Accretive Health second quarter net income increases 118% to $8.6 million

Accretive Health, Inc. (NYSE:AH), a leading provider of comprehensive end-to-end healthcare revenue cycle management services and population health management services infrastructure, today announced financial results for the quarter ended June 30, 2011.

Financial Highlights - Second Quarter 2011

• Net services revenue for the second quarter of 2011 was $183.6 million, an increase of $31.7 million, or 21%, over the second quarter of 2010.

• Operating margin for the second quarter of 2011 was $47.1 million, an increase of $13.2 million, or 39%, over the second quarter of 2010.

• Net income for the second quarter of 2011 was $8.6 million, an increase of $4.6 million, or 118%, as compared to the $3.9 million for the second quarter of 2010.

• Non-GAAP adjusted EBITDA was $20.7 million for the second quarter of 2011, an increase of $8.4 million, or 68%, over the second quarter of 2010.

• Diluted net income per common share was $0.08 for the second quarter of 2011, a 100% increase as compared to $0.04 recorded in the second quarter of 2010.

• Non-GAAP adjusted net income per diluted common share was $0.12 for the second quarter of 2011, an increase of 71% over the second quarter of 2010.

Mary Tolan, Accretive Health's Founder and Chief Executive Officer, said, "We are very pleased by the continuing momentum as demonstrated by our strong Projected Contracted Annual Revenue Run-Rate which at the midpoint increased by $119 million since our last earnings call. This addition to our PCARR is more than double the dollar amount of PCARR added between our fourth quarter 2010 and first quarter 2011 earnings calls. These additions produced a 41% year over year increase in PCARR. While our PCARR to date is exceeding our expectations, we recognize that the exact timing of contract signings can have a disproportionate impact on revenue in any single quarter. We continue to be positive about our annual revenue expectations and remain confident that the full year revenues will be within our guidance range. In addition, we believe we are managing our business well and our 2011 adjusted EBITDA is tracking to our annual plan."

"Our five-year exclusive revenue cycle management agreement with the Beaumont Health System further validates the success of our differentiated RCM outsourcing solution. Further this agreement brings Accretive Health's market share of acute care hospital volume to 65% of the Detroit market. We believe this leadership position demonstrates the potential that can be replicated in our other markets as they mature."

"In addition, our Physician Advisory Services continued to gain traction during the quarter and today is contributing over $40 million to our PCARR."

"As of today, we have $120 million to $140 million of potential PCARR in the contracting phase of our sales process."

Revenues and Operating Results - Second Quarter ended June 30, 2011

Total net services revenue for the second quarter of 2011 grew to $183.6 million, a $31.7 million, or 21%, increase over the second quarter of 2010. Net base fee revenue was $149.1 million for the second quarter of 2011, an increase of $20.9 million over the second quarter of 2010. Incentive payments were $25.9 million during the second quarter of 2011, an increase of $5.8 million over the second quarter of 2010. Other services revenue was $8.6 million for the second quarter of 2011, an increase of $4.9 million over the second quarter of 2010.

Non-GAAP adjusted EBITDA for the quarter ended June 30, 2011 was $20.7 million, an increase of $8.4 million, or 68%, over the second quarter of 2010.

Net income for the second quarter of 2011 was $8.6 million, as compared to $3.9 million in the second quarter of 2010. Included in these results were non-cash employee stock based compensation expenses of $5.4 million and $3.6 million, respectively. After adjusting for these non-cash expenses on an after tax basis, our non-GAAP adjusted net income for the second quarter of 2011 was $11.8 million, as compared to $6.1 million in the second quarter of 2010. Non-GAAP adjusted net income per diluted common share was $0.12 for the second quarter of 2011, an increase of 71% over the adjusted net income per diluted common share of $0.07 in second quarter of 2010.

For the quarter ended June 30, 2011, cash provided by operating activities was $16.8 million. Cash used in operating activities for the six months ended June 30, 2011 totaled $28.5 million as compared to $2.3 million in the six months ended June 30, 2010. Of the 2011 total, $16.9 million represents the impact of excess tax benefits related to the exercise of stock options. Cash used in investing activities was $5.8 million for the six months ended June 30, 2011.

2011 Outlook

Based on the status of current contract negotiations and pipeline, Accretive Health confirms its 2011 guidance issued March 2, 2011. The Company expects its Projected Contracted Annual Revenue Run Rate at December 31, 2011 to exceed $900 million. Furthermore, for the year ended December 31, 2011, the Company expects net services revenues of $835 million to $850 million and non-GAAP adjusted EBITDA of $80 million to $86 million. The midpoint of the non-GAAP adjusted EBITDA guidance represents an 84% growth over the non-GAAP adjusted EBITDA for 2010. As a result of the seasonality of incentive payments and our ongoing investments in our Quality and Total Cost of Care service offering, we anticipate that approximately two thirds of 2011 adjusted EBITDA will be recognized in the second half of the year. In addition, the Company expects non-GAAP adjusted net income per diluted common share to be in the range of $0.42 to $0.45.

Source: Accretive Health, Inc.