018 and 2017, the Company had $2.3 million and $1.5 million in restricted cash equivalents, respectively. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is comprised of unpaid balances pertaining to modular services and end-to-end RCM customers. The Company maintains an estimated allowance for doubtful accounts to reduce its accounts receivable to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay, the length of time a balance has been outstanding, input from key customer resources assigned to each customer and the status of any ongoing operations with each applicable customer. Property, Equipment and Software Property, equipment and software are stated at cost, and related depreciation and amortization are calculated on the straight-line method over the estimated useful lives of the assets. The Company capitalizes qualifying internal and third-party costs and hardware and software costs related to the Company’s software development activities in accordance with ASC 350-40. The Company amortizes the capitalized software development costs over their estimated life on a straight-line basis. The major classifications of property, equipment and software and their expected useful lives are as follows:
Goodwill Goodwill represents the difference between the purchase price of acquired companies and the related fair value of the net assets acquired, which is accounted for by the acquisition method of accounting. The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying value. The goodwill impairment test consists of a qualitative assessment of impairment indicators, followed by, if necessary, a quantitative assessment comparing the carrying amount to the reporting unit's fair value. To the extent that the carrying value exceeds the fair value, and impairment charge would be recorded. The Company has determined there to be one reporting unit, end-to-end RCM, consistent with its operating segment. As part of its annual impairment analysis, the Company performed a qualitative assessment and determined there was no impairment of goodwill for the year ended December 31, 2018. Impairment of Long-Lived Assets Property, equipment, software and other acquired intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If circumstances require a long-lived asset or asset group be reviewed for possible impairment, the Company first compares undiscounted cash flows expected to be generated by each asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying value exceeds the fair value. There was no material impairment of property, equipment, software or other acquired intangible assets for the years ended December 31, 2018, 2017, and 2016. Accrued Compensation and Benefits Accrued compensation and benefits consists of accrued payroll, bonus, paid time off, health benefits, severance, and compensation and benefits related taxes. Total accrued payroll and bonus was $51.1 million and $25.1 million at December 31, 2018 and 2017, respectively. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using current tax laws and enacted tax rates in effect for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets if, based upon the weight of all available evidence, both positive and negative, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the relevant tax authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest amount of benefit that has a greater than 50% percent likelihood of being realized upon ultimate settlement. Interest and penalties relating to income taxes are recognized in our income tax provision in the consolidated statements of operations and comprehensive income (loss). Legal and Other Contingencies In the normal course of business, the Company is subject to regulatory investigations or legal proceedings, as well as demands, claims and threatened litigation. The Company records an estimated loss for any claim, lawsuit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of the probability and whether the loss can be reasonably estimated. Actual expenses could differ from such estimates. Foreign Currency Translation and Transaction Gains (Losses) Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where such local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense accounts are translated at average exchange rates during the year which approximates the rates in effect at the transaction dates. The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss). Share-Based Compensation Expense The Company determines the expense for all employee share-based compensation awards by estimating their fair value and recognizing such value as an expense, on a ratable basis, in the consolidated financial statements over the requisite service period in which the employees earn the awards. The fair value of performance and service condition stock options is calculated using the Black-Scholes option pricing model and, for market condition stock awards, the fair value is estimated using Monte Carlo simulations. As of January 1, 2017, the Company adopted ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). The Company elected to change its accounting policy to account for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded. Prior to January 1, 2017, the Company applied an estimated forfeiture rate derived from its historical data and estimates of the likely future actions of option holders when recognizing the share-based compensation expense of the options. Excess tax benefits and shortfalls for share-based payments are now included in operating activities rather than in financing activities. The changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted. To determine the fair value of a share-based award using the Black-Scholes option pricing model, the Company makes assumptions regarding the risk-free interest rate, expected future volatility and expected life of the award. These inputs are subjective and generally require significant analysis and judgment to develop. The Company aggregates all employees into one pool based on the grant date for valuation purposes. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. The Company estimates the expected volatility of the share price by reviewing the historical volatility levels of its common stock in conjunction with that of public companies that operate in similar industries or are similar in terms of stage of development or size and then projecting this information toward its future expected volatility. The Company exercises judgment in selecting these companies, as well as in evaluating the available historical and implied volatility for these companies. The Company calculates the expected term in years for each stock option using a simplified method based on the average of each option’s vesting term and original contractual term. The simplified method was used due to the lack of sufficient historical data available to provide a reasonable basis upon which to estimate the expected term of each stock option. To determine the fair value of a share-based award using Monte Carlo simulations, the Company makes assumptions regarding the risk-free interest rate, expected future volatility, expected dividend yield and performance period. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. The Company estimates the expected volatility of the share price by reviewing the historical volatility levels of its common stock in conjunction with that of public companies that operate in similar industries or are similar in terms of stage of development or size and then projecting this information toward its future expected volatility. Dividend yield is determined based on the Company’s future plans to pay dividends. The Company had no plans to pay dividends at December 31, 2018. The Company calculates the performance period based on the specific market condition to be achieved and derived from historical data and estimates of future performance. The Company recognizes compensation expense using a straight-line method over the applicable service or performance period. During each quarter, the share-based compensation expense is adjusted to reflect options that vested or were forfeited during the period; however, compensation expense already recognized is not adjusted if market conditions are not met. Derivative Financial Instruments The Company is actively managing the risk of changes in foreign currency exchange rate through foreign currency forward contracts traded in over-the-counter markets governed by International Swaps and Derivatives Association, Inc. (ISDA) agreements. Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses. The Company does not enter into derivative transactions for trading purposes. In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a cash flow hedge by documenting the relationship between the derivative and the hedged item. The documentation includes a description of the hedging instrument, the hedged item, the risk being hedged, the Company’s risk management objective and strategy for undertaking the hedge, and the method for assessing the effectiveness of the hedge. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in the cash flows of the hedged item at both inception of the hedge and on an ongoing basis. Prospective and retrospective hedge effectiveness will be assessed by a comparison of the critical terms of the hedging instrument and the hedged transaction. In the event that the Company’s ongoing assessment demonstrates that the critical terms of the hedging instrument or the hedged transaction have changed and no longer match, hedge effectiveness is assessed by use of a Hypothetical Derivative Method, which assesses hedge effectiveness based on a comparison of the change in fair value of the actual derivative designated as the hedging instrument and the change in fair value of a perfectly effective hypothetical derivative. The perfectly effective hypothetical derivative would have terms that identically match the critical terms of the hedged item. The Company’s derivative financial instruments consist of non-deliverable foreign currency forward contracts. Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements. The change in fair value of a hedging instrument is recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity (deficit) and is reclassified into cost of services in the consolidated statement of operations and comprehensive income (loss) during the period in which the hedged transaction impacts earnings. Treasury Stock The Company records treasury stock at the cost to acquire such shares, including commissions paid to brokers. Treasury stock is included as a component of stockholders’ equity (deficit). Earnings (Loss) Per Share Basic net income per share is computed by dividing net income, less any dividends, accretion or decretion, redemption or induced conversion on the Preferred Stock, by the weighted average number of common shares outstanding during the period. As the Preferred Stock (as defined in Note 13) participates in dividends alongside the Company’s common stock (per their participating dividends), the Preferred Stock would constitute participating securities under ASC 260-10 and are applied to earnings per share using the two-class method. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. |
Recent Accounting Pronouncements |
12 Months Ended |
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Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Standards and Disclosures In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), which supersedes existing guidance on accounting for leases in Topic 840, Leases. ASU 2016-02 generally requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The Company will adopt ASU 2016-02 on January 1, 2019 using the modified retrospective transition method and record a cumulative-effect adjustment to beginning retained earnings without restating prior period comparative financial statements. The Company will elect the package of practical expedients that will retain existing lease classification and initial directs costs for any leases that exist prior to adoption of the standard. In addition, the Company will not separate lease and non-lease components for its equipment assets. As part of the adoption, the Company implemented lease accounting software, updated processes and accounting policies and enhanced internal controls. The Company expects to record between $70.0 million and $80.0 million of right-of-use assets and offsetting lease liabilities between $85.0 million and $95.0 million. The Company expects no significant impact to retained earnings. The adjustment will have no impact on the consolidated statement of operations and comprehensive income (loss) or the consolidated statement of cash flows. On January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"), using a retrospective transition method. ASU 2016-18 is intended to reduce diversity in practice in the classification and presentation of changes in restricted cash on the Consolidated Statement of Cash Flows. ASU 2016-18 requires that the Consolidated Statement of Cash Flows explain the change in total cash and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. Upon adoption of ASU 2016-18, restricted cash equivalents of $1.5 million as of December 31, 2017, and December 31, 2016, and January 1, 2016 were reclassified to be included within the reconciliation of beginning and ending cash and restricted cash equivalents on the Company's Consolidated Statements of Cash Flows. Restricted cash equivalents of $2.3 million are included in the ending cash balance on the Company's Consolidated Statement of Cash Flows as of December 31, 2018. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 is intended to improve the financial reporting of hedging relationships in order to better portray the economic results of an entity's risk management activities in its financial statements. The guidance is effective for interim and annual periods beginning after December 15, 2018. On January 1, 2018, we adopted ASU 2017-12. The adoption of ASU 2017-12 did not have a material effect on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force). This ASU addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company adopted this standard on January 1, 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In June 2018, the Company elected to early adopt ASU 2017-04. The adoption had no impact on the Company's consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Suptopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. ASU 2018-15 is effective for periods beginning after December 15, 2019. The Company plans to adopt ASU 2018-15 on January 1, 2019 using the prospective method. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements. |
Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company records its financial assets and liabilities at fair value. The accounting standard for fair value (i) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, (ii) establishes a framework for measuring fair value, (iii) establishes a hierarchy of fair value measurements based upon the ability to observe inputs used to value assets and liabilities, (iv) requires consideration of nonperformance risk and (v) expands disclosures about the methods used to measure fair value. The accounting standard establishes a three-level hierarchy of measurements based upon the reliability of observable and unobservable inputs used to arrive at fair value. Observable inputs are independent market data, while unobservable inputs reflect the Company’s assumptions about valuation. The three levels of the hierarchy are defined as follows:
The carrying amounts of the Company’s financial instruments, which include financial assets such as cash and cash equivalents, restricted cash equivalents, accounts receivable, net, and certain other current assets, as well as financial liabilities such as accounts payable, accrued service costs, accrued compensation and benefits and certain other accrued expenses, approximate their fair values, due to the short-term nature of these instruments. See Note 23, Derivative Financial Instruments, for a discussion of the fair value of the Company's forward currency derivative contracts. The fair value of the Company's senior term loan is estimated based on the quoted market prices for the same or similar issue, and is considered a Level 2 measurement. The fair value of the Company's notes is estimated based on market indications compared to the inputs of the existing agreement and is considered a Level 2 measurement. The fair value of liabilities carried at book value in the financial statements at December 31, 2018 is as follows (in millions):
(1) Book value net of unamortized debt issuance costs of $8.1 million. (2) Book value net of unamortized debt issuance costs of $2.2 million. Other than the items discussed above, the Company does not have any financial assets or liabilities that are required to be measured at fair value on a recurring basis. |
Acquisition |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition | Acquisition Intermedix Holdings, Inc. On May 8, 2018, the Company completed the acquisition of Intermedix. The Intermedix Acquisition has been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired company, after adjustments to reflect fair values assigned to assets and liabilities, have been included in the Company’s consolidated financial statements since the date of the Intermedix Acquisition. The purchase price for the Intermedix Acquisition was $460 million, subject to customary adjustments for cash, debt, transaction expenses, and normalized working capital. The purchase price after adjustments amounted to $469.2 million. The Company funded the purchase price for the Intermedix Acquisition and the Company’s associated transaction expenses with a combination of cash on hand and the incurrence of additional indebtedness through a senior term loan and subordinated debt (see Note 12, Debt). The purchase price has been provisionally allocated, on a preliminary basis, to assets acquired and liabilities assumed based on their preliminary estimated fair values as of the completion of the Intermedix Acquisition. The Company is continuing its review of the fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon as the Company receives the information about facts and circumstances that existed as of the acquisition date or learns that more information is not available. This measurement period will not exceed one year from the acquisition date. At the effective date of the Intermedix Acquisition, the assets acquired and liabilities assumed are generally required to be measured at fair value. Given the timing of the Intermedix Acquisition, the fair value estimate of assets acquired and liabilities assumed are pending completion of multiple elements, including the finalization of an independent appraisal and valuations of fair value of the assets acquired and liabilities assumed, finalization of deferred tax assets and liabilities, and final review by the Company's management. Accordingly, management considers the balances shown in the following table to be preliminary. Some of the more significant amounts that are not yet finalized relate to the fair value of property, equipment and software, intangible assets, operating leases or commitments, contingent liabilities, and income and non-income related taxes. Accordingly, there could be material adjustments to the consolidated financial statements, including changes to depreciation and amortization expense related to the valuation of property, equipment and software, and intangible assets acquired and the respective useful lives for those assets among other adjustments. The final determination of the assets acquired and liabilities assumed will be based on the established fair value of the assets acquired and the liabilities assumed as of the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The final determination of the purchase price, fair values, and resulting goodwill may differ significantly from what is reflected in these consolidated financial statements. The preliminary fair value of assets acquired and liabilities assumed is (in millions):
The fair value of accounts receivables acquired is $35.5 million, with the gross contractual amount being $37.5 million. The Company expects $2.0 million to be uncollectible. The goodwill recognized is primarily attributable to synergies that are expected to be achieved from the integration of Intermedix. None of the goodwill is expected to be deductible for income tax purposes. As of December 31, 2018, there were no impairment changes in the recognized amounts of goodwill resulting from the acquisition of Intermedix. Included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2018 are net sales of $119.2 million and loss before income taxes of $0.6 million related to the operations of Intermedix since the acquisition date of May 8, 2018. The Company retained Bank of America to provide both advisory and financing services related to the Intermedix Acquisition. The amount of debt issuance costs paid to Bank of America was $4.1 million. Measurement period adjustments The Company had various measurement period adjustments due to updated valuation reports and additional knowledge gained since the acquisition. The significant adjustments included a reduction to intangible assets and property, equipment and software of $10.5 million and $5.4 million, respectively, related to updated information included in the valuation reports, a reduction to the deferred tax liability of $6.5 million, and an offset of these changes to goodwill. In conjunction with the adjustments, the Company reduced depreciation and amortization expense in the quarter ended December 31, 2018. Pro Forma Results (Unaudited) The following table summarizes, on a pro forma basis, the combined results of the Company as though the Intermedix Acquisition had occurred as of January 1, 2017. These pro forma results are not necessarily indicative of either the actual consolidated results had the Intermedix Acquisition occurred as of January 1, 2017 or of the future consolidated operating results. Pro forma results are (in millions):
Supplemental pro-forma earnings were adjusted to exclude $11.9 million of acquisition-related costs incurred by the Company in 2018 and include those costs in 2017. Adjustments were also made to earnings to adjust depreciation and amortization to reflect fair value of identified assets acquired, to remove the impairment charges recognized by Intermedix on intangible assets which were revalued as of the acquisition date, to record the effects of extinguishing the debt of Intermedix and replacing it with the debt of the Company, and to record the income tax effect of these adjustments. |
Accounts Receivable and Allowance for Doubtful Accounts |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is comprised of unpaid balances pertaining to modular services and end-to-end RCM customers, net receivable balances for end-to-end RCM customers after considering cost reimbursements owed to such customers, including related accrued balances, and amounts due from physician RCM and PM customers. The Company maintains an estimated allowance for doubtful accounts to reduce its accounts receivable to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay, the length of time a balance has been outstanding, input from key Company resources assigned to each customer, and the status of any ongoing operations with each applicable customer. Movements in the allowance for doubtful accounts are as follows (in thousands):
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Property, Equipment and Software |
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Property, Equipment and Software | Property, Equipment and Software Property, equipment and software consist of the following (in millions):
Property, equipment and software, net, located internationally was $15.6 million and $10.1 million as of December 31, 2018 and 2017, respectively. The remaining property, equipment and software was located in the U.S. as of December 31, 2018 and 2017. During the year ended December 31, 2018, the Company capitalized $22.6 million of computer equipment and software related to a capital lease and financing, of which $10.0 million and $4.2 million are recorded in other accrued expenses and other non-current liabilities, respectively. The following table summarizes the allocation of depreciation and amortization expense between cost of services and selling, general and administrative expenses (in millions):
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Intangible Assets |
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Intangible Assets | Intangible Assets In conjunction with the acquisition of Intermedix, the Company acquired certain intangible assets. Prior to the acquisition of Intermedix on May 8, 2018, the Company did not have any intangible assets. As discussed in Note 5, Acquisition, the amounts and estimated useful lives are preliminary. The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at December 31, 2018 (in millions, except weighted average useful life):
A preliminary fair value of the identifiable intangible assets was derived, utilizing the following valuation methodology:
Intangible asset amortization expense was $10.6 million and $0.0 million for the year ended December 31, 2018 and 2017, respectively. Estimated annual amortization expense related to intangible assets with definite lives as of December 31, 2018 is as follows (in millions):
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Goodwill |
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Goodwill | Goodwill Changes in the carrying amount of goodwill for the year ended December 31, 2018 were (in millions):
There was no impairment of goodwill in 2018. |
Revenue Recognition |
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Revenue Recognition | Revenue Recognition The Company follows the guidance under Topic 606, Revenue from Contracts with Customers, (“Topic 606”). Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contract term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. See Note 2, Summary of Significant Accounting Polices, for further discussion. Disaggregation of Revenue In the following table, revenue is disaggregated by source of revenue (in millions):
Contract Balances The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers (in millions):
(1) Receivables are included in accounts receivable, net. The balance includes accounts receivable, net - related party. The Company recognized an increase of revenue of $0.4 million and $1.3 million for the year ended December 31, 2018 and 2017 related to changes in transaction price estimates. The Company recognized revenue of $0.2 million and $1.9 million for the year ended December 31, 2018 and 2017, related to services performed in periods prior to the parties reaching an agreement that creates enforceable rights and obligations. A receivable is recognized in the period the Company provides services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30-60 days. Significant changes in the contract assets and the contract liabilities balances during the year ended December 31, 2018 are as follows (in millions):
The Company recognized revenue of $51.8 million and $19.9 million during the year ended December 31, 2018 and 2017, which amounts were included in contract liabilities at the beginning of the respective periods. These revenue amounts include $47.8 million and $19.5 million for the year ended December 31, 2018 and 2017, respectively, related to advanced billings which become accounts receivable and contract liabilities on the first day of the respective service period. Transaction Price Allocated to the Remaining Performance Obligation The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in millions). The estimated revenue does not include amounts of variable consideration that are constrained.
The amounts presented in the table above include variable fee estimates for the non-cancellable term of the Company's physician groups and EMS providers, RCM services contracts, fixed fees which are typically recognized ratably as the performance obligation is satisfied, and incentive fees which are measured cumulatively over the contractually defined performance period. Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services within the Company's PAS contracts that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services. The Company does not disclose information about remaining performance obligations with an original expected duration of one year or less. The Company has elected certain of the optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. Accordingly, the Company applies a practical expedient to its stand-alone PAS contracts and modular RCM services and does not disclose information about variable consideration from remaining performance obligations when the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date. PAS performance obligations are typically short in duration (often less than 1 day) with any uncertainty related to the associated variable consideration resolved as each increment of service (completion of a level of care review or an appeal) is completed which reflects the value the customer receives from the Company’s fulfillment of the performance obligation. Modular RCM services performance obligations for variable consideration are of short duration with fees corresponding to the value the customer has realized, for example, patient accounts collected on behalf of the customer or medical record lines transcribed. For end-to-end RCM contracts, the Company does not disclose information about remaining, wholly unsatisfied performance obligations for variable consideration that the Company is able to allocate to one or more, but not all, of the performance obligations in its contracts. The Company’s end-to-end RCM services performance obligations are satisfied over time and are substantially the same from period to period under either a co-managed or operating partner model. Fees are variable and consist of net operating fees and incentive fees, with the uncertainty related to net operating fees and certain incentive fees being resolved quarterly, and with the uncertainty of other incentive fees being resolved annually. The information presented in the table above includes estimates for incentive fees where the uncertainty related to the final fee is resolved on longer than a quarterly basis and to the extent the Company does not believe the associated consideration is constrained. Changes in Accounting Policies Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements. The Company adopted Topic 606 with a date of the initial application of January 1, 2017. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company adopted Topic 606, effective January 1, 2017, using the modified retrospective method, applying Topic 606 to contracts that were not complete as of the date of initial application. Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. For contracts that were modified before the beginning of the earliest reporting period presented the Company has not retrospectively restated the contract for those modifications in accordance with the contract modification guidance in 606-10-25-12 and 25-13. The Company instead reflected the aggregate effect of those modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligation. Deferred Contract Costs Certain costs associated with the initial phases of customer contracts and the related transition of customer organizations are deferred. These fulfillment costs relate directly to the Company’s responsibilities under the corresponding customer contracts, generate or enhance resources of the Company that will be used in satisfying its performance obligations in the future, and are expected to be recovered through the margins realized. The following table summarizes the breakout of deferred contract costs (in millions):
The associated assets are amortized as services are transferred to the customer over the remaining life of the contracts. For the year ended December 31, 2018 and 2017, total amortization was $2.2 million and $1.0 million, respectively, and there were no associated impairment losses. |
Customer Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer Liabilities | Customer Liabilities Customer liabilities include (i) accrued service costs (amounts due and accrued for cost reimbursements), (ii) collections payable to clients (consisting primarily of amounts collected on behalf of the Company’s physician group customers to be remitted within twelve months), (iii) refund liabilities (amounts potentially due as a refund to the Company's customers on incentive fees), and (iv) deferred revenue (contract liabilities) (fixed or variable fees amortized to revenue over the service period). Customer liabilities consist of the following (in millions):
(1) Current and non-current portion of customer liabilities include amounts for a related party. See Note 20, Related Party Transactions, for further discussion. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt The carrying amounts of debt consist of the following (in millions):
Credit Agreement and Note Purchase Agreement On May 8, 2018, the Company and certain of its subsidiaries entered into (1) a new senior credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders named therein, for the new senior secured credit facilities (the “Senior Secured Credit Facilities”), consisting of a $270.0 million senior secured term loan facility (the “Senior Term Loan”) issued at 97% of par and a $25.0 million senior secured revolving credit facility (the “Senior Revolver”); and (2) a new subordinated note purchase agreement (the “Note Purchase Agreement”) with TI IV ACHI Holdings, LP, IHC Health Services, Inc. and Ascension Health Alliance d/b/a Ascension, as purchasers, consisting of the issuance and sale of $110.0 million aggregate principal amount of subordinated notes due 2026 (the "Notes") issued at 98% of par. Senior Secured Credit Facilities The Senior Term Loan has a seven-year maturity and the Senior Revolver has a five-year maturity. The Credit Agreement provides that the Company may make one or more offers to the lenders, and consummate transactions with individual lenders that accept the terms contained in such offers, to extend the maturity date of the lender’s term loans and/or revolving commitments, subject to certain conditions, and any extended term loans or revolving commitments will constitute a separate class of term loans or revolving commitments. All of the Company’s obligations under the Senior Secured Credit Facilities are guaranteed by the subsidiary guarantors named therein (the “Subsidiary Guarantors”). Pursuant to (1) the Security Agreement, dated as of May 8, 2018 (the “Security Agreement”), among the Company, the Subsidiary Guarantors and Bank of America, N.A., as administrative agent, and (2) the Guaranty, dated as of May 8, 2018 (the “Guaranty”), among the Company, the Subsidiary Guarantors and Bank of America, N.A., as administrative agent, subject to certain exceptions, the obligations under the Senior Secured Credit Facilities are secured by a pledge of 100% of the capital stock of certain domestic subsidiaries owned by the Company and a security interest in substantially all of the Company’s tangible and intangible assets and the tangible and intangible assets of each Subsidiary Guarantor. The Senior Revolver includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as the “swing loans.” Any issuance of letters of credit or making of a swing loan will reduce the amount available under the revolving credit facility. As of December 31, 2018, the Company had no borrowings and no letters of credit under the Senior Revolver, and $25.0 million of availability under the Senior Revolver. At the Company’s option, the Company may add one or more new term loan facilities or increase the commitments under the Senior Revolver (collectively, the “Incremental Borrowings”) in an aggregate amount of up to $25.0 million plus any additional amounts so long as certain conditions, including a consolidated first lien leverage ratio (as defined in the Credit Agreement) of not more than 3.75 to 1.00 (on a pari passu basis) or 5.50 to 1.00 (on a junior basis), in each case on a pro forma basis, are satisfied plus the amount of certain voluntary prepayments of Senior Term Loans. Borrowings under the Senior Secured Credit Facilities bear interest, at the Company’s option, at: (i) an ABR rate equal to the greater of (a) the prime rate of Bank of America, N.A., (b) the federal funds rate plus 0.5% per annum, and (c) the Eurodollar rate for an interest period of one-month beginning on such day plus 100 basis points, plus 4.25% (provided that the Eurodollar rate applicable to the Term Loan Facility shall not be less than 0.00% per annum); or (ii) the Eurodollar rate (provided that the Eurodollar rate applicable to the Term Loan Facility shall not be less than 0.00% per annum), plus 5.25%. The interest rate as of December 31, 2018 was 7.62%. The Company is also required to pay an unused commitment fee to the lenders under the Senior Revolver at a rate of 0.50% of the average daily unutilized commitments thereunder if the first lien net leverage ratio is greater than 2.00 to 1.00, or at a rate of 0.375% at any other time. The Company must also pay customary letter of credit fees, including a fronting fee as well as administration fees. The Credit Agreement requires the Company to make mandatory prepayments, subject to certain exceptions, with: (i) beginning with fiscal year 2019, 75% (which percentage will be reduced upon the achievement of certain first lien net leverage ratios) of the Company’s annual excess cash flow; (ii) 100% of net cash proceeds of all non-ordinary course assets sales or other dispositions of property or casualty events, subject to certain exceptions and thresholds; and (iii) 100% of the net cash proceeds of any debt incurrence, other than debt permitted under the Credit Agreement. The Company is required to repay the Senior Term Loan portion of the Senior Secured Credit Facilities in quarterly principal installments of 0.25% of the original principal amount commencing on September 30, 2018, with the balance payable at maturity. If, on or prior to May 8, 2019, the Company prepays or reprices any portion of the Senior Term Loan, the Company will be required to pay a prepayment premium of 1% of the loans being prepaid or repriced. The Credit Agreement contains two financial covenants. (1) The Company is required to maintain at the end of each fiscal quarter, commencing with the quarter ending September 30, 2018, a consolidated first lien net leverage ratio of not more than 5.50 to 1.00. This consolidated ratio will step down in increments to 4.00 to 1.00 commencing with the fiscal quarter ending September 30, 2020. (2) The Company is required to maintain at the end of each such fiscal quarter, commencing with the quarter ending September 30, 2018, a consolidated interest coverage ratio of not less than 1.75 to 1.00. This consolidated ratio will step up in increments to 2.50 to 1.00 commencing with the fiscal quarter ending September 30, 2020. The Credit Agreement also contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability and the ability of its subsidiaries to: (i) incur additional indebtedness; (ii) create liens on assets; (iii) engage in mergers or consolidations; (iv) sell assets; (v) pay dividends and distributions or repurchase the Company’s capital stock; (vi) make investments, loans or advances; (vii) repay certain junior indebtedness; (viii) engage in certain transactions with affiliates; (ix) enter into sale and leaseback transactions; (x) amend material agreements governing certain of the Company’s junior indebtedness; (xi) change the Company’s lines of business; (xii) make certain acquisitions; and (xiii) limitations on the letter of credit cash collateral account. The Credit Agreement contains customary affirmative covenants and events of default. Note Purchase Agreement The Notes issued pursuant to the Note Purchase Agreement have an eight-year maturity. All of the Company’s obligations under the Note Purchase Agreement are guaranteed by the Subsidiary Guarantors pursuant to the Subsidiary Guaranty, dated as of May 8, 2018 (the “Subsidiary Guaranty”), among the Company, the Subsidiary Guarantors and the Purchasers (as defined in the Notes). The obligations under the Note Purchase Agreement are unsecured. As of December 31, 2018, $105.0 million of the Notes were due to related parties. For the year ended December 31, 2018, $9.5 million of interest was attributable to related parties. The Notes bear interest at 14.0% per annum, increasing by 1.0% per annum on May 8, 2021, and by an additional 1.0% per annum on each subsequent anniversary until the Notes are repaid in full. Interest is payable quarterly in cash; provided, that, subject to the subordination agreement, (i) for any fiscal quarters ending on or prior to May 8, 2019, at the Company’s election, up to 75% of the interest payments will be payable in kind and the remaining amount of such interest payment will be payable quarterly in cash; (ii) for any fiscal quarters ending after May 8, 2019 and on or prior to May 8, 2020, at the Company’s election, up to 50% of the interest payments will be payable in kind and the remaining amount of such interest payment will be payable quarterly in cash; and (iii) for any subsequent fiscal quarters, at the Company’s election, up to 25% of the interest payments will be payable in kind and the remaining amount of such interest payment will be payable quarterly in cash. Interest expense is incurred through the effective interest rate method. Deferred interest, generated due to a difference in the effective interest rate and the stated interest rate, is recognized in other non-current liabilities on the balance sheet. As of December 31, 2018, total deferred interest was $1.4 million. The Note Purchase Agreement does not require any mandatory prepayments. Any voluntary prepayment of the obligations pursuant to the Note Purchase Agreement (other than in connection with a change of control) shall be subject to a prepayment premium of (a) if such prepayment is made before May 8, 2019, 3.0% of the principal amount of the obligations prepaid, (b) if such prepayment is made on or after May 8, 2019 but prior to May 8, 2020, 2.0% of the principal amount of the obligations prepaid, (c) if such prepayment is made on or after May 8, 2020 but prior to May 8, 2021, 1.0% of the principal amount of the obligations prepaid, and (d) if such prepayment is made on or after May 8, 2021, 0.0% of the principal amount of the obligations prepaid. The Note Purchase Agreement also contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Company’s ability and the ability of its subsidiaries to: (i) create liens on assets; (ii) engage in mergers or consolidations or sell all or substantially all of their respective assets; and (iii) pay dividends and distributions or repurchase the Company’s capital stock. The Note Purchase Agreement contains customary affirmative covenants and events of default. Debt Issuance Costs The Company incurred debt issuance costs of $11.5 million in relation to the Credit Agreement and Note Purchase Agreement which were allocated to the respective agreements. Debt Maturities Scheduled maturities of the Company's long-term debt for each of the five years succeeding December 31, 2018 and thereafter are summarized as follows (in millions):
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Equity [Abstract] | |
Stockholders' Equity (Deficit) | Stockholders’ Equity (Deficit) Preferred Stock and Warrant The Company has 5,000,000 shares of authorized preferred stock, each with a par value of $0.01. The preferred stock may be issued from time to time in one or more series. The board of directors of the Company ("Board") is authorized to determine the rights, preferences, privileges and restrictions of the Company’s authorized but unissued shares of preferred stock. On February 16, 2016, at the close of the Transaction, the Company issued to TCP-ASC ACHI Series LLLP, a limited liability limited partnership jointly owned by Ascension Health Alliance and investment funds affiliated with TowerBrook (the "Investor"): (i) 200,000 shares of its 8.00% Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock" or "Preferred Stock"), for an aggregate price of $200 million and (ii) an exercisable warrant to acquire up to 60 million shares of its common stock with an exercise price of $3.50 per common share and a term of ten years. The Series A Preferred Stock is immediately convertible into shares of common stock. As of December 31, 2018 and December 31, 2017, the Company had 246,233 and 227,483 shares of Preferred Stock outstanding, respectively. See Note 17, 8.00% Series A Convertible Preferred Stock, for additional information. Common Stock Each outstanding share of the Company's common stock, par value $0.01 per share ("common stock"), is entitled to one vote per share on all matters submitted to a vote by shareholders. Subject to the rights of any preferred stock which may from time to time be outstanding, the holders of outstanding shares of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive pro rata all assets legally available for distribution to stockholders. No dividends were declared or paid on the common stock during 2018 or 2017. Treasury Stock On November 13, 2013, the Board authorized a repurchase of up to $50.0 million of the Company’s common stock in the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Company based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time at the sole discretion of the Board. Any repurchased shares will be available for use in connection with the Company’s stock plans and for other corporate purposes. The Company funds the repurchases from cash on hand. During the year ended December 31, 2017, the Company repurchased 855,474 shares of the Company stock for $2.5 million. During the year ended December 31, 2018, no shares were repurchased. No shares have been retired. As of December 31, 2018 and 2017, the Company held in treasury 5,321,393 shares of repurchased stock. Treasury stock also includes repurchases of Company stock related to employees’ tax withholding upon vesting of restricted shares. For the years ended December 31, 2018 and 2017, the Company repurchased 499,069 and 784,531 shares related to employees’ tax withholding upon vesting of restricted shares, respectively. Additionally, treasury stock includes restricted stock awards that have been canceled or forfeited. See Note 14, Share-Based Compensation. |
Share-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation The Company maintains two stock incentive plans: the Amended and Restated Stock Option Plan (the "2006 Plan") and the Second Amended and Restated Stock 2010 Incentive Plan (the "2010 Amended Plan", together with the 2006 Plan, the "Plans"). In December 2016, the Company's stockholders approved the Second Amended and Restated 2010 Stock Incentive Plan, which authorized the issuance of an additional 17 million shares of the Company's common stock pursuant to awards. Under the Plans, the Company is authorized to issue up to a maximum of 46,374,756 shares of common stock. This number includes any shares that remained available for issuance under the 2006 Plan as of the date of the IPO and any shares subject to awards that were outstanding under the 2006 Plan as of the date of the IPO that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company without the issuance of shares thereunder. The Company will not make any further grants under the 2006 Plan. The 2010 Amended Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards ("RSAs"), restricted stock units ("RSUs") and other share-based awards. As of December 31, 2018, 8,548,545 shares were available for future grants of awards under the 2010 Amended Plan. To the extent that previously granted awards under the 2006 Plan or 2010 Amended Plan expire, terminate or are otherwise surrendered, canceled or forfeited, the number of shares available for future awards under the 2010 Amended Plan will increase. Under the terms of the Plans, all stock options will expire if they are not exercised within ten years of their grant date. Generally all employee options, RSAs and RSUs vest ratably between one and four years. As of January 1, 2017, the Company adopted ASU 2016-09. The Company elected to change its accounting policy to account for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded to increase accumulated deficit by $0.9 million, increase additional paid-in capital by $1.5 million and increase non-current deferred tax assets by $0.6 million as of January 1, 2017. Excess tax benefits for share-based payments are now included in net cash used in operating activities rather than net cash used in financing activities. The changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted. Amendments related to accounting for excess tax benefits and shortfalls have been adopted prospectively, resulting in recognition of excess tax benefits and shortfalls in income tax expenses (benefit) rather than additional paid-in capital. For the years ended December 31, 2018 and December 31, 2017, the Company recognized $2.4 million income tax benefit from windfalls and $0.9 million of income tax expense from shortfalls associated with vesting and exercises of equity awards. The Company uses the Black-Scholes option pricing model to estimate the fair value of its service-based options as of its grant date. The Company uses the Monte Carlo simulations to estimate the fair value of its RSAs with vesting based on market-based performance conditions as of their respective grant dates. Expected life is based on the market condition to which the vesting is tied. Monte Carlo simulations are also used to estimate the fair value of its PBRSUs. The PBRSUs vest upon satisfaction of both time-based requirements and performance targets based on share price. The following table sets forth the significant assumptions used in the Black-Scholes option pricing model and the Monte Carlo simulations and the calculation of share-based compensation expense during 2018, 2017, and 2016:
Total share-based compensation costs that have been included in the Company’s consolidated statements of operations were as follows (in millions):
(1) In addition to the share-based compensation expense recorded above, $0.3 million, $0.5 million, and $0.4 million of share-based compensation expense was capitalized to deferred contract costs for the year ended December 31, 2018, 2017, and 2016, respectively. See Note 21, Deferred Contract Costs, for further discussion. Stock options The following table sets forth a summary of all option activity under all plans for the years ended December 31, 2018, 2017, and 2016:
The weighted-average grant date fair value of options granted during the years ended December 31, 2018, 2017, and 2016 was $3.01, $1.34, and $1.07 per share, respectively. The weighted-average grant date fair value excludes the options granted under the option exchange discussed further below. The total intrinsic value of the options exercised in the years ended December 31, 2018, 2017, and 2016 was $9.6 million, $0.1 million, and $0.1 million, respectively. The total fair value of options vested during the years ended December 31, 2018, 2017, and 2016 was $4.2 millions, $4.9 million, and $15.0 million, respectively. On May 12, 2017, the Company offered certain employees and directors an opportunity to elect to exchange certain stock options for new options covering a fewer number of shares of common stock. Under this offer, the Company accepted for exchange 4,279,463 options. All surrendered options were canceled and the Company issued 1,728,795 new stock options in exchange for such tendered options. The exchange ratios were established with the intent not to generate incremental share-based compensation expense and were established just prior to commencement of the offer. The incremental compensation associated with the fluctuations in the Company’s common stock price between the date the exchange ratios were established and the commencement of the offer was insignificant. Restricted stock awards The following table sets forth a summary of the activity during the years ended December 31, 2018, 2017, and 2016:
The total fair value of RSAs vested during the years ended December 31, 2018, 2017, and 2016 was $3.6 million, $9.3 million, and $14.7 million, respectively. The Company’s RSA agreements allow employees to deliver to the Company shares of stock upon vesting of their RSAs in lieu of their payment of the required personal employment-related taxes. The Company does not withhold taxes in excess of maximum required statutory requirements. During the years ended December 31, 2018, 2017, and 2016, employees delivered to the Company 404,466, 733,769, and 996,510 shares of stock, respectively, which the Company recorded at a cost of approximately $2.3 million, $1.8 million, and $2.2 million, respectively. As of December 31, 2018, the Company held 2,668,172 shares of surrendered common stock in treasury related to the vesting of RSAs. Forfeited and canceled RSAs are added to treasury stock. For the years ended December 31, 2018, 2017, and 2016, 72,259, 834,440, and 3,103,760 shares were added to treasury stock due to canceled RSAs, respectively. Restricted stock units In the fourth quarter of 2016, the Company began to grant RSUs to its employees. A summary of the activity during the years ended December 31, 2018, 2017, and 2016 is shown below:
The Company's RSU agreements allow employees to surrender to the Company shares of common stock upon vesting of their RSUs in lieu of their payment of the required personal employment-related taxes. During the years ended December 31, 2018, 2017, and 2016, employees delivered to the Company 94,603, 50,762, and 0 shares of stock, respectively, which the Company recorded at a cost of approximately $0.7 million, $0.2 million, and $0.0 million, respectively. Shares surrendered for payment of personal employment-related taxes are held in treasury. Performance-based restricted stock units In the third quarter of 2017, the Company began to grant performance-based RSUs ("PBRSUs") to its employees. The PBRSUs vest upon satisfaction of both time-based requirements and performance targets based on share price with certain awards vesting between December 31, 2019 and December 31, 2021. Depending on the average price of the stock for the 60 days prior to the end of the vesting period, the number of shares vesting could be between 0% and 350% of the number of PBRSUs originally granted. Based on the established price targets, 9,619,066 is the maximum number of shares that could vest. A summary of the PBRSU activity during the years ended December 31, 2018, and 2017 is shown below:
At March 31, 2018, the Company had 983,472 shares subject to PBRSU award agreements that were intended to be settled in cash until such time as the share reserve available under the 2010 Amended Plan had been deemed sufficient by the Compensation Committee of our Board of Directors ("Compensation Committee") to allow for settlement of the PBRSUs in shares. On the consolidated balance sheet, these awards settleable in cash were liability classified as of March 31, 2018. During the second quarter of 2018, the Compensation Committee determined that the available share reserve was sufficient for the awards to be settled in shares rather than cash and thus the provision allowing for the awards to be cash settled was terminated. As a result, $1.3 million was reclassified from liabilities to equity in the second quarter of 2018. Other During the second quarter of 2016, in connection with the resignation of the Company's Chief Executive Officer and Chief Financial Officer, the vesting of certain options and RSAs was accelerated pursuant to the agreements previously entered into by the former employees and resulted in an increase of share-based compensation expense for the year ended December 31, 2016 of $7.0 million. |
Other |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | Other Other costs are comprised of reorganization-related and certain other costs. For the year ended December 31, 2018, 2017, and 2016, other costs consist of the following (in millions):
(1) Costs related to retention payments and legal fees paid in connection with the closing of the Transaction. (2) Costs related to evaluating, pursuing and integrating acquisitions as part of the Company’s inorganic growth strategy. Integration costs include employee time and expenses spent on integration activities, vendor spend and severance and retention amounts associated with integration activities. (3) As part of the transition of personnel to the Company under certain operating partner model contracts, the Company has agreed to reimburse, or directly pay the affected employees, for certain severance and retention costs related to certain employees who will not be transitioned to the Company, or whose jobs will be relocated after the employee transitions to the Company. (4) Project costs related to the Company's effort to automate its transactional environment. |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The domestic and foreign components of income (loss) before income taxes consist of the following (in millions):
For the years ended December 31, 2018, 2017, and 2016, the Company’s current and deferred income tax expense (benefit) attributable to income (loss) from operations are as follows (in millions):
Reconciliation of the difference between the actual tax rate and the statutory U.S. federal income tax rate is as follows:
The following table sets forth the Company’s net deferred tax assets as of December 31, 2018 and 2017 (in millions):
At December 31, 2018, the Company had cumulative U.S. federal and state net operating loss carryforwards of approximately $235.2 million and $221.1 million, respectively, which are available to offset U.S. federal and state taxable income in future periods through 2038. These amounts include net operating losses acquired in the Intermedix Acquisition which are subject to Section 382 of the Internal Revenue Code. The general limitation rules allow the Company to utilize the net operating losses subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership change. We finalized the accounting impacts of the Tax Cuts and Jobs Act in connection with filing our 2017 U.S. federal income tax return during the fourth quarter 2018. This resulted in a decrease to income tax expense of $0.1 million, offsetting our original $38.2 million tax expense estimated under SAB 118 during the fourth quarter 2017. We also elected to report Global Intangible Low Taxed Income (“GILTI”) in income tax expense as part of the current income tax provision. A valuation allowance is required to be established when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The guidance on accounting for income taxes provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset. Consideration is given to the weight of all available evidence, both positive and negative. The Company estimates its already contracted business growth associated with the Ascension A&R MPSA will be profitable and allow the Company to utilize its NOL carryforwards and other deferred tax assets. Accordingly, the Company believes that it is more likely than not that the remaining deferred tax assets will be realized. Should the Company not operationally execute as expected, and the growth in the Ascension business not be as profitable as expected, such realizability assessment may change. The Company has recorded valuation allowances at December 31, 2018 and 2017 of $1.8 million and $1.3 million, respectively, based on our assessment that it is more likely than not that a portion of the Company’s separate state income tax net operating loss will not be realized because the Company no longer has business activities in that state, or where the activity level has decreased to such a level where we believe the NOL will not be realized. The Company has the ability and intent to maintain our investments in India. The Company has not provided for any additional outside basis difference inherent in its foreign subsidiaries where the indefinite reinvestment assertion has been applied. No deferred income taxes have been provided on the applicable undistributed earnings of the non-U.S. subsidiaries where the indefinite reinvestment assertion has not been applied. Pursuant to changes made by the Tax Cuts and Jobs Act, the Company reported its previously unremitted foreign earnings. Future distributions are generally not subject to U.S. income taxation. These remittances are either excluded from U.S. taxable income as earnings that have already been subjected to taxation, or alternatively are subject to a 100% foreign dividends received deduction. The 2018, 2017, and 2016 current tax provision includes $1.5 million, $1.4 million, and $1.2 million, respectively, for income taxes arising from the pre-tax income of the Company’s India subsidiaries. The tax provisions are net of the impact of a tax holiday in India. The Company’s benefits from this tax holiday were $1.6 million, $1.0 million, and $0.9 million for the year ended December 31, 2018, 2017, and 2016, respectively. The Company expanded its operations in India during the year and was awarded new tax holiday agreements. The tax holidays are set to expire between March 31, 2019 and March 31, 2027. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company’s unrecognized tax benefits as of December 31, 2018, 2017, and 2016 were not material. In connection with tax return examinations, contingencies can arise that generally result from different interpretations of tax laws and regulations as they pertain to the amount, timing or inclusion of revenues and expenses in taxable income, or the ability to utilize tax credits to reduce income taxes payable. While it is probable, based on the potential outcome of the Company’s federal and state tax examinations or the expiration of the statute of limitations for specific jurisdictions, that the liability for unrecognized tax benefits may increase or decrease within the next 12 months, the Company does not expect any such change would have a material effect on our financial condition, results of operations or cash flow. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. U.S. federal income tax returns for 2015 and all subsequent years are currently open for examination. State jurisdictions vary for open tax years. The statute of limitations for most states ranges from three to six years. Certain income tax returns since fiscal year 2009 for the Company’s India subsidiaries are currently open for final determination. |
8.00% Series A Convertible Preferred Stock |
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Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8.00% Series A Convertible Preferred Stock | 8.00% Series A Convertible Preferred Stock At the close of the Transaction on February 16, 2016 (as described in Note 1), the Company issued to the Investor: (i) 200,000 shares of Preferred Stock, for an aggregate price of $200 million, and (ii) a warrant with a term of ten years to acquire up to 60 million shares of common stock at an exercise price of $3.50 per share, on the terms and subject to the conditions set forth in the Warrant Agreement (“Warrant”). The Preferred Stock is immediately convertible into shares of common stock. During the twelve months ended December 31, 2016, the Company incurred direct and incremental expenses of $21.3 million (including $14.0 million in closing fees paid to the Investor) relating to financial advisory fees, closing costs, legal expenses and other offering-related expenses in connection with the Transaction. These direct and incremental expenses reduced the carrying amount of the Preferred Stock. In connection with the issuance of the Preferred Stock, a beneficial conversion feature of $48.3 million was recognized. Since the Preferred Stock is presently convertible into common stock, this amount was subsequently accreted to the carrying amount of the Preferred Stock, and treated as a deemed preferred stock dividend in the calculation of earnings per share. Dividend Rights The holders of the Preferred Stock are entitled to receive cumulative dividends January 1, April 1, July 1, and October 1 of each year (dividend payment dates), which commenced on April 1, 2016, at a rate equal to 8% per annum (preferred dividend) multiplied by the liquidation preference per share, initially $1,000 per share adjusted for any unpaid cumulative preferred dividends. For the first seven years after issuance, the dividends on the Preferred Stock will be paid-in-kind. As of December 31, 2018 and 2017, the Company had accrued dividends of $4.9 million and $4.5 million associated with the Preferred Stock, respectively, of which $4.9 million and $4.5 million was paid in additional shares and $660 and $660 was paid in cash in January of the following year, respectively. For the year ended December 31, 2018 and 2017, the dividends paid, or accrued, in additional shares of Preferred Stock totaled $19.1 million and $17.7 million, respectively. Conversion Features Each share of the Preferred Stock may be converted to common stock on any date at the option of the holder into the per share amount (as defined in the Certificate of Designations of the 8.00% Series A Convertible Preferred Stock (the "Series A COD")). Fractional shares resulting from any conversion will be rounded to the nearest whole share. Redemption Rights Since the redemption of the Preferred Stock is contingently or optionally redeemable and therefore not certain to occur, the Preferred Stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Preferred Stock is redeemable at the option of the holders upon a fundamental change (as defined in the Series A COD) and is redeemable in certain circumstances upon the occurrence of an event that is not solely within the Company's control, the Company has classified the Preferred Stock in mezzanine equity on the Consolidated Balance Sheets. In the event the Company believes that redemption of the Preferred Stock is probable, the Company would be required to accrete changes in the carrying value to the redemption value over the period until the expected redemption date. Voting Rights Each holder of the Preferred Stock is entitled to vote with the common stock on an as-converted basis on all matters submitted to a vote of shareholders of the Company, and has full voting rights and powers equal to the voting rights and powers of the holders of common stock. The following summarizes the Preferred Stock activity for the year ended December 31, 2018 and 2017 (in millions, except per share data):
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Earnings (Loss) Per Share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic net income per share is computed by dividing net income, less any dividends, accretion or decretion, redemption or induced conversion on the Preferred Stock, by the weighted average number of common shares outstanding during the period. As the Preferred Stock participates in dividends alongside the Company’s common stock (per their participating dividends), the Preferred Stock would constitute participating securities under ASC 260-10 and are applied to earnings per share using the two-class method. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. Diluted net income per share is calculated using the more dilutive of the if-converted or the two-class method. For the years ended December 31, 2018 and 2017, the two-class method was more dilutive and was computed by adjusting the denominator used in the basic net income per share computation by the weighted average number of common shares outstanding and potentially dilutive securities outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, shares issuable upon vesting of RSAs, RSUs, PBRSUs and Preferred Stock. Basic and diluted net income (loss) per common share are calculated as follows (in millions, except share and per share data):
Because of their anti-dilutive effect, 25,725,761, 26,064,856, and 27,628,093 common share equivalents comprised of stock options, RSAs, PBRSUs and RSUs have been excluded from the diluted earnings per share calculation for the years ended December 31, 2018, 2017, and 2016, respectively. Additionally, the Investor's and Intermountain's exercisable warrants to acquire up to 60 million and 1.5 million shares, respectively, of the Company's common stock has been excluded from the diluted earnings per share calculation because they are anti-dilutive. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Operating Leases The Company rents office space and equipment under operating leases, primarily for its Chicago corporate office, U.S. shared services centers and international operations. Office space lease terms range from one to 12 years, whereas equipment lease terms range from one to three years. The Company’s leases contain various rent holidays and rent escalation clauses and entitlements for tenant improvement allowances. Lease payments are amortized to expense on a straight-line basis over the lease term. Total rent expense under all operating leases was $15.1 million, $7.9 million, and $5.6 million for the years ended December 31, 2018, 2017, and 2016, respectively. The aggregate future minimum rental commitments under all noncancelable operating leases having remaining terms in excess of one year as of December 31, 2018 are as follows (in millions):
Legal Proceedings Other than as described below, the Company is not presently a party to any material litigation or regulatory proceeding and is not aware of any pending or threatened litigation or regulatory proceeding against the Company which, individually or in the aggregate, could have a material adverse effect on its business, operating results, financial condition or cash flows. In May 2016, the Company was served with a False Claims Act case brought by a former emergency department service associate who worked at a hospital of one of the Company’s customers, MedStar Inc.’s Washington Hospital Center (“WHC”), along with WHC and three other hospitals that were PAS clients and a place holder, John Doe hospital, representing all PAS clients (U.S. ex rel. Graziosi vs. Accretive Health, Inc. et. al.), and seeking money damages, False Claims Act penalties and plaintiff’s attorneys’ fees. The Third Amended Complaint alleges that the Company’s PAS business violates the federal False Claims Act. The case was originally filed under seal in 2013 in the Federal district court in Chicago, was presented to the U.S. Attorney in Chicago, and the U.S. Attorneys declined to intervene. The Company believes that it has meritorious defenses to all claims in the case and intends to vigorously defend itself against these claims. The outcome is not presently determinable. |
Related Party Transactions |
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Related Party Transactions | Related Party Transactions As a result of the closing of the Transaction with Ascension Health Alliance on February 16, 2016 and Ascension Health Alliance's ownership interest in the Investor, Ascension became a related party to the Company. This note, encompasses transactions between Ascension and its affiliates, including AMITA Health, and the Company pursuant to the A&R MPSA, including all supplements, amendments and other documents entered into in connection therewith. See Note 1, Business Description and Basis of Presentation, Note 12, Debt, and Note 17, 8.00% Series A Convertible Preferred Stock for further discussion about the agreements with Ascension. Net services revenue from services provided to Ascension included in the Company’s consolidated statements of operations were (in millions):
Amounts included in the Company's consolidated balance sheets for Ascension, excluding debt (see Note 12, Debt), are (in millions):
As part of the transition of Ascension personnel to the Company in conjunction with the A&R MPSA, the Company has agreed to reimburse Ascension for certain severance and retention costs related to certain Ascension employees who will not be transitioned to the Company. As of December 31, 2018 and December 31, 2017, the Company had $0.8 million and $0.5 million in accrued compensation and benefits related to these costs, respectively. As Ascension is the Company's largest customer, a significant percentage of the Company's cost of services is associated with providing services to Ascension. However, due to the nature of the Company's shared services and information technology operations, it is impractical to assign the dollar amount associated with services provided to Ascension. |
Deferred Contract Costs |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Contract Costs | Revenue Recognition The Company follows the guidance under Topic 606, Revenue from Contracts with Customers, (“Topic 606”). Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contract term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. See Note 2, Summary of Significant Accounting Polices, for further discussion. Disaggregation of Revenue In the following table, revenue is disaggregated by source of revenue (in millions):
Contract Balances The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers (in millions):
(1) Receivables are included in accounts receivable, net. The balance includes accounts receivable, net - related party. The Company recognized an increase of revenue of $0.4 million and $1.3 million for the year ended December 31, 2018 and 2017 related to changes in transaction price estimates. The Company recognized revenue of $0.2 million and $1.9 million for the year ended December 31, 2018 and 2017, related to services performed in periods prior to the parties reaching an agreement that creates enforceable rights and obligations. A receivable is recognized in the period the Company provides services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are typically 30-60 days. Significant changes in the contract assets and the contract liabilities balances during the year ended December 31, 2018 are as follows (in millions):
The Company recognized revenue of $51.8 million and $19.9 million during the year ended December 31, 2018 and 2017, which amounts were included in contract liabilities at the beginning of the respective periods. These revenue amounts include $47.8 million and $19.5 million for the year ended December 31, 2018 and 2017, respectively, related to advanced billings which become accounts receivable and contract liabilities on the first day of the respective service period. Transaction Price Allocated to the Remaining Performance Obligation The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in millions). The estimated revenue does not include amounts of variable consideration that are constrained.
The amounts presented in the table above include variable fee estimates for the non-cancellable term of the Company's physician groups and EMS providers, RCM services contracts, fixed fees which are typically recognized ratably as the performance obligation is satisfied, and incentive fees which are measured cumulatively over the contractually defined performance period. Estimates of revenue expected to be recognized in future periods also exclude unexercised customer options to purchase services within the Company's PAS contracts that do not represent material rights to the customer. Customer options that do not represent a material right are only accounted for in accordance with Topic 606 when the customer exercises its option to purchase additional goods or services. The Company does not disclose information about remaining performance obligations with an original expected duration of one year or less. The Company has elected certain of the optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue. Accordingly, the Company applies a practical expedient to its stand-alone PAS contracts and modular RCM services and does not disclose information about variable consideration from remaining performance obligations when the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date. PAS performance obligations are typically short in duration (often less than 1 day) with any uncertainty related to the associated variable consideration resolved as each increment of service (completion of a level of care review or an appeal) is completed which reflects the value the customer receives from the Company’s fulfillment of the performance obligation. Modular RCM services performance obligations for variable consideration are of short duration with fees corresponding to the value the customer has realized, for example, patient accounts collected on behalf of the customer or medical record lines transcribed. For end-to-end RCM contracts, the Company does not disclose information about remaining, wholly unsatisfied performance obligations for variable consideration that the Company is able to allocate to one or more, but not all, of the performance obligations in its contracts. The Company’s end-to-end RCM services performance obligations are satisfied over time and are substantially the same from period to period under either a co-managed or operating partner model. Fees are variable and consist of net operating fees and incentive fees, with the uncertainty related to net operating fees and certain incentive fees being resolved quarterly, and with the uncertainty of other incentive fees being resolved annually. The information presented in the table above includes estimates for incentive fees where the uncertainty related to the final fee is resolved on longer than a quarterly basis and to the extent the Company does not believe the associated consideration is constrained. Changes in Accounting Policies Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these consolidated financial statements. The Company adopted Topic 606 with a date of the initial application of January 1, 2017. As a result, the Company has changed its accounting policy for revenue recognition as detailed below. The Company adopted Topic 606, effective January 1, 2017, using the modified retrospective method, applying Topic 606 to contracts that were not complete as of the date of initial application. Therefore, the comparative information has not been adjusted and continues to be reported under Topic 605. For contracts that were modified before the beginning of the earliest reporting period presented the Company has not retrospectively restated the contract for those modifications in accordance with the contract modification guidance in 606-10-25-12 and 25-13. The Company instead reflected the aggregate effect of those modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price to the satisfied and unsatisfied performance obligation. Deferred Contract Costs Certain costs associated with the initial phases of customer contracts and the related transition of customer organizations are deferred. These fulfillment costs relate directly to the Company’s responsibilities under the corresponding customer contracts, generate or enhance resources of the Company that will be used in satisfying its performance obligations in the future, and are expected to be recovered through the margins realized. The following table summarizes the breakout of deferred contract costs (in millions):
The associated assets are amortized as services are transferred to the customer over the remaining life of the contracts. For the year ended December 31, 2018 and 2017, total amortization was $2.2 million and $1.0 million, respectively, and there were no associated impairment losses. |
Segments and Customer Concentrations |
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Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Segments and Customer Concentrations | Segments and Customer Concentrations The Company has determined that it has a single operating segment in accordance with how its business activities are managed and evaluated. All of the Company’s significant operations are organized around the single business of providing end-to-end management services of revenue cycle operations for healthcare providers. Accordingly, for purposes of segment disclosures, the Company has only one reporting segment. The Company's international sales are not material. Healthcare providers affiliated with Ascension have accounted for a significant portion of the Company’s net services revenue each year since the Company’s formation. For the year ended December 31, 2018, 2017, and 2016, net services revenue from healthcare organizations affiliated with Ascension accounted for 69%, 90%, and 78% of the Company's total net services revenue, respectively. The loss of customers within the Ascension health system would have a material adverse impact on the Company’s operations. For the year ended December 31, 2018 and 2017, Intermountain Healthcare accounted for 14% and 4% of the Company's total net services revenue, respectively. As of December 31, 2018 and 2017, the Company had a concentration of credit risk of customers affiliated with Ascension accounting for 57% and 66% of accounts receivable, respectively. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments Certain of the Company’s subsidiaries are exposed to currency risk through their use of the Company’s global delivery resources. The Company is actively managing the risk of changes in foreign currency exchange rate through foreign currency forward contracts traded in over-the-counter markets governed by International Swaps and Derivatives Association, Inc. (ISDA) agreements. Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses. The Company does not enter into derivative transactions for trading purposes. As of December 31, 2018, the Company’s currency forward contracts have maturities extending no later than December 31, 2019. The Company has designated these derivatives as cash flow hedges. As of December 31, 2018, the Company held no derivatives, or non-derivative hedging instruments, that were designated in fair value or net investment hedges. As of December 31, 2018, the Company estimates that $0.7 million of existing gains reported in accumulated other comprehensive loss are expected to be reclassified into earnings within the next 12 months. The amount related to derivatives designated as cash flow hedges that was reclassified into cost of services was a net loss of $1.3 million during year ended December 31, 2018. The Company classifies cash flows from its derivative programs as cash flows from operating activities in the consolidated statements of cash flows. Impact of Derivatives on our Consolidated Financial Statements at Fair Value As of December 31, 2018 and December 31, 2017, the notional amount of the Company's open foreign currency forward contracts was approximately $52.0 million and $0 million, respectively. The effect of derivatives in the Company's consolidated statements of operations for the year ended December 31, 2018 and 2017 were (in millions):
The accumulated gain, net of tax of $0.2 million and $0.0 million, recognized in accumulated other comprehensive income was $0.5 million and $0.0 million as of December 31, 2018 and December 31, 2017, respectively. The location and fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 31, 2018 and December 31, 2017 are as follows:
The Company's ISDA agreements contain credit risk-related contingent features. In the event of certain defaults or changes to the Company's credit profile, counterparties may request early termination and net settlement of certain derivative trades or may require the Company to collateralize derivatives in a net liability position. As of December 31, 2018 and December 31, 2017, the aggregate fair value of the derivative instruments with credit risk-related contingent features in net liability positions was $0 million and $0 million, respectively, which also approximates the fair value of the maximum amount of additional collateral that would need to be posted or assets needed to settle the obligations if the credit risk-related contingent features were triggered at the reporting dates. Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements. As of December 31, 2018 and December 31, 2017, we had $1.4 million and $0 million in cash collateral on deposit with counterparties for derivative contracts, respectively. The cash collateral on deposit with counterparties is classified as current portion of restricted cash on the consolidated balance sheets. The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event. The following table presents amounts relevant to offsetting of the Company's derivative assets and liabilities and the corresponding collateral account as of December 31, 2018 and December 31, 2017 (in millions):
Certain derivatives also give rise to credit risks from the possible non-performance by counterparties. Credit risk is generally limited to the fair value of those contracts that are favorable to the Company, and the maximum amount of loss due to credit risk, based on the gross fair value of all of the Company’s derivative financial instruments, was $0 million as of December 31, 2018. |
Retirement Plan |
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Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
Retirement Plan | Retirement Plan The Company maintains a 401(k) retirement plan (the "401(k) plan") that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all employees are eligible to participate. In conjunction with the acquisition of Intermedix, the company continued to maintain the pre-existing Intermedix 401(k) retirement plan ("Intermedix 401(k) plan"). Both 401(k) plans include a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit, equal to $18,500 in 2018, and $18,000 in 2017 and 2016, and have the amount of the reduction contributed to the 401(k) plan. The Company currently matches employee contributions up to 50% of the first 6% of base compensation that a participant contributes to the 401(k) plan, including director-level and above employees. For the years ended December 31, 2018, 2017, and 2016, total Company contributions to the 401(k) plan were $5.2 million, $2.2 million, and $0.7 million, respectively. The Company matches employee contributions 100% of the first 1% of base compensation and 50% of the next 5% that a participant contributes to the Intermedix 401(k) plan. Since the acquisition date, for the year ended December 31, 2018, total Company contributions to the Intermedix 401(k) plan were $1.1 million. |
Prepaid Expenses and Other Current Assets |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses and Other Current Assets | Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets is comprised of the following (in millions):
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Other Current Liabilities and Accrued Expenses |
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Other Current Liabilities and Accrued Expenses | Other Current Liabilities and Accrued Expenses Other current liabilities and accrued expenses is comprised of the following (in millions):
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Quarterly Financial Information (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information (Unaudited) | Quarterly Financial Information (Unaudited) The following tables provide our Quarterly Condensed Consolidated Statements of Operations (in millions except per share data):
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | Basis of Presentation The consolidated financial statements include the assets, liabilities and results of operations of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The preparation of financial statements in conformity with the United States generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes. Actual results can differ from those estimates. Beginning in 2017, the Company changed the presentation in its financial statements to be stated in millions instead of thousands. Therefore, previously reported amounts may differ due to rounding. |
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Segments | Segments Reporting segments are identified as components of an enterprise about which separate discrete financial information is available and is evaluated by the chief operating decision maker, or decision-making group, relating to resource allocation and performance assessments. All of the Company’s significant operations are organized around the single business of providing revenue cycle operations for healthcare providers. The Company views its operations and manages its business as one operating and reporting segment. |
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Revenue Recognition | Revenue Recognition Periods commencing January 1, 2017 The Company's primary source of revenue is its end-to-end RCM services fees. The Company also generates revenue through modular RCM services, where customers will engage the Company for only specific components of its end-to-end RCM service offering on a fixed-fee or transactional basis. Revenue Cycle Management RCM services fees are primarily variable and performance related, and are generally viewed as the consideration earned in satisfaction of a single performance obligation which is considered a series. Variable consideration for end-to-end RCM services are allocated to and recognized over the related time period as the amounts reflect the consideration the Company is entitled to and relate specifically to the Company’s efforts to satisfy its performance obligation. Fees for physician group and EMS provider RCM services are variable consideration contingent on customer collections, and inputs to the Company’s revenue estimates typically include historical service fees and historical customer collection amounts. RCM services fees consist of net operating fees, incentive fees, and other fees. Net Operating Fees The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; plus iii) fees accrued for physician group and EMS providers' RCM services. The Company recognizes revenue related to net operating fees ratably as the performance obligation for the RCM services is satisfied. Base fees are typically billed in advance of the quarter and paid in three monthly payments as the entity performs and the customer simultaneously receives and consumes the benefits of the services provided. The costs of customers’ revenue cycle operations, which the Company pays pursuant to its RCM agreements, are accrued based on the service period. RCM services fees for physician groups and EMS providers are invoiced on a monthly basis and payment terms are typically 30 days. Incentive Fees The Company recognizes revenue related to incentive fees ratably as the performance obligation for RCM services is satisfied, to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. Incentive fees are structured to reflect quarterly or annual performance and are evaluated on a contract-by-contract basis. Incentive fees are typically billed and paid on a quarterly basis. RCM Other The Company recognizes revenue related to other RCM fees as RCM services are provided. These services typically consist of the Company's modular RCM services offering, which consists of an obligation to provide services for a specific component of its end-to-end RCM service offering. Fees are typically variable in nature with the entire amount being included in revenue in the month of service. The customer simultaneously receives and consumes the benefits provided by the services and the fees are typically billed on a monthly basis with payment terms of up to 30 days. To the extent that certain service fees are fixed and not subject to refund, adjustment, or concession, these fees are generally recognized into revenue ratably as the performance obligation is satisfied. The Company recognizes revenue from PAS in the period in which the service is performed. The Company’s PAS arrangements typically consist of an obligation to provide specific services to customers on an if and when needed basis. These services are provided under a fixed price per unit arrangement. These contracts are evaluated on a contract-by-contract basis. Fees for the Company's PAS arrangements are typically billed on a monthly basis with 30 to 60 day payment terms. PM services arrangements include a single performance obligation, constituting a series, to manage and administer various non-clinical aspects of a customer's physician practice, which may be comprised of numerous physical office locations. Consideration for PM services is typically variable in nature and allocated to and recognized over the related time period as the amounts reflect the consideration the Company is entitled to and relate specifically to the Company’s effort to satisfy its performance obligation. PM services fees are invoiced on a monthly basis and payment terms are typically 30 days. Bundled Services Modular RCM services may be sold separately or bundled in a contract. End-to-end RCM services are typically sold separately but may be bundled with PAS. PAS are commonly sold separately. The typical length of an end-to-end RCM contract is two to ten years (subject to the parties' respective termination rights) but varies from customer to customer. PAS and modular RCM agreements generally vary in length between one and three years. For bundled arrangements, the Company accounts for individual services as a separate performance obligation if a service is separately identifiable from other items in the bundled arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The transaction price is allocated between separate services in a bundle based on their relative standalone selling prices. The standalone selling prices are determined based on the prices at which the Company separately sells its RCM, PAS, PM, or other modular services. PAS are provided at a customer’s election but do not represent material rights as the services are priced at standalone selling price throughout the life of the agreement. Periods prior to January 1, 2017 Revenue is generally recognized when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) services have been rendered, (iii) the fee is fixed or determinable and (iv) collectability is reasonably assured. Net service fees, as reported in the consolidated statement of operations and comprehensive income (loss), consist of: (a) RCM services fees and (b) professional service fees earned on a fixed fee, transactional fee or time and materials basis. The Company’s primary source of revenue is RCM services fees. RCM services fees are primarily contingent, but along with fixed fees are generally viewed as one deliverable. To the extent that certain RCM services fees are fixed and not subject to refund, adjustment or concession, such fees are generally recognized as revenue on a straight-line basis over the term of the contract. On a limited basis, the Company enters into contracts with multiple accounting elements which may include a combination of fixed fee or transactional fee elements. The selling price of each element is determined by using management's best estimate of selling price. Revenues are recognized in accordance with the accounting policies for the separate elements. RCM services fees that are contingent in nature are recognized as revenue once all the criteria for revenue recognition are met, which is generally at the end of a contract or other contractual agreement event. Revenue is recognized for RCM services fees upon the contract reaching the end of its stated term (such that the contractual relationship will not continue in its current form) to the extent that: (i) cash has been received for invoiced fees and (ii) there are no disputes at the conclusion of the term of the contract. If fees or services are disputed by a customer at the end of a contract, a settlement agreement entered into with the customer triggers revenue recognition. An other "contractual agreement event" occurs when a renewal, amendment to an existing contract, or other settlement agreement is executed in which the parties reach agreement on prior fees. Revenue is recognized up to the amount covered by such agreements. RCM services fees consist of the following contingent fees: (i) Net Operating Fees and (ii) Incentive Fees. Net Operating Fees The Company generates net operating fees to the extent the Company is able to assist customers in reducing the cost of revenue cycle operations. In limited cases, the Company earns a fixed fee instead of a fee based on the mechanics described below. The Company’s net operating fees consist of: i) gross base fees invoiced to customers; less ii) corresponding costs of customers’ revenue cycle operations which the Company pays pursuant to its RCM agreements, including salaries and benefits for the customers' RCM personnel, and related third-party vendor costs; less iii) any cost savings the Company shares with customers. Net operating fees are recorded as deferred customer billings until the Company recognizes revenue for a customer contract at the end of a contract or reaches an "other contractual agreement event". The amount of unpaid costs of customers’ revenue cycle operations and shared cost savings are reported as accrued service costs within customer liabilities in the consolidated balance sheets. Incentive Fees The Company generates revenue in the form of performance-based fees when the Company improves the customers’ financial or operational metrics. These performance metrics vary by customer contract. However, certain contracts contain a contract-to-date performance metric that is not resolved until the end of the term of the contract. Cost of Services Costs associated with generating the Company’s net services revenue, including the cost of operating its shared services centers, are expensed as incurred, with the exception of deferred contract costs, which are discussed further in Note 21. Cost of services consist of (i) infused management, on-site revenue cycle employees and technology costs, (ii) shared services costs and (iii) other costs to perform physician advisory services. Infused management, on-site revenue cycle employees and technology costs consist primarily of wages, bonuses, benefits, share-based compensation, travel and other costs associated with employees who are assigned to customer sites to help manage the Company’s customers’ revenue cycle operations. The other significant portion of such expenses is an allocation of the costs associated with maintaining, improving and deploying our integrated proprietary technology suite. Shared services costs relate to the Company’s shared services centers in the U.S. and internationally that perform patient scheduling and pre-registration, medical transcription, cash posting, reconciliation of payments to billing records, patient follow-up and Medicaid eligibility determination for our customers. The Company incurs expenses related to salaries and benefits for employees in its shared services centers and non-payroll costs associated with operating its shared services centers. Other expenses consist of costs related to managing other services. These expenses consist primarily of wages, bonuses, benefits, share-based compensation and facilities costs. Revenue Recognition The Company follows the guidance under Topic 606, Revenue from Contracts with Customers, (“Topic 606”). Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a service to a customer, which is typically over the contract term. Estimates of variable consideration are included in revenue to the extent that it is probable that a significant reversal of cumulative revenue will not occur once the uncertainty is resolved. |
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Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) is the net income (loss) of the Company combined with other changes in stockholders’ equity (deficit) not involving ownership interest changes. For the Company, such changes are foreign currency translation adjustments and changes in derivatives designated as cash flow hedges. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. |
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Restricted Cash Equivalents | Restricted Cash Equivalents In 2018 and 2017, restricted cash equivalents represent the amount of cash or certificate of deposits ("CDs") that the Company is unable to access for operational purposes as it collateralizes certain Company expenses or derivatives. |
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Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable is comprised of unpaid balances pertaining to modular services and end-to-end RCM customers. The Company maintains an estimated allowance for doubtful accounts to reduce its accounts receivable to the amount that it believes will be collected. This allowance is based on the Company’s historical experience, its assessment of each customer’s ability to pay, the length of time a balance has been outstanding, input from key customer resources assigned to each customer and the status of any ongoing operations with each applicable customer. |
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Property, Equipment and Software | Property, Equipment and Software Property, equipment and software are stated at cost, and related depreciation and amortization are calculated on the straight-line method over the estimated useful lives of the assets. The Company capitalizes qualifying internal and third-party costs and hardware and software costs related to the Company’s software development activities in accordance with ASC 350-40. The Company amortizes the capitalized software development costs over their estimated life on a straight-line basis. |
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Goodwill | Goodwill Goodwill represents the difference between the purchase price of acquired companies and the related fair value of the net assets acquired, which is accounted for by the acquisition method of accounting. The Company annually tests goodwill for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying value. The goodwill impairment test consists of a qualitative assessment of impairment indicators, followed by, if necessary, a quantitative assessment comparing the carrying amount to the reporting unit's fair value. To the extent that the carrying value exceeds the fair value, and impairment charge would be recorded. The Company has determined there to be one reporting unit, end-to-end RCM, consistent with its operating segment. |
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Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Property, equipment, software and other acquired intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If circumstances require a long-lived asset or asset group be reviewed for possible impairment, the Company first compares undiscounted cash flows expected to be generated by each asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment charge is recognized to the extent that the carrying value exceeds the fair value. |
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Accrued Compensation and Benefits | Accrued Compensation and Benefits Accrued compensation and benefits consists of accrued payroll, bonus, paid time off, health benefits, severance, and compensation and benefits related taxes. |
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Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using current tax laws and enacted tax rates in effect for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets if, based upon the weight of all available evidence, both positive and negative, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the relevant tax authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest amount of benefit that has a greater than 50% percent likelihood of being realized upon ultimate settlement. Interest and penalties relating to income taxes are recognized in our income tax provision in the consolidated statements of operations and comprehensive income (loss). |
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Legal and Other Contingencies | Legal and Other Contingencies In the normal course of business, the Company is subject to regulatory investigations or legal proceedings, as well as demands, claims and threatened litigation. The Company records an estimated loss for any claim, lawsuit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgment is required in both the determination of the probability and whether the loss can be reasonably estimated. Actual expenses could differ from such estimates. |
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Foreign Currency Translation and Transaction Gains (Losses) | Foreign Currency Translation and Transaction Gains (Losses) Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where such local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense accounts are translated at average exchange rates during the year which approximates the rates in effect at the transaction dates. The resulting translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss). |
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Share-Based Compensation Expense | Share-Based Compensation Expense The Company determines the expense for all employee share-based compensation awards by estimating their fair value and recognizing such value as an expense, on a ratable basis, in the consolidated financial statements over the requisite service period in which the employees earn the awards. The fair value of performance and service condition stock options is calculated using the Black-Scholes option pricing model and, for market condition stock awards, the fair value is estimated using Monte Carlo simulations. As of January 1, 2017, the Company adopted ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). The Company elected to change its accounting policy to account for forfeitures as they occur under the new standard. The change was applied on a modified retrospective basis with a cumulative effect adjustment recorded. Prior to January 1, 2017, the Company applied an estimated forfeiture rate derived from its historical data and estimates of the likely future actions of option holders when recognizing the share-based compensation expense of the options. Excess tax benefits and shortfalls for share-based payments are now included in operating activities rather than in financing activities. The changes have been applied prospectively in accordance with ASU 2016-09 and prior periods have not been adjusted. To determine the fair value of a share-based award using the Black-Scholes option pricing model, the Company makes assumptions regarding the risk-free interest rate, expected future volatility and expected life of the award. These inputs are subjective and generally require significant analysis and judgment to develop. The Company aggregates all employees into one pool based on the grant date for valuation purposes. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. The Company estimates the expected volatility of the share price by reviewing the historical volatility levels of its common stock in conjunction with that of public companies that operate in similar industries or are similar in terms of stage of development or size and then projecting this information toward its future expected volatility. The Company exercises judgment in selecting these companies, as well as in evaluating the available historical and implied volatility for these companies. The Company calculates the expected term in years for each stock option using a simplified method based on the average of each option’s vesting term and original contractual term. The simplified method was used due to the lack of sufficient historical data available to provide a reasonable basis upon which to estimate the expected term of each stock option. To determine the fair value of a share-based award using Monte Carlo simulations, the Company makes assumptions regarding the risk-free interest rate, expected future volatility, expected dividend yield and performance period. The risk-free rate is based on the U.S. treasury yield curve in effect at the time of grant. The Company estimates the expected volatility of the share price by reviewing the historical volatility levels of its common stock in conjunction with that of public companies that operate in similar industries or are similar in terms of stage of development or size and then projecting this information toward its future expected volatility. Dividend yield is determined based on the Company’s future plans to pay dividends. The Company had no plans to pay dividends at December 31, 2018. The Company calculates the performance period based on the specific market condition to be achieved and derived from historical data and estimates of future performance. The Company recognizes compensation expense using a straight-line method over the applicable service or performance period. During each quarter, the share-based compensation expense is adjusted to reflect options that vested or were forfeited during the period; however, compensation expense already recognized is not adjusted if market conditions are not met. |
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Derivative Financial Instruments | Derivative Financial Instruments The Company is actively managing the risk of changes in foreign currency exchange rate through foreign currency forward contracts traded in over-the-counter markets governed by International Swaps and Derivatives Association, Inc. (ISDA) agreements. Derivative transactions are governed by a uniform set of policies and procedures covering areas such as authorization, counterparty exposure and hedging practices. Positions are monitored using techniques such as market value and sensitivity analyses. The Company does not enter into derivative transactions for trading purposes. In order for a derivative to qualify for hedge accounting, the derivative must be formally designated as a cash flow hedge by documenting the relationship between the derivative and the hedged item. The documentation includes a description of the hedging instrument, the hedged item, the risk being hedged, the Company’s risk management objective and strategy for undertaking the hedge, and the method for assessing the effectiveness of the hedge. Additionally, the hedge relationship must be expected to be highly effective at offsetting changes in the cash flows of the hedged item at both inception of the hedge and on an ongoing basis. Prospective and retrospective hedge effectiveness will be assessed by a comparison of the critical terms of the hedging instrument and the hedged transaction. In the event that the Company’s ongoing assessment demonstrates that the critical terms of the hedging instrument or the hedged transaction have changed and no longer match, hedge effectiveness is assessed by use of a Hypothetical Derivative Method, which assesses hedge effectiveness based on a comparison of the change in fair value of the actual derivative designated as the hedging instrument and the change in fair value of a perfectly effective hypothetical derivative. The perfectly effective hypothetical derivative would have terms that identically match the critical terms of the hedged item. The Company’s derivative financial instruments consist of non-deliverable foreign currency forward contracts. Fair values for derivative financial instruments are based on prices computed using third-party valuation models and are classified as Level 2 in accordance with the three-level hierarchy of fair value measurements. The change in fair value of a hedging instrument is recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity (deficit) and is reclassified into cost of services in the consolidated statement of operations and comprehensive income (loss) during the period in which the hedged transaction impacts earnings. |
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Treasury Stock | Treasury Stock The Company records treasury stock at the cost to acquire such shares, including commissions paid to brokers. Treasury stock is included as a component of stockholders’ equity (deficit). |
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Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic net income per share is computed by dividing net income, less any dividends, accretion or decretion, redemption or induced conversion on the Preferred Stock, by the weighted average number of common shares outstanding during the period. As the Preferred Stock (as defined in Note 13) participates in dividends alongside the Company’s common stock (per their participating dividends), the Preferred Stock would constitute participating securities under ASC 260-10 and are applied to earnings per share using the two-class method. Under this method, all earnings (distributed and undistributed) are allocated to common shares and participating securities based on their respective rights to receive dividends. |
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Recently Issued Accounting Standards and Disclosures | Recently Issued Accounting Standards and Disclosures In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"), which supersedes existing guidance on accounting for leases in Topic 840, Leases. ASU 2016-02 generally requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The Company will adopt ASU 2016-02 on January 1, 2019 using the modified retrospective transition method and record a cumulative-effect adjustment to beginning retained earnings without restating prior period comparative financial statements. The Company will elect the package of practical expedients that will retain existing lease classification and initial directs costs for any leases that exist prior to adoption of the standard. In addition, the Company will not separate lease and non-lease components for its equipment assets. As part of the adoption, the Company implemented lease accounting software, updated processes and accounting policies and enhanced internal controls. The Company expects to record between $70.0 million and $80.0 million of right-of-use assets and offsetting lease liabilities between $85.0 million and $95.0 million. The Company expects no significant impact to retained earnings. The adjustment will have no impact on the consolidated statement of operations and comprehensive income (loss) or the consolidated statement of cash flows. On January 1, 2018, the Company adopted ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU 2016-18"), using a retrospective transition method. ASU 2016-18 is intended to reduce diversity in practice in the classification and presentation of changes in restricted cash on the Consolidated Statement of Cash Flows. ASU 2016-18 requires that the Consolidated Statement of Cash Flows explain the change in total cash and cash equivalents and amounts generally described as restricted cash or restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts. Upon adoption of ASU 2016-18, restricted cash equivalents of $1.5 million as of December 31, 2017, and December 31, 2016, and January 1, 2016 were reclassified to be included within the reconciliation of beginning and ending cash and restricted cash equivalents on the Company's Consolidated Statements of Cash Flows. Restricted cash equivalents of $2.3 million are included in the ending cash balance on the Company's Consolidated Statement of Cash Flows as of December 31, 2018. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 is intended to improve the financial reporting of hedging relationships in order to better portray the economic results of an entity's risk management activities in its financial statements. The guidance is effective for interim and annual periods beginning after December 15, 2018. On January 1, 2018, we adopted ASU 2017-12. The adoption of ASU 2017-12 did not have a material effect on our consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force). This ASU addresses the following eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company adopted this standard on January 1, 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In June 2018, the Company elected to early adopt ASU 2017-04. The adoption had no impact on the Company's consolidated financial statements. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company records its financial assets and liabilities at fair value. The accounting standard for fair value (i) defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date, (ii) establishes a framework for measuring fair value, (iii) establishes a hierarchy of fair value measurements based upon the ability to observe inputs used to value assets and liabilities, (iv) requires consideration of nonperformance risk and (v) expands disclosures about the methods used to measure fair value. The accounting standard establishes a three-level hierarchy of measurements based upon the reliability of observable and unobservable inputs used to arrive at fair value. Observable inputs are independent market data, while unobservable inputs reflect the Company’s assumptions about valuation. The three levels of the hierarchy are defined as follows:
The carrying amounts of the Company’s financial instruments, which include financial assets such as cash and cash equivalents, restricted cash equivalents, accounts receivable, net, and certain other current assets, as well as financial liabilities such as accounts payable, accrued service costs, accrued compensation and benefits and certain other accrued expenses, approximate their fair values, due to the short-term nature of these instruments. See Note 23, Derivative Financial Instruments, for a discussion of the fair value of the Company's forward currency derivative contracts. The fair value of the Company's senior term loan is estimated based on the quoted market prices for the same or similar issue, and is considered a Level 2 measurement. The fair value of the Company's notes is estimated based on market indications compared to the inputs of the existing agreement and is considered a Level 2 measurement. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||
Property, Equipment and Software, Schedule of Useful Lives | The major classifications of property, equipment and software and their expected useful lives are as follows:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Liabilities Carried at Book Value | The fair value of liabilities carried at book value in the financial statements at December 31, 2018 is as follows (in millions):
(1) Book value net of unamortized debt issuance costs of $8.1 million. (2) Book value net of unamortized debt issuance costs of $2.2 million. |
Acquisition (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Assets Acquired and Liabilities Assumed | The preliminary fair value of assets acquired and liabilities assumed is (in millions):
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Schedule of Pro Forma Results | The following table summarizes, on a pro forma basis, the combined results of the Company as though the Intermedix Acquisition had occurred as of January 1, 2017. These pro forma results are not necessarily indicative of either the actual consolidated results had the Intermedix Acquisition occurred as of January 1, 2017 or of the future consolidated operating results. Pro forma results are (in millions):
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Accounts Receivable and Allowance for Doubtful Accounts (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allowance for Doubtful Accounts | Movements in the allowance for doubtful accounts are as follows (in thousands):
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Property, Equipment and Software (Tables) |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property, Equipment and Software | Property, equipment and software consist of the following (in millions):
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Summary Depreciation and Amortization Expense | The following table summarizes the allocation of depreciation and amortization expense between cost of services and selling, general and administrative expenses (in millions):
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Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets | The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at December 31, 2018 (in millions, except weighted average useful life):
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Schedule of Valuation Methodologies Used to Determine Preliminary Fair Values of Intangible Assets | A preliminary fair value of the identifiable intangible assets was derived, utilizing the following valuation methodology:
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Schedule of Estimated Annual Amortization Expense | Estimated annual amortization expense related to intangible assets with definite lives as of December 31, 2018 is as follows (in millions):
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Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Schedule of Changes in Carrying Amount of Goodwill | Changes in the carrying amount of goodwill for the year ended December 31, 2018 were (in millions):
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Revenue Recognition (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregated Revenue By Source | In the following table, revenue is disaggregated by source of revenue (in millions):
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Schedule of Assets and Liabilities | The following table provides information about receivables, contracts assets, and contract liabilities from contracts with customers (in millions):
(1) Receivables are included in accounts receivable, net. The balance includes accounts receivable, net - related party. Significant changes in the contract assets and the contract liabilities balances during the year ended December 31, 2018 are as follows (in millions):
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Schedule of Transaction Price Allocated to the Remaining Performance Obligation | The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period (in millions). The estimated revenue does not include amounts of variable consideration that are constrained.
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Customer Liabilities (Tables) |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Customer Liabilities | Customer liabilities consist of the following (in millions):
(1) Current and non-current portion of customer liabilities include amounts for a related party. See Note 20, Related Party Transactions, for further discussion. |
Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Carrying Values Long-Term Debt | The carrying amounts of debt consist of the following (in millions):
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Schedule of Maturities of Long-term Debt | Scheduled maturities of the Company's long-term debt for each of the five years succeeding December 31, 2018 and thereafter are summarized as follows (in millions):
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Share-Based Compensation (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Valuation Assumptions | The following table sets forth the significant assumptions used in the Black-Scholes option pricing model and the Monte Carlo simulations and the calculation of share-based compensation expense during 2018, 2017, and 2016:
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Schedule of Share-based Compensation Expense | Total share-based compensation costs that have been included in the Company’s consolidated statements of operations were as follows (in millions):
(1) In addition to the share-based compensation expense recorded above, $0.3 million, $0.5 million, and $0.4 million of share-based compensation expense was capitalized to deferred contract costs for the year ended December 31, 2018, 2017, and 2016, respectively. See Note 21, Deferred Contract Costs, for further discussion. |
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Schedule of Stock Option Activity | The following table sets forth a summary of all option activity under all plans for the years ended December 31, 2018, 2017, and 2016:
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Schedule of Restricted Stock Awards Activity | The following table sets forth a summary of the activity during the years ended December 31, 2018, 2017, and 2016:
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Schedule of Restricted Stock Units Award Activity | A summary of the activity during the years ended December 31, 2018, 2017, and 2016 is shown below:
A summary of the PBRSU activity during the years ended December 31, 2018, and 2017 is shown below:
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Other (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Restructuring and Related Costs | For the year ended December 31, 2018, 2017, and 2016, other costs consist of the following (in millions):
(1) Costs related to retention payments and legal fees paid in connection with the closing of the Transaction. (2) Costs related to evaluating, pursuing and integrating acquisitions as part of the Company’s inorganic growth strategy. Integration costs include employee time and expenses spent on integration activities, vendor spend and severance and retention amounts associated with integration activities. (3) As part of the transition of personnel to the Company under certain operating partner model contracts, the Company has agreed to reimburse, or directly pay the affected employees, for certain severance and retention costs related to certain employees who will not be transitioned to the Company, or whose jobs will be relocated after the employee transitions to the Company. (4) Project costs related to the Company's effort to automate its transactional environment. |
Income Taxes (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic and Foreign Components of Income (Loss) | The domestic and foreign components of income (loss) before income taxes consist of the following (in millions):
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Schedule of Components of Income Tax Expense (Benefit) | For the years ended December 31, 2018, 2017, and 2016, the Company’s current and deferred income tax expense (benefit) attributable to income (loss) from operations are as follows (in millions):
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Schedule of Effective Income Tax Rate Reconciliation | Reconciliation of the difference between the actual tax rate and the statutory U.S. federal income tax rate is as follows:
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Schedule of Net Deferred Tax Assets | The following table sets forth the Company’s net deferred tax assets as of December 31, 2018 and 2017 (in millions):
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8.00% Series A Convertible Preferred Stock (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Temporary Equity Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Preferred Stock Activity | The following summarizes the Preferred Stock activity for the year ended December 31, 2018 and 2017 (in millions, except per share data):
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Earnings (Loss) Per Share (Tables) |
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings (Loss) Per Share, Basic and Diluted | Basic and diluted net income (loss) per common share are calculated as follows (in millions, except share and per share data):
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | The aggregate future minimum rental commitments under all noncancelable operating leases having remaining terms in excess of one year as of December 31, 2018 are as follows (in millions):
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Related Party Transactions (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | Net services revenue from services provided to Ascension included in the Company’s consolidated statements of operations were (in millions):
Amounts included in the Company's consolidated balance sheets for Ascension, excluding debt (see Note 12, Debt), are (in millions):
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Deferred Contract Costs (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Deferred Contract Costs | The following table summarizes the breakout of deferred contract costs (in millions):
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Derivative Financial Instruments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivatives Effect on Statement of Operations | The effect of derivatives in the Company's consolidated statements of operations for the year ended December 31, 2018 and 2017 were (in millions):
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Schedule of Derivatives Fair Value on Balance Sheet | The location and fair value of derivative instruments designated as hedges in the consolidated balance sheet as of December 31, 2018 and December 31, 2017 are as follows:
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Schedule of Offsetting Derivative Assets | The following table presents amounts relevant to offsetting of the Company's derivative assets and liabilities and the corresponding collateral account as of December 31, 2018 and December 31, 2017 (in millions):
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Schedule of Offsetting Derivative Liabilities | The following table presents amounts relevant to offsetting of the Company's derivative assets and liabilities and the corresponding collateral account as of December 31, 2018 and December 31, 2017 (in millions):
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Prepaid Expenses and Other Current Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets is comprised of the following (in millions):
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Other Current Liabilities and Accrued Expenses (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Current Liabilities and Accrued Expenses | Other current liabilities and accrued expenses is comprised of the following (in millions):
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Quarterly Financial Information (Unaudited) (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Condensed Consolidated Statements of Operations | The following tables provide our Quarterly Condensed Consolidated Statements of Operations (in millions except per share data):
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Description of Business - Narrative (Details) |
May 08, 2018
USD ($)
customer
|
Jan. 23, 2018
USD ($)
$ / shares
shares
|
Feb. 16, 2016 |
---|---|---|---|
Business Acquisition [Line Items] | |||
Long term strategic partnership, term | 10 years | ||
Contract term | 10 years | ||
Number of shares issued in transaction (in shares) | shares | 4,665,594 | ||
Class of warrant or right, number of securities called by warrants or rights (in shares) (up to) | shares | 1,500,000 | ||
Warrant exercise price (in dollars per share) | $ / shares | $ 6.00 | ||
Proceeds from issuance of warrants | $ | $ 20,000,000 | ||
Intermedix | |||
Business Acquisition [Line Items] | |||
Purchase price, subject to customary adjustments | $ | $ 460,000,000 | ||
Number of customers | customer | 700 | ||
Number of employees | customer | 2,200 |
Summary of Significant Accounting Policies - Property, Equipment and Software (Details) |
12 Months Ended |
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Dec. 31, 2018 | |
Buildings | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 39 years |
Computers and other equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 3 years |
Computers and other equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 5 years |
Leasehold improvements | |
Property, Plant and Equipment [Line Items] | |
Useful lives, description | Shorter of 10 years or lease term |
Leasehold improvements | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 10 years |
Office furniture | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 5 years |
Software | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 3 years |
Software | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful lives | 5 years |
Recent Accounting Pronouncements - Narrative (Details) - USD ($) $ in Millions |
Jan. 01, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Jan. 01, 2016 |
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New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Restricted Cash | $ 2.3 | $ 1.5 | $ 1.5 | $ 1.5 | |
Minimum | Accounting Standards Update 2016-02 | Scenario, Forecast | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Estimated increase in right-of-use assets, upon adoption | $ 70.0 | ||||
Estimated increase in lease liabilities, upon adoption | 85.0 | ||||
Maximum | Accounting Standards Update 2016-02 | Scenario, Forecast | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Estimated increase in right-of-use assets, upon adoption | 80.0 | ||||
Estimated increase in lease liabilities, upon adoption | $ 95.0 |
Fair Value of Financial Instruments - Narrative (Details) - Fair Value, Measurements, Recurring |
Dec. 31, 2018
USD ($)
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Financial assets required to be measured at fair value | $ 0 |
Financial liabilities required to be measured at fair value | $ 0 |
Acquisition - Fair Value of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions |
May 08, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Allocation of consideration to assets acquired and liabilities assumed: | |||
Goodwill | $ 254.8 | $ 0.0 | |
Intermedix | |||
Business Acquisition [Line Items] | |||
Total purchase consideration | $ 469.2 | ||
Allocation of consideration to assets acquired and liabilities assumed: | |||
Cash, cash equivalents, and restricted cash | 6.4 | ||
Accounts receivable | 35.5 | ||
Prepaid expenses and other current assets | 11.6 | ||
Property, equipment and software | 25.4 | ||
Intangible assets | 191.1 | ||
Goodwill | 254.8 | ||
Other assets | 0.3 | ||
Accounts payable | (6.4) | ||
Current portion of customer liabilities | (8.6) | ||
Accrued compensation and benefits | (7.7) | ||
Other accrued expenses | (6.2) | ||
Deferred income tax liabilities | (27.0) | ||
Net assets acquired | $ 469.2 |
Acquisition - Pro Forma Results (Unaudited) (Details) - Intermedix - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Business Acquisition [Line Items] | ||
Net services revenue | $ 938.5 | $ 642.8 |
Net income (loss) | $ (57.8) | $ (74.7) |
Accounts Receivable and Allowance for Doubtful Accounts - Schedule of Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Beginning balance | $ 363 | $ 66 | |
Provision (recoveries) | 754 | 304 | $ 0 |
Write-offs | (3) | (7) | |
Ending balance | $ 1,114 | $ 363 | $ 66 |
Property, Equipment and Software - Schedule of Property, Equipment and Software (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | $ 176.7 | $ 102.9 |
Less accumulated depreciation and amortization | (81.5) | (54.6) |
Property, equipment and software, net | 95.2 | 48.3 |
Buildings and land | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 4.6 | 0.0 |
Computer and other equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 48.6 | 28.7 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 27.9 | 22.3 |
Software | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | 85.9 | 44.5 |
Office furniture | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software, gross | $ 9.7 | $ 7.4 |
Property, Equipment and Software - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software | $ 95.2 | $ 48.3 |
Capitalized computer and software additions | 22.6 | |
Located Internationally | ||
Property, Plant and Equipment [Line Items] | ||
Property, equipment and software | 15.6 | $ 10.1 |
Other accrued expenses | ||
Property, Plant and Equipment [Line Items] | ||
Capital lease obligations | 10.0 | |
Other non-current liabilities | ||
Property, Plant and Equipment [Line Items] | ||
Capital lease obligations | $ 4.2 |
Property, Equipment and Software - Allocation of Depreciation and Amortization Expense between Cost of Services and Selling, General and Administrative Expenses (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | |||
Total depreciation and amortization | $ 28.2 | $ 16.3 | $ 10.2 |
Cost of services | |||
Property, Plant and Equipment [Line Items] | |||
Total depreciation and amortization | 23.9 | 14.5 | 9.5 |
Selling, general and administrative | |||
Property, Plant and Equipment [Line Items] | |||
Total depreciation and amortization | $ 4.3 | $ 1.8 | $ 0.7 |
Intangible Assets - Components of Intangible Assets (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Finite-Lived Intangible Assets [Line Items] | |
Gross Carrying Value | $ 191.1 |
Accumulated Amortization | (10.6) |
Net Book Value | $ 180.5 |
Customer relationships | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 17 years |
Gross Carrying Value | $ 160.9 |
Accumulated Amortization | (6.1) |
Net Book Value | $ 154.8 |
Tradename | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 1 year |
Gross Carrying Value | $ 1.1 |
Accumulated Amortization | (1.1) |
Net Book Value | $ 0.0 |
Technology | |
Finite-Lived Intangible Assets [Line Items] | |
Weighted Average Useful Life | 6 years |
Gross Carrying Value | $ 26.8 |
Accumulated Amortization | (2.9) |
Net Book Value | 23.9 |
Favorable leasehold interests | |
Finite-Lived Intangible Assets [Line Items] | |
Gross Carrying Value | 2.3 |
Accumulated Amortization | (0.5) |
Net Book Value | $ 1.8 |
Intangible Assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2018 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Intangible asset amortization expense | $ 0.0 | $ 10.6 |
Intangible Assets - Future Amortization (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract] | |
2019 | $ 14.3 |
2020 | 14.2 |
2021 | 14.2 |
2022 | 14.2 |
2023 | 14.2 |
Thereafter | 109.4 |
Net Book Value | $ 180.5 |
Goodwill - Carrying Amount of Goodwill (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning Balance | $ 0.0 |
Acquisitions | 254.8 |
Ending Balance | $ 254.8 |
Goodwill - Narrative (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
| |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Impairment of goodwill | $ 0 |
Revenue Recognition - Schedule of Disaggregated Revenue by Source (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Disaggregation of Revenue [Line Items] | |||||||||||
Net services revenue | $ 262.9 | $ 250.4 | $ 207.9 | $ 147.3 | $ 140.3 | $ 123.2 | $ 99.4 | $ 86.9 | $ 868.5 | $ 449.8 | $ 592.6 |
Net operating fees | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net services revenue | 760.2 | 374.8 | |||||||||
Incentive fees | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net services revenue | 38.3 | 29.0 | |||||||||
Other | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net services revenue | $ 70.0 | $ 46.0 |
Revenue Recognition - Schedule of Contract Balances (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Receivables, including related party | $ 97.4 | $ 23.6 |
Contract assets | 1.2 | 0.0 |
Contract liabilities | $ 22.3 | $ 15.5 |
Revenue Recognition - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Revenue from Contract with Customer [Abstract] | ||
Revenue recognized from changes in transaction prices | $ 0.4 | $ 1.3 |
Revenue recognized for services performed in periods prior to execution of new agreements | $ 0.2 | 1.9 |
Revenue performance obligation, period | PAS performance obligations are typically short in duration (often less than 1 day) with any uncertainty related to the associated variable consideration resolved as each increment of service (completion of a level of care review or an appeal) is completed which reflects the value the customer receives from the Company’s fulfillment of the performance obligation. | |
Revenue recognized that was included in the contract liability balance at the beginning of the period | $ 51.8 | 19.9 |
Revenue recognized, advanced billings | $ 47.8 | $ 19.5 |
Revenue Recognition - Schedule of Changes in Contra Assets and Contract Liabilities (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Revenue from Contract with Customer [Abstract] | ||
Revenue recognized that was included in the contract liability balance at the beginning of the period | $ 51.8 | $ 19.9 |
Increases due to cash received, excluding amounts recognized as revenue during the period | 5.8 | |
Acquisitions, Contract assets | 1.2 | |
Acquisitions, Contract liabilities | $ 2.1 |
Customer Liabilities - Schedule of Customer Liabilities (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Accrued service costs, current | $ 51.0 | $ 23.7 |
Collections payable to clients, current | 9.1 | 0.0 |
Refund liabilities, current | 0.6 | 0.5 |
Deferred revenue (contract liabilities), current | 5.1 | 4.0 |
Current portion of customer liabilities | 65.8 | 28.2 |
Refund liabilities, non-current | 0.4 | 0.0 |
Deferred revenue (contract liabilities), non-current | 17.3 | 11.5 |
Non current portion of customer liabilities | 17.7 | 11.5 |
Total customer liabilities | $ 83.5 | $ 39.7 |
Debt - Carrying Amounts of Debt (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt | $ 378.7 | |
Unamortized discount and issuance costs | (20.0) | |
Total debt | 358.7 | |
Less: Current maturities | (2.7) | $ 0.0 |
Total long-term debt | 356.0 | |
Notes (primarily with related parties) | Subordinated Notes Due 2026 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 110.0 | |
Senior Revolver | Line of Credit | ||
Debt Instrument [Line Items] | ||
Long-term debt | 0.0 | |
Senior Term Loan | Line of Credit | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 268.7 |
Debt - Schedule of Maturities of Long-term Debt (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2019 | $ 2.7 |
2020 | 2.7 |
2021 | 2.7 |
2022 | 2.7 |
2023 | 2.7 |
Thereafter | 365.2 |
Total debt | $ 378.7 |
Share-Based Compensation - Assumptions (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Risk-free interest rate, minimum | 2.30% | 1.80% | 1.20% |
Risk-free interest rate, maximum | 2.98% | 2.38% | 2.06% |
Expected volatility, minimum | 40.00% | 40.00% | 45.00% |
Expected volatility, maximum | 45.00% | 45.00% | 50.00% |
Forfeitures | 0.00% | 0.00% | 5.68% |
Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected term (in years) | 2 years 7 months 2 days | 2 years 4 months 2 days | 5 years 11 months 15 days |
Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected term (in years) | 6 years 3 months | 6 years 3 months 15 days | 6 years 3 months 19 days |
Share-Based Compensation - Compensation Expense Allocation (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Share-based compensation expense allocation | $ 18.4 | $ 10.7 | $ 29.9 |
Share-based compensation expense capitalized to deferred contract costs | 0.3 | 0.5 | 0.4 |
Cost of services | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Share-based compensation expense allocation | 5.8 | 4.5 | 6.1 |
Selling, general and administrative | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Share-based compensation expense allocation | 12.4 | 6.1 | 22.0 |
Other | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Share-based compensation expense allocation | $ 0.2 | $ 0.1 | $ 1.8 |
Share-Based Compensation - Restricted Stock Award Activity (Details) - Restricted Stock Awards - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Shares | |||
Outstanding and unvested at beginning of period (in shares) | 2,352,490 | 5,862,712 | 9,255,932 |
Granted (in shares) | 0 | 0 | 3,071,876 |
Vested (in shares) | (1,184,687) | (2,675,782) | (3,361,336) |
Forfeited (in shares) | (72,259) | (834,440) | (3,103,760) |
Outstanding and unvested at end of period (in shares) | 1,095,544 | 2,352,490 | 5,862,712 |
Weighted- Average Grant Date Fair Value | |||
Outstanding and unvested at beginning of period (in dollars per share) | $ 3.03 | $ 3.01 | $ 4.24 |
Granted (in dollars per share) | 0.00 | 0.00 | 2.58 |
Vested (in dollars per share) | 3.07 | 3.50 | 4.37 |
Forfeited (in dollars per share) | 3.24 | 1.52 | 4.69 |
Outstanding and unvested at end of period (in dollars per share) | $ 3.02 | $ 3.03 | $ 3.01 |
Other - Other Costs (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Restructuring and Related Activities [Abstract] | |||
Severance and employee benefits | $ 2.3 | $ 0.3 | $ 3.5 |
Facility charges | 0.1 | 0.0 | 1.1 |
Non-cash share based compensation | 0.0 | 0.1 | 1.8 |
Transaction fees | 0.0 | 0.0 | 12.7 |
Restatement costs | 0.0 | 0.0 | 1.2 |
Acquisition related costs | 19.7 | 3.1 | 0.0 |
Transitioned employees restructuring expense | 4.3 | 1.2 | 0.0 |
Digital Transformation Office | 3.6 | 0.0 | 0.0 |
Other | 0.4 | 0.0 | 0.5 |
Total other | $ 30.4 | $ 4.7 | $ 20.8 |
Income Taxes - Schedule of Domestic and Foreign Components of Income (Loss) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ (65.5) | $ (33.9) | $ 292.4 |
Foreign | 8.8 | 6.6 | 5.8 |
Income (loss) before income tax provision (benefit) | $ (56.7) | $ (27.3) | $ 298.2 |
Income Taxes - Schedule of Current and Deferred Income Tax Expense (Benefit) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Current | |||
Current, U.S. Federal | $ 0.0 | $ 0.1 | $ (0.2) |
Current, State & Local | 0.9 | 0.2 | 0.0 |
Current, Foreign | 1.9 | 1.5 | 1.1 |
Current Income Tax Expense (Benefit) | 2.8 | 1.8 | 0.9 |
Deferred | |||
Deferred, U. S. Federal | (10.3) | 32.4 | 95.6 |
Deferred, State & Local | (2.6) | (2.3) | 25.0 |
Deferred, Foreign | (1.3) | (0.4) | (0.4) |
Deferred Income Tax Expense (Benefit) | (14.2) | 29.7 | 120.2 |
Total | |||
Total U. S. Federal Current and Deferred Income Tax Expense (Benefit) | (10.3) | 32.5 | 95.4 |
Total State & Local Current and Deferred Income Tax Expense (Benefit) | (1.7) | (2.1) | 25.0 |
Total Foreign Current and Deferred Income Tax Expense (Benefit) | 0.6 | 1.1 | 0.7 |
Total Current and Deferred Income Tax Expense (Benefit) | $ (11.4) | $ 31.5 | $ 121.1 |
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Federal statutory tax rate | 21.00% | 35.00% | 35.00% |
Increase in income tax rate resulting from: | |||
State and local income taxes, net of federal tax benefits | 2.00% | 5.00% | 5.00% |
U.S. Tax Reform | (3.00%) | (140.00%) | 0.00% |
Stock-based Compensation | 3.00% | (17.00%) | 0.00% |
Other | (3.00%) | 2.00% | 1.00% |
Actual tax rate | 20.00% | (115.00%) | 41.00% |
Income Taxes - Schedule of Net Deferred Tax Assets (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred Tax assets: | ||
Net operating loss carryforwards | $ 60.5 | $ 47.9 |
Share-based compensation | 13.3 | 13.0 |
Accrued bonus | 8.6 | 4.0 |
Advanced billing revenue | 5.3 | 4.0 |
Other reserves | 0.7 | 0.4 |
Alternative minimum tax | 3.1 | 2.4 |
Interest expense limitation | 5.3 | 0.0 |
Other | 3.8 | 4.0 |
Deferred Rent | 4.3 | 2.9 |
Total gross deferred tax assets | 104.9 | 78.6 |
Intangible assets | (36.1) | 0.0 |
Fixed assets | (4.1) | (1.7) |
Contract implementation costs | (5.1) | (3.3) |
Less valuation allowance | (2.1) | (3.1) |
Net deferred tax asset | $ 57.5 | $ 70.5 |
Income Taxes - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Examination [Line Items] | ||||
Finalized net provisional tax cost, Tax Cuts And Jobs Act Of 2017 | $ 0.1 | |||
Net provisional tax cost, Tax Cuts And Jobs Act Of 2017 | $ 38.2 | |||
Valuation allowance | 2.1 | $ 2.1 | 3.1 | |
Future foreign earnings distributions, percentage eligible for foreign dividends received deduction | 100.00% | |||
Current tax provision | $ 2.8 | 1.8 | $ 0.9 | |
Unrecognized tax benefits | 0.0 | $ 0.0 | 0.0 | 0.0 |
Statute of limitations minimum | 3 years | |||
Statute of limitations maximum | 6 years | |||
U.S. Federal | ||||
Income Tax Examination [Line Items] | ||||
Operating loss carryforwards | 235.2 | $ 235.2 | ||
State | ||||
Income Tax Examination [Line Items] | ||||
Operating loss carryforwards | 221.1 | 221.1 | ||
Valuation allowance | $ 1.8 | 1.8 | 1.3 | |
India | ||||
Income Tax Examination [Line Items] | ||||
Current tax provision | 1.5 | 1.4 | 1.2 | |
Benefit from tax holiday | $ 1.6 | $ 1.0 | $ 0.9 |
8.00% Series A Convertible Preferred Stock - Schedule of Preferred Stock Activity (Details) - Redeemable Convertible Preferred Stock - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Shares Issued and Outstanding | |||
Beginning Balance (in shares) | 227,483 | 210,160 | 0 |
Issuance of preferred stock (in shares) | 200,000 | ||
Dividends paid/accrued dividends (in shares) | 18,750 | 17,323 | 10,160 |
Ending Balance (in shares) | 246,233 | 227,483 | 210,160 |
Carrying Value | |||
Beginning Balance | $ 189.3 | $ 171.6 | $ 0.0 |
Issuance of preferred stock | 108.9 | ||
Beneficial conversion feature deemed dividend | 48.3 | ||
Dividends paid/accrued dividends | 19.1 | 17.7 | 14.4 |
Ending Balance | $ 208.4 | $ 189.3 | $ 171.6 |
Earnings (Loss) Per Share - Computation of Basic Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Basic EPS: | |||||||||||
Net income (loss) | $ (5.7) | $ (13.4) | $ (2.9) | $ (23.3) | $ (40.2) | $ (3.6) | $ (6.7) | $ (8.3) | $ (45.3) | $ (58.8) | $ 177.1 |
Less dividends on preferred shares | (19.1) | (17.7) | (62.7) | ||||||||
Less income allocated to preferred shareholders | 0.0 | 0.0 | (49.0) | ||||||||
Net income (loss) available/(allocated) to common shareholders - basic | (64.4) | (76.5) | 65.4 | ||||||||
Diluted EPS: | |||||||||||
Less income allocated to preferred shareholders | 0.0 | 0.0 | (49.0) | ||||||||
Net income (loss) available/(allocated) to common shareholders - diluted | $ (64.4) | $ (76.5) | $ 65.4 | ||||||||
Basic weighted-average common shares (in shares) | 108,175,159 | 102,062,051 | 100,160,206 | ||||||||
Add: Effect of dilutive securities (in shares) | 0 | 0 | 0 | ||||||||
Diluted weighted-average common shares (in shares) | 108,175,159 | 102,062,051 | 100,160,206 | ||||||||
Net income (loss) per common share (basic) (in dollars per share) | $ (0.10) | $ (0.17) | $ (0.07) | $ (0.26) | $ (0.44) | $ (0.08) | $ (0.11) | $ (0.12) | $ (0.60) | $ (0.75) | $ 0.65 |
Net income (loss) per common share (diluted) (in dollars per share) | $ (0.10) | $ (0.17) | $ (0.07) | $ (0.26) | $ (0.44) | $ (0.08) | $ (0.11) | $ (0.12) | $ (0.60) | $ (0.75) | $ 0.65 |
Earnings (Loss) Per Share - Narrative (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities excluded from computation of earnings per share (in shares) | 25,725,761 | 26,064,856 | 27,628,093 |
Warrant | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||
Antidilutive securities excluded from computation of earnings per share (in shares) | 60,000,000 | 1,500,000 |
Commitments and Contingencies - Narrative (Details) $ in Millions |
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
May 31, 2016
plaintiff
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
|
Commitments and Contingencies [Line Items] | ||||
Rent expense | $ | $ 15.1 | $ 7.9 | $ 5.6 | |
Number of plaintiffs | plaintiff | 4 | |||
Office Building | Minimum | ||||
Commitments and Contingencies [Line Items] | ||||
Contract term | 1 year | |||
Office Building | Maximum | ||||
Commitments and Contingencies [Line Items] | ||||
Contract term | 12 years | |||
Equipment | Minimum | ||||
Commitments and Contingencies [Line Items] | ||||
Contract term | 1 year | |||
Equipment | Maximum | ||||
Commitments and Contingencies [Line Items] | ||||
Contract term | 3 years |
Commitments and Contingencies - Schedule of Future Minimum Operating Lease Payments (Details) $ in Millions |
Dec. 31, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 18.1 |
2020 | 16.5 |
2021 | 15.6 |
2022 | 12.7 |
2023 | 11.3 |
Thereafter | 34.5 |
Total | $ 108.7 |
Related Party Transactions - Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Feb. 16, 2016 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
A&R MPSA Services | |||
Related Party Transaction [Line Items] | |||
Accrued compensation and benefits | $ 0.8 | $ 0.5 | |
Redeemable Convertible Preferred Stock | |||
Related Party Transaction [Line Items] | |||
Preferred stock, dividend rate, percentage | 8.00% | 8.00% | |
Redeemable Convertible Preferred Stock | TCP-ASC ACHI Series LLLP | |||
Related Party Transaction [Line Items] | |||
Preferred stock, dividend rate, percentage | 8.00% | 8.00% | |
Ascension | Redeemable Convertible Preferred Stock | TCP-ASC ACHI Series LLLP | |||
Related Party Transaction [Line Items] | |||
Preferred stock, dividend rate, percentage | 8.00% | 8.00% |
Related Party Transactions - Net Services Revenue (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Related Party Transactions [Abstract] | |||
Ascension | $ 600.1 | $ 404.4 | $ 461.4 |
Segments and Customer Concentrations - Narrative (Details) - segment |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Segment Reporting Information [Line Items] | |||
Number of operating segments | 1 | ||
Number of reporting segments | 1 | ||
Sales Revenue, Services, Net | Customer Concentration Risk | Ascension | |||
Segment Reporting Information [Line Items] | |||
Concentration percentage | 69.00% | 90.00% | 78.00% |
Sales Revenue, Services, Net | Customer Concentration Risk | Intermountain Healthcare | |||
Segment Reporting Information [Line Items] | |||
Concentration percentage | 14.00% | 4.00% | |
Accounts Receivable | Customer Concentration Risk | Ascension | |||
Segment Reporting Information [Line Items] | |||
Concentration percentage | 57.00% | 66.00% |
Deferred Contract Costs - Narrative (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Contract amortization | $ 2,200,000 | $ 1,000,000 |
Impairment losses | $ 0 | $ 0 |
Deferred Contract Costs - Summary of Deferred Contract Costs (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Capitalized Contract Cost [Line Items] | ||
Total deferred contract costs | $ 20.2 | $ 13.2 |
Prepaid expenses and other current assets | ||
Capitalized Contract Cost [Line Items] | ||
Total deferred contract costs | 2.8 | 1.6 |
Other assets | ||
Capitalized Contract Cost [Line Items] | ||
Total deferred contract costs | $ 17.4 | $ 11.6 |
Derivative Financial Instruments - Narrative (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Derivative [Line Items] | |||
Gain to be reclassified within next 12 months | $ 700,000 | ||
Accumulated gain, net of tax | 500,000 | $ 0 | $ 0 |
Designated as Hedging Instrument | Cash Flow Hedging | Foreign Currency Forward Contracts | |||
Derivative [Line Items] | |||
Derivatives, net loss reclassified into cost of services | 1,300,000 | ||
Notional amount | 52,000,000 | 0 | |
Accumulated gain, tax | 200,000 | 0 | |
Accumulated gain, net of tax | 500,000 | 0 | |
Fair value of derivative instruments with credit-risk-related contingent features in net liability positions | 0 | 0 | |
Cash collateral on deposit with counterparties | 1,400,000 | $ 0 | |
Maximum amount of loss due to credit risk | $ 0 |
Derivative Financial Instruments - Effect of Derivative on Statement of Operations (Details) - Designated as Hedging Instrument - Cash Flow Hedging - Foreign currency forward contracts - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Derivative [Line Items] | ||
Amount of gain (loss) recognized in other comprehensive income | $ (0.6) | |
Amount of gain (loss) reclassified from accumulated other comprehensive income to other income | $ (1.3) | |
Amount of gain (loss) recognized in other comprehensive income, prior period | $ 0.0 | |
Amount of gain (loss) reclassified from accumulated other comprehensive income to other income, prior period | $ 0.0 |
Derivative Financial Instruments - Fair Value of Derivatives Included in Balance Sheets (Details) - Cash Flow Hedging - Foreign currency forward contracts - Designated as Hedging Instrument - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Prepaid expenses and other current assets | ||
Cash Flow Hedges: | ||
Assets | $ 0.7 | $ 0.0 |
Other accrued expenses | ||
Cash Flow Hedges: | ||
Liabilities | $ 0.0 | $ 0.0 |
Derivative Financial Instruments - Offsetting of Derivatives (Details) - Cash Flow Hedging - Designated as Hedging Instrument - Foreign currency forward contracts - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Derivative [Line Items] | ||
Net assets | $ 0.7 | $ 0.0 |
Net liabilities | 0.0 | 0.0 |
Total Fair Value | $ 0.7 | $ 0.0 |
Prepaid Expenses and Other Current Assets - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 13.6 | $ 6.6 |
Notes receivable | 4.0 | 0.0 |
Security deposits | 4.8 | 3.3 |
Other current assets | 12.4 | 3.9 |
Ending balance | $ 34.8 | $ 13.8 |
Other Current Liabilities and Accrued Expenses - Schedule of Accrued Compensation and Benefits (Details) - USD ($) $ in Millions |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued expenses | $ 22.4 | $ 14.9 |
Notes payable | 14.5 | 0.0 |
Other | 3.9 | 1.8 |
Ending balance | $ 40.8 | $ 16.7 |
Quarterly Financial Information (Unaudited) - (Schedule of Quarterly Condensed Consolidated Statements of Operations) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Net services revenue | $ 262.9 | $ 250.4 | $ 207.9 | $ 147.3 | $ 140.3 | $ 123.2 | $ 99.4 | $ 86.9 | $ 868.5 | $ 449.8 | $ 592.6 |
Total operating expenses | 259.0 | 256.2 | 225.6 | 158.1 | 144.0 | 128.3 | 109.6 | 95.4 | |||
Income (loss) from operations | 3.9 | (5.8) | (17.7) | (10.8) | (3.7) | (5.1) | (10.2) | (8.5) | (30.4) | (27.5) | 297.9 |
Net income (loss) | $ (5.7) | $ (13.4) | $ (2.9) | $ (23.3) | $ (40.2) | $ (3.6) | $ (6.7) | $ (8.3) | $ (45.3) | $ (58.8) | $ 177.1 |
Net income (loss) per common share | |||||||||||
Basic (in dollars per share) | $ (0.10) | $ (0.17) | $ (0.07) | $ (0.26) | $ (0.44) | $ (0.08) | $ (0.11) | $ (0.12) | $ (0.60) | $ (0.75) | $ 0.65 |
Diluted (in dollars per share) | $ (0.10) | $ (0.17) | $ (0.07) | $ (0.26) | $ (0.44) | $ (0.08) | $ (0.11) | $ (0.12) | $ (0.60) | $ (0.75) | $ 0.65 |
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