|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
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 Number)
|
|
|
401 North Michigan Avenue Suite 2700 Chicago, Illinois
|
60611
|
(Address of principal executive offices)
|
(Zip code)
|
Large accelerated filer
|
o
|
Accelerated filer
|
ý
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
o
|
Emerging growth company
|
o
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
||
|
|
|
ITEM 1.
|
CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
(Unaudited)
|
|
|
||||
|
|
September 30,
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
52.4
|
|
|
$
|
164.9
|
|
Current portion of restricted cash equivalents
|
|
1.8
|
|
|
—
|
|
||
Accounts receivable, net
|
|
40.2
|
|
|
8.2
|
|
||
Accounts receivable, net - related party
|
|
29.2
|
|
|
15.4
|
|
||
Prepaid expenses and other current assets
|
|
35.5
|
|
|
13.8
|
|
||
Total current assets
|
|
159.1
|
|
|
202.3
|
|
||
Property, equipment and software, net
|
|
94.1
|
|
|
48.3
|
|
||
Intangible assets, net
|
|
182.9
|
|
|
—
|
|
||
Goodwill
|
|
256.3
|
|
|
—
|
|
||
Non-current deferred tax assets
|
|
53.4
|
|
|
70.5
|
|
||
Non-current portion of restricted cash equivalents
|
|
0.5
|
|
|
1.5
|
|
||
Other assets
|
|
21.3
|
|
|
13.4
|
|
||
Total assets
|
|
$
|
767.6
|
|
|
$
|
336.0
|
|
Liabilities
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Accounts payable
|
|
$
|
7.8
|
|
|
$
|
7.2
|
|
Current portion of customer liabilities
|
|
12.5
|
|
|
1.1
|
|
||
Current portion of customer liabilities - related party
|
|
23.8
|
|
|
27.1
|
|
||
Accrued compensation and benefits
|
|
60.2
|
|
|
37.8
|
|
||
Current portion of long-term debt
|
|
3.4
|
|
|
—
|
|
||
Interest payable
|
|
6.9
|
|
|
—
|
|
||
Other accrued expenses
|
|
35.3
|
|
|
16.7
|
|
||
Total current liabilities
|
|
149.9
|
|
|
89.9
|
|
||
Non-current portion of customer liabilities - related party
|
|
18.0
|
|
|
11.5
|
|
||
Long-term debt
|
|
255.3
|
|
|
—
|
|
||
Long-term debt - related party
|
|
100.8
|
|
|
—
|
|
||
Other non-current liabilities
|
|
30.1
|
|
|
11.9
|
|
||
Total liabilities
|
|
554.1
|
|
|
113.3
|
|
||
|
|
|
|
|
||||
8.00% Series A convertible preferred stock, par value $0.01, 370,000 shares authorized, 241,405 shares issued and outstanding as of September 30, 2018 (aggregate liquidation value of $246.2); 370,000 shares authorized, 227,483 shares issued and outstanding as of December 31, 2017 (aggregate liquidation value of $232.0)
|
|
203.5
|
|
|
189.3
|
|
||
Stockholders’ equity (deficit)
|
|
|
|
|
||||
Common stock, $0.01 par value, 500,000,000 shares authorized, 123,031,938 shares issued and 110,231,689 shares outstanding at September 30, 2018; 116,650,388 shares issued and 104,409,961 shares outstanding at December 31, 2017
|
|
1.2
|
|
|
1.2
|
|
||
Additional paid-in capital
|
|
360.6
|
|
|
337.9
|
|
||
Accumulated deficit
|
|
(284.1
|
)
|
|
(244.5
|
)
|
||
Accumulated other comprehensive loss
|
|
(5.2
|
)
|
|
(1.6
|
)
|
||
Treasury stock, at cost, 12,800,249 shares as of September 30, 2018; 12,240,427 shares as of December 31, 2017
|
|
(62.5
|
)
|
|
(59.6
|
)
|
||
Total stockholders’ equity (deficit)
|
|
10.0
|
|
|
33.4
|
|
||
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
767.6
|
|
|
$
|
336.0
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net services revenue ($155.3 million and $433.4 million for the three and nine months ended September 30, 2018, respectively, and $112.2 million and $275.3 million for the three and nine months ended September 30, 2017, respectively, from related party)
|
|
$
|
250.4
|
|
|
$
|
123.2
|
|
|
$
|
605.6
|
|
|
$
|
309.5
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
||||||||
Cost of services
|
|
219.3
|
|
|
111.8
|
|
|
547.9
|
|
|
289.1
|
|
||||
Selling, general and administrative
|
|
29.6
|
|
|
15.1
|
|
|
69.1
|
|
|
41.6
|
|
||||
Other
|
|
7.3
|
|
|
1.4
|
|
|
22.9
|
|
|
2.6
|
|
||||
Total operating expenses
|
|
256.2
|
|
|
128.3
|
|
|
639.9
|
|
|
333.3
|
|
||||
Income (loss) from operations
|
|
(5.8
|
)
|
|
(5.1
|
)
|
|
(34.3
|
)
|
|
(23.8
|
)
|
||||
Net interest (expense) income
|
|
(10.0
|
)
|
|
—
|
|
|
(15.6
|
)
|
|
0.1
|
|
||||
Income (loss) before income tax provision (benefit)
|
|
(15.8
|
)
|
|
(5.1
|
)
|
|
(49.9
|
)
|
|
(23.7
|
)
|
||||
Income tax provision (benefit)
|
|
(2.4
|
)
|
|
(1.5
|
)
|
|
(10.3
|
)
|
|
(5.1
|
)
|
||||
Net income (loss)
|
|
$
|
(13.4
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(39.6
|
)
|
|
$
|
(18.6
|
)
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
(0.17
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.31
|
)
|
Diluted
|
|
$
|
(0.17
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.31
|
)
|
Weighted average shares used in calculating net income (loss) per common share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
109,089,507
|
|
|
102,225,422
|
|
|
107,921,457
|
|
|
102,022,129
|
|
||||
Diluted
|
|
109,089,507
|
|
|
102,225,422
|
|
|
107,921,457
|
|
|
102,022,129
|
|
||||
Consolidated statements of comprehensive income (loss)
|
|
|
|
|
|
|
||||||||||
Net income (loss)
|
|
(13.4
|
)
|
|
(3.6
|
)
|
|
(39.6
|
)
|
|
(18.6
|
)
|
||||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
||||||||
Net change on derivatives designated as cash flow hedges, net of tax
|
|
0.4
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
||||
Foreign currency translation adjustments
|
|
(1.5
|
)
|
|
(0.2
|
)
|
|
(3.4
|
)
|
|
0.6
|
|
||||
Comprehensive income (loss)
|
|
$
|
(14.5
|
)
|
|
$
|
(3.8
|
)
|
|
$
|
(43.2
|
)
|
|
$
|
(18.0
|
)
|
|
|
Common Stock
|
|
Treasury Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
other
comprehensive
(loss)
|
|
Total
|
||||||||||||||||||
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
||||||||||||||
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
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12.8
|
|
|
—
|
|
|
—
|
|
|
12.8
|
|
||||||
Reclassification of equity award
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
||||||
Issuance of common stock related to share-based compensation plans
|
|
300,096
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of common stock and stock warrants
|
|
4,665,594
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19.2
|
|
|
—
|
|
|
—
|
|
|
19.2
|
|
||||||
Exercise of vested stock options
|
|
1,415,860
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.6
|
|
|
—
|
|
|
—
|
|
|
3.6
|
|
||||||
Dividends paid/accrued dividends
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
|
—
|
|
|
—
|
|
|
(14.2
|
)
|
||||||
Acquisition of treasury stock related to equity award plans
|
|
—
|
|
|
—
|
|
|
(498,392
|
)
|
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.9
|
)
|
||||||
Forfeitures
|
|
—
|
|
|
—
|
|
|
(61,430
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net change on derivatives designated as cash flow hedges, net of tax of $0.1
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
||||||
Foreign currency translation adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.4
|
)
|
|
(3.4
|
)
|
||||||
Net (loss) income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39.6
|
)
|
|
—
|
|
|
(39.6
|
)
|
||||||
Balance at September 30, 2018
|
|
123,031,938
|
|
|
$
|
1.2
|
|
|
(12,800,249
|
)
|
|
$
|
(62.5
|
)
|
|
$
|
360.6
|
|
|
$
|
(284.1
|
)
|
|
$
|
(5.2
|
)
|
|
$
|
10.0
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2018
|
|
2017
|
||||
Operating activities
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
(39.6
|
)
|
|
$
|
(18.6
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operations:
|
|
|
|
|
||||
Depreciation and amortization
|
|
27.6
|
|
|
11.5
|
|
||
Amortization of debt issuance costs
|
|
0.9
|
|
|
—
|
|
||
Share-based compensation
|
|
13.8
|
|
|
8.2
|
|
||
Loss on disposal
|
|
0.8
|
|
|
0.2
|
|
||
Provision for doubtful receivables
|
|
0.5
|
|
|
0.1
|
|
||
Deferred income taxes
|
|
(12.7
|
)
|
|
(5.6
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Accounts receivable and related party accounts receivable
|
|
(10.8
|
)
|
|
(15.4
|
)
|
||
Prepaid expenses and other assets
|
|
(18.0
|
)
|
|
(3.7
|
)
|
||
Accounts payable
|
|
(6.0
|
)
|
|
0.3
|
|
||
Accrued compensation and benefits
|
|
15.2
|
|
|
4.3
|
|
||
Other liabilities
|
|
16.3
|
|
|
(0.3
|
)
|
||
Customer liabilities and customer liabilities - related party
|
|
6.0
|
|
|
14.7
|
|
||
Net cash used in operating activities
|
|
(6.0
|
)
|
|
(4.3
|
)
|
||
Investing activities
|
|
|
|
|
||||
Purchases of property, equipment, and software
|
|
(20.1
|
)
|
|
(30.1
|
)
|
||
Acquisition of Intermedix, net of cash acquired
|
|
(462.8
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
|
(482.9
|
)
|
|
(30.1
|
)
|
||
Financing activities
|
|
|
|
|
||||
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 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
|
|
3.6
|
|
|
—
|
|
||
Purchase of treasury stock
|
|
—
|
|
|
(2.0
|
)
|
||
Shares withheld for taxes
|
|
(2.9
|
)
|
|
(2.4
|
)
|
||
Net cash provided (used in) by financing activities
|
|
378.1
|
|
|
(4.4
|
)
|
||
Effect of exchange rate changes in cash, cash equivalents and restricted cash
|
|
(0.9
|
)
|
|
0.4
|
|
||
Net decrease in cash, cash equivalents and restricted cash
|
|
(111.7
|
)
|
|
(38.4
|
)
|
||
Cash, cash equivalents and restricted cash, at beginning of period
|
|
166.4
|
|
|
182.7
|
|
||
Cash, cash equivalents and restricted cash, at end of period
|
|
$
|
54.7
|
|
|
$
|
144.3
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
||||
Accrued dividends payable to preferred stockholders
|
|
$
|
4.8
|
|
|
$
|
4.5
|
|
Accrued and other liabilities related to purchases of property, equipment and software
|
|
$
|
21.7
|
|
|
$
|
2.6
|
|
Accounts payable related to purchases of property, equipment and software
|
|
$
|
0.6
|
|
|
$
|
0.6
|
|
Interest paid
|
|
$
|
7.5
|
|
|
$
|
—
|
|
Income taxes paid
|
|
$
|
(2.5
|
)
|
|
$
|
(1.1
|
)
|
Income taxes refunded
|
|
$
|
0.4
|
|
|
$
|
3.4
|
|
•
|
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.
|
|
|
|
||
|
|
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, net
|
|
35.5
|
|
|
Prepaid expenses and other current assets
|
|
11.6
|
|
|
Property, equipment and software, net
|
|
28.3
|
|
|
Intangible assets, net
|
|
189.6
|
|
|
Goodwill
|
|
256.3
|
|
|
Other assets
|
|
0.3
|
|
|
Accounts payable
|
|
(6.4
|
)
|
|
Current portion of customer liabilities
|
|
(8.6
|
)
|
|
Accrued compensation and benefits
|
|
(7.7
|
)
|
|
Other accrued expenses
|
|
(6.3
|
)
|
|
Deferred income tax liabilities
|
|
(29.8
|
)
|
|
Net assets acquired
|
|
$
|
469.2
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net services revenue
|
|
$
|
250.3
|
|
|
$
|
178.8
|
|
|
$
|
675.8
|
|
|
$
|
461.3
|
|
Net income (loss)
|
|
$
|
(12.8
|
)
|
|
$
|
(6.4
|
)
|
|
$
|
(40.6
|
)
|
|
$
|
(38.5
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Beginning balance
|
$
|
597
|
|
|
$
|
151
|
|
|
$
|
363
|
|
|
$
|
66
|
|
Provision (recoveries)
|
309
|
|
|
(6
|
)
|
|
546
|
|
|
85
|
|
||||
Write-offs
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(6
|
)
|
||||
Ending balance
|
$
|
906
|
|
|
$
|
145
|
|
|
$
|
906
|
|
|
$
|
145
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Buildings and land
|
|
$
|
4.6
|
|
|
$
|
—
|
|
Computer and other equipment
|
|
42.7
|
|
|
28.7
|
|
||
Leasehold improvements
|
|
27.2
|
|
|
22.3
|
|
||
Software
|
|
84.3
|
|
|
44.5
|
|
||
Office furniture
|
|
10.0
|
|
|
7.4
|
|
||
Property, equipment and software, gross
|
|
168.8
|
|
|
102.9
|
|
||
Less accumulated depreciation and amortization
|
|
(74.7
|
)
|
|
(54.6
|
)
|
||
Property, equipment and software, net
|
|
$
|
94.1
|
|
|
$
|
48.3
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of services
|
|
$
|
7.7
|
|
|
$
|
4.0
|
|
|
$
|
17.5
|
|
|
$
|
10.4
|
|
Selling, general and administrative
|
|
2.0
|
|
|
0.5
|
|
|
3.4
|
|
|
1.1
|
|
||||
Total depreciation and amortization
|
|
$
|
9.7
|
|
|
$
|
4.5
|
|
|
$
|
20.9
|
|
|
$
|
11.5
|
|
|
|
|
|
September 30, 2018
|
||||||||||
|
|
Weighted Average Useful Life
|
|
Gross Carrying Value
|
|
Accumulated Amortization
|
|
Net Book Value
|
||||||
Customer relationships
|
|
17 years
|
|
$
|
155.0
|
|
|
$
|
(3.6
|
)
|
|
$
|
151.4
|
|
Tradename
|
|
1 year
|
|
1.0
|
|
|
(0.7
|
)
|
|
0.3
|
|
|||
Technology
|
|
6 years
|
|
30.4
|
|
|
(2.0
|
)
|
|
28.4
|
|
|||
Non-competition agreements
|
|
3 years
|
|
0.9
|
|
|
(0.1
|
)
|
|
0.8
|
|
|||
Favorable leasehold interests
|
|
Life of lease
|
|
2.3
|
|
|
(0.3
|
)
|
|
2.0
|
|
|||
Total intangible assets
|
|
|
|
$
|
189.6
|
|
|
$
|
(6.7
|
)
|
|
$
|
182.9
|
|
|
|
Valuation Methodology
|
Customer relationships
|
|
Income approach to derive the present value of future cash flows from customer relationship.
|
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.
|
Non-competition agreements
|
|
Income approach to compare cash flows with and without the non-compete.
|
Tradename
|
|
Relief from royalty method was utilized to determine the present value of savings from owning the asset.
|
Favorable leasehold interests
|
|
Income approach to derive the present value of the market versus contractual rent.
|
Remainder of 2018
|
|
$
|
4.2
|
|
2019
|
|
14.8
|
|
|
2020
|
|
14.7
|
|
|
2021
|
|
14.5
|
|
|
2022
|
|
14.4
|
|
|
Thereafter
|
|
120.3
|
|
|
Total
|
|
$
|
182.9
|
|
|
|
Goodwill
|
||
Balance as of December 31, 2017
|
|
$
|
—
|
|
Acquisitions
|
|
256.3
|
|
|
Balance as of September 30, 2018
|
|
$
|
256.3
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net operating fees
|
|
$
|
220.1
|
|
|
$
|
104.6
|
|
|
$
|
529.4
|
|
|
$
|
255.4
|
|
Incentive fees
|
|
8.9
|
|
|
7.5
|
|
|
26.8
|
|
|
20.2
|
|
||||
Other
|
|
21.4
|
|
|
11.1
|
|
|
49.4
|
|
|
33.9
|
|
||||
Net service revenue
|
|
$
|
250.4
|
|
|
$
|
123.2
|
|
|
$
|
605.6
|
|
|
$
|
309.5
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Receivables, which are included in accounts receivable, net
|
|
$
|
69.4
|
|
|
$
|
23.6
|
|
Contract assets
|
|
1.3
|
|
|
—
|
|
||
Contract liabilities
|
|
22.9
|
|
|
15.5
|
|
|
|
Nine Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2017
|
||||||||||||
|
|
Contract assets
|
|
Contract liabilities
|
|
Contract assets
|
|
Contract liabilities
|
||||||||
Revenue recognized that was included in the contract liability balance at the beginning of the period
|
|
$
|
—
|
|
|
$
|
51.1
|
|
|
$
|
—
|
|
|
$
|
19.9
|
|
Increases due to cash received, excluding amounts recognized as revenue during the period
|
|
—
|
|
|
6.5
|
|
|
—
|
|
|
11.3
|
|
||||
Acquisitions
|
|
1.3
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
Net operating fees
|
|
Incentive fees
|
|
Other
|
||||||
2018
|
$
|
27.2
|
|
|
$
|
6.4
|
|
|
$
|
1.0
|
|
2019
|
27.8
|
|
|
9.4
|
|
|
2.8
|
|
|||
2020
|
13.8
|
|
|
—
|
|
|
2.8
|
|
|||
2021
|
8.4
|
|
|
—
|
|
|
2.8
|
|
|||
Thereafter
|
6.9
|
|
|
—
|
|
|
11.6
|
|
|||
Total
|
$
|
84.1
|
|
|
$
|
15.8
|
|
|
$
|
21.0
|
|
|
September 30,
|
|
December 31,
|
||||
|
2018
|
|
2017
|
||||
Accrued service costs, current
|
$
|
23.7
|
|
|
$
|
23.7
|
|
Collections payable to clients, current
|
7.3
|
|
|
—
|
|
||
Refund liabilities, current
|
0.4
|
|
|
0.5
|
|
||
Deferred revenue (contract liabilities), current
|
4.9
|
|
|
4.0
|
|
||
Current portion of customer liabilities (1)
|
$
|
36.3
|
|
|
$
|
28.2
|
|
Deferred revenue (contract liabilities), non-current
|
18.0
|
|
|
11.5
|
|
||
Non-current portion of customer liabilities (1)
|
$
|
18.0
|
|
|
$
|
11.5
|
|
Total customer liabilities
|
$
|
54.3
|
|
|
$
|
39.7
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Senior Revolver
|
|
$
|
—
|
|
|
$
|
—
|
|
Senior Term Loan
|
|
270.0
|
|
|
—
|
|
||
Notes (primarily with related parties)
|
|
110.0
|
|
|
—
|
|
||
Unamortized discount and issuance costs
|
|
(20.5
|
)
|
|
—
|
|
||
Total debt
|
|
359.5
|
|
|
—
|
|
||
Less: Current maturities
|
|
(3.4
|
)
|
|
—
|
|
||
Total long-term debt
|
|
$
|
356.1
|
|
|
$
|
—
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Share-Based Compensation Expense Allocation Details:
|
|
|
|
|
|
|
|
|
||||||||
Cost of services
|
|
$
|
1.6
|
|
|
$
|
1.2
|
|
|
$
|
4.4
|
|
|
$
|
3.3
|
|
Selling, general and administrative
|
|
3.2
|
|
|
1.2
|
|
|
9.3
|
|
|
4.8
|
|
||||
Other
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
||||
Total share-based compensation expense (1)
|
|
$
|
4.8
|
|
|
$
|
2.4
|
|
|
$
|
13.8
|
|
|
$
|
8.2
|
|
|
|
Nine Months Ended September 30,
|
||||
|
|
2018
|
|
2017
|
||
Expected dividend yield
|
|
—
|
|
|
—
|
|
Risk-free interest rate
|
|
2.3% to 2.8%
|
|
1.8% to 2.3%
|
||
Expected volatility
|
|
40% to 45%
|
|
40% to 45%
|
||
Expected term (in years)
|
|
2.59 to 6.25
|
|
2.34 to 6.29
|
|
|
Shares
|
|
Weighted-
Average
Exercise
Price
|
|||
Outstanding at December 31, 2017
|
|
17,742,966
|
|
|
$
|
4.70
|
|
Granted
|
|
263,662
|
|
|
6.39
|
|
|
Exercised
|
|
(1,415,860
|
)
|
|
2.61
|
|
|
Canceled/forfeited
|
|
(1,968,455
|
)
|
|
2.68
|
|
|
Outstanding at September 30, 2018
|
|
14,622,313
|
|
|
5.20
|
|
|
Outstanding, vested and exercisable at September 30, 2018
|
|
7,947,990
|
|
|
7.21
|
|
|
Outstanding, vested and exercisable at December 31, 2017
|
|
5,778,376
|
|
|
$
|
8.87
|
|
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Outstanding and unvested at December 31, 2017
|
|
2,352,490
|
|
|
$
|
3.03
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Vested
|
|
(1,184,687
|
)
|
|
3.07
|
|
|
Forfeited
|
|
(61,430
|
)
|
|
3.29
|
|
|
Outstanding and unvested at September 30, 2018
|
|
1,106,373
|
|
|
$
|
3.02
|
|
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Outstanding and unvested at December 31, 2017
|
|
1,183,500
|
|
|
$
|
2.50
|
|
Granted
|
|
427,906
|
|
|
7.98
|
|
|
Vested
|
|
(300,096
|
)
|
|
2.42
|
|
|
Forfeited
|
|
(137,779
|
)
|
|
3.21
|
|
|
Outstanding and unvested at September 30, 2018
|
|
1,173,531
|
|
|
$
|
4.43
|
|
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Outstanding and unvested at December 31, 2017
|
|
4,785,900
|
|
|
$
|
3.37
|
|
Granted
|
|
1,472,677
|
|
|
8.30
|
|
|
Vested
|
|
—
|
|
|
—
|
|
|
Forfeited
|
|
(1,208,348
|
)
|
|
3.83
|
|
|
Outstanding and unvested at September 30, 2018
|
|
5,050,229
|
|
|
$
|
4.67
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Severance and employee benefits
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
0.3
|
|
Facility charges
|
(0.1
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
Non-cash share based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||
Reorganization-related
|
0.9
|
|
|
—
|
|
|
2.1
|
|
|
0.4
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Acquisition related costs (1)
|
4.6
|
|
|
1.4
|
|
|
16.5
|
|
|
1.4
|
|
||||
Transitioned employees restructuring expense (2)
|
1.3
|
|
|
—
|
|
|
3.8
|
|
|
0.8
|
|
||||
Other
|
0.5
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
||||
Total other
|
$
|
7.3
|
|
|
$
|
1.4
|
|
|
$
|
22.9
|
|
|
$
|
2.6
|
|
|
|
Preferred Stock
|
|||||
|
|
Shares Issued and Outstanding
|
|
Carrying Value
|
|||
Balance at December 31, 2017
|
|
227,483
|
|
|
$
|
189.3
|
|
Dividends paid/accrued dividends
|
|
13,922
|
|
|
14.2
|
|
|
Balance at September 30, 2018
|
|
241,405
|
|
|
$
|
203.5
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Basic EPS:
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
$
|
(13.4
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(39.6
|
)
|
|
$
|
(18.6
|
)
|
Less dividends on preferred shares
|
|
(4.8
|
)
|
|
(4.4
|
)
|
|
(14.2
|
)
|
|
(13.1
|
)
|
||||
Less income allocated to preferred shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss) available/(allocated) to common shareholders - basic
|
|
$
|
(18.2
|
)
|
|
$
|
(8.0
|
)
|
|
$
|
(53.8
|
)
|
|
$
|
(31.7
|
)
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
(13.4
|
)
|
|
(3.6
|
)
|
|
(39.6
|
)
|
|
(18.6
|
)
|
||||
Less dividends on preferred shares
|
|
(4.8
|
)
|
|
(4.4
|
)
|
|
(14.2
|
)
|
|
(13.1
|
)
|
||||
Less income allocated to preferred shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss) available/(allocated) to common shareholders - diluted
|
|
$
|
(18.2
|
)
|
|
$
|
(8.0
|
)
|
|
$
|
(53.8
|
)
|
|
$
|
(31.7
|
)
|
Basic weighted-average common shares
|
|
109,089,507
|
|
|
102,225,422
|
|
|
107,921,457
|
|
|
102,022,129
|
|
||||
Add: Effect of dilutive securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted weighted average common shares
|
|
109,089,507
|
|
|
102,225,422
|
|
|
107,921,457
|
|
|
102,022,129
|
|
||||
Net income (loss) per common share (basic)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.31
|
)
|
Net income (loss) per common share (diluted)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.50
|
)
|
|
$
|
(0.31
|
)
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Ascension
|
|
$
|
155.3
|
|
|
$
|
112.2
|
|
|
$
|
433.4
|
|
|
$
|
275.3
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Accounts receivable, net - related party
|
$
|
29.2
|
|
|
$
|
15.4
|
|
|
|
|
|
||||
Accrued service costs, current
|
$
|
20.6
|
|
|
$
|
23.7
|
|
Refund liabilities, current
|
0.4
|
|
|
0.5
|
|
||
Deferred revenue (contract liabilities), current
|
2.8
|
|
|
2.9
|
|
||
Current portion of customer liabilities
|
$
|
23.8
|
|
|
$
|
27.1
|
|
|
|
|
|
||||
Deferred revenue (contract liabilities), non-current
|
18.0
|
|
|
11.5
|
|
||
Non-current portion of customer liabilities
|
$
|
18.0
|
|
|
$
|
11.5
|
|
Total customer liabilities
|
$
|
41.8
|
|
|
$
|
38.6
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Prepaid expenses and other current assets
|
|
$
|
2.6
|
|
|
$
|
1.6
|
|
Other assets
|
|
16.3
|
|
|
11.6
|
|
||
Total deferred contract costs
|
|
$
|
18.9
|
|
|
$
|
13.2
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Amount of gain (loss) recognized in other comprehensive income
|
|
$
|
(0.4
|
)
|
|
$
|
—
|
|
|
$
|
(1.3
|
)
|
|
$
|
—
|
|
Amount of gain (loss) reclassified from accumulated other comprehensive income to other income
|
|
(0.6
|
)
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
|
|
Balance sheet location
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Cash Flow Hedges:
|
|
|
|
|
|
|
||||
Foreign currency forward contracts
|
|
Other assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
Other accrued expenses
|
|
$
|
0.5
|
|
|
$
|
—
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Net assets
|
|
$
|
—
|
|
|
$
|
—
|
|
Net liabilities
|
|
(0.5
|
)
|
|
—
|
|
||
Total Fair Value
|
|
$
|
(0.5
|
)
|
|
$
|
—
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Three Months Ended September 30,
|
|
2018 vs. 2017
Change |
|
Nine Months Ended September 30,
|
|
2018 vs. 2017
Change |
||||||||||||||||||||||
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
||||||||||||||
|
(In millions except percentages)
|
||||||||||||||||||||||||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net operating fees
|
$
|
220.1
|
|
|
$
|
104.6
|
|
|
$
|
115.5
|
|
|
110
|
%
|
|
$
|
529.4
|
|
|
$
|
255.4
|
|
|
$
|
274.0
|
|
|
107
|
%
|
Incentive fees
|
8.9
|
|
|
7.5
|
|
|
1.4
|
|
|
19
|
%
|
|
26.8
|
|
|
20.2
|
|
|
6.6
|
|
|
33
|
%
|
||||||
Other
|
21.4
|
|
|
11.1
|
|
|
10.3
|
|
|
93
|
%
|
|
49.4
|
|
|
33.9
|
|
|
15.5
|
|
|
46
|
%
|
||||||
Net services revenue
|
250.4
|
|
|
123.2
|
|
|
127.2
|
|
|
103
|
%
|
|
605.6
|
|
|
309.5
|
|
|
296.1
|
|
|
96
|
%
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of services
|
219.3
|
|
|
111.8
|
|
|
107.5
|
|
|
96
|
%
|
|
547.9
|
|
|
289.1
|
|
|
258.8
|
|
|
90
|
%
|
||||||
Selling, general and administrative
|
29.6
|
|
|
15.1
|
|
|
14.5
|
|
|
96
|
%
|
|
69.1
|
|
|
41.6
|
|
|
27.5
|
|
|
66
|
%
|
||||||
Other
|
7.3
|
|
|
1.4
|
|
|
5.9
|
|
|
421
|
%
|
|
22.9
|
|
|
2.6
|
|
|
20.3
|
|
|
781
|
%
|
||||||
Total operating expenses
|
256.2
|
|
|
128.3
|
|
|
127.9
|
|
|
100
|
%
|
|
639.9
|
|
|
333.3
|
|
|
306.6
|
|
|
92
|
%
|
||||||
Income (loss) from operations
|
(5.8
|
)
|
|
(5.1
|
)
|
|
(0.7
|
)
|
|
14
|
%
|
|
(34.3
|
)
|
|
(23.8
|
)
|
|
(10.5
|
)
|
|
44
|
%
|
||||||
Net interest (expense) income
|
(10.0
|
)
|
|
—
|
|
|
(10.0
|
)
|
|
100
|
%
|
|
(15.6
|
)
|
|
0.1
|
|
|
(15.7
|
)
|
|
n.m.
|
|
||||||
Net income (loss) before income tax provision
|
(15.8
|
)
|
|
(5.1
|
)
|
|
(10.7
|
)
|
|
210
|
%
|
|
(49.9
|
)
|
|
(23.7
|
)
|
|
(26.2
|
)
|
|
111
|
%
|
||||||
Income tax provision (benefit)
|
(2.4
|
)
|
|
(1.5
|
)
|
|
(0.9
|
)
|
|
60
|
%
|
|
(10.3
|
)
|
|
(5.1
|
)
|
|
(5.2
|
)
|
|
102
|
%
|
||||||
Net income (loss)
|
$
|
(13.4
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(9.8
|
)
|
|
272
|
%
|
|
$
|
(39.6
|
)
|
|
$
|
(18.6
|
)
|
|
$
|
(21.0
|
)
|
|
113
|
%
|
•
|
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.
|
|
|
Three Months Ended September 30,
|
|
2018 vs. 2017
Change |
|
Nine Months Ended September 30,
|
|
2018 vs. 2017
Change |
||||||||||||||||||||||
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
|
2018
|
|
2017
|
|
Amount
|
|
%
|
||||||||||||||
|
|
(In millions except percentages)
|
||||||||||||||||||||||||||||
Net income (loss)
|
|
$
|
(13.4
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
(9.8
|
)
|
|
272
|
%
|
|
$
|
(39.6
|
)
|
|
$
|
(18.6
|
)
|
|
$
|
(21.0
|
)
|
|
113
|
%
|
Net interest expense (income)
|
|
10.0
|
|
|
—
|
|
|
10.0
|
|
|
100
|
%
|
|
15.6
|
|
|
(0.1
|
)
|
|
15.7
|
|
|
n.m.
|
|
||||||
Income tax provision (benefit)
|
|
(2.4
|
)
|
|
(1.5
|
)
|
|
(0.9
|
)
|
|
60
|
%
|
|
(10.3
|
)
|
|
(5.1
|
)
|
|
(5.2
|
)
|
|
102
|
%
|
||||||
Depreciation and amortization expense
|
|
14.2
|
|
|
4.5
|
|
|
9.7
|
|
|
216
|
%
|
|
27.6
|
|
|
11.5
|
|
|
16.1
|
|
|
140
|
%
|
||||||
Share-based compensation expense (1)
|
|
4.7
|
|
|
2.4
|
|
|
2.3
|
|
|
96
|
%
|
|
13.7
|
|
|
8.2
|
|
|
5.5
|
|
|
67
|
%
|
||||||
Other (2)
|
|
7.3
|
|
|
1.4
|
|
|
5.9
|
|
|
421
|
%
|
|
22.9
|
|
|
2.6
|
|
|
20.3
|
|
|
781
|
%
|
||||||
Adjusted EBITDA (non-GAAP)
|
|
$
|
20.4
|
|
|
$
|
3.1
|
|
|
$
|
17.3
|
|
|
558
|
%
|
|
$
|
29.9
|
|
|
$
|
(1.6
|
)
|
|
$
|
31.5
|
|
|
n.m.
|
|
(1)
|
Share-based compensation expense represents the expense associated with stock options, restricted stock units and restricted stock awards granted, as reflected in our Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 13, Share-Based Compensation, to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the detail of the amounts of share-based compensation expense.
|
(2)
|
Other costs consist of the following (in millions):
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Severance and employee benefits
|
$
|
1.0
|
|
|
$
|
—
|
|
|
$
|
2.0
|
|
|
$
|
0.3
|
|
Facility charges
|
(0.1
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
||||
Non-cash share based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
||||
Reorganization-related
|
0.9
|
|
|
—
|
|
|
2.1
|
|
|
0.4
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Acquisition related costs (1)
|
4.6
|
|
|
1.4
|
|
|
16.5
|
|
|
1.4
|
|
||||
Transitioned employees restructuring expense (2)
|
1.3
|
|
|
—
|
|
|
3.8
|
|
|
0.8
|
|
||||
Other
|
0.5
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
||||
Total other
|
$
|
7.3
|
|
|
$
|
1.4
|
|
|
$
|
22.9
|
|
|
$
|
2.6
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In millions)
|
||||||
Net cash (used in) provided by operating activities
|
|
$
|
(6.0
|
)
|
|
$
|
(4.3
|
)
|
Net cash (used in) investing activities
|
|
$
|
(482.9
|
)
|
|
$
|
(30.1
|
)
|
Net cash provided by (used in) financing activities
|
|
$
|
378.1
|
|
|
$
|
(4.4
|
)
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
||||||||||||||||
Operating Leases (1)
|
|
$
|
4.0
|
|
|
$
|
15.0
|
|
|
$
|
13.7
|
|
|
$
|
12.8
|
|
|
$
|
9.8
|
|
|
$
|
8.8
|
|
|
$
|
33.4
|
|
|
$
|
97.5
|
|
Purchase and Capital Lease Obligations (2)
|
|
$
|
3.3
|
|
|
$
|
12.2
|
|
|
$
|
5.7
|
|
|
$
|
1.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22.7
|
|
Debt obligations
|
|
$
|
1.4
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
365.1
|
|
|
$
|
380.0
|
|
Interest on debt
|
|
$
|
9.0
|
|
|
$
|
35.7
|
|
|
$
|
35.5
|
|
|
$
|
36.0
|
|
|
$
|
36.9
|
|
|
$
|
37.7
|
|
|
$
|
73.0
|
|
|
$
|
263.8
|
|
Total
|
|
$
|
17.7
|
|
|
$
|
65.6
|
|
|
$
|
57.6
|
|
|
$
|
53.0
|
|
|
$
|
49.4
|
|
|
$
|
49.2
|
|
|
$
|
471.5
|
|
|
$
|
764.0
|
|
Item 3.
|
Qualitative and Quantitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
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)
|
||||||
July 1, 2018 through July 31, 2018
|
|
799
|
|
|
$
|
8.66
|
|
|
—
|
|
|
$
|
49.0
|
|
August 1, 2018 through August 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
49.0
|
|
September 1, 2018 through September 30, 2018
|
|
293
|
|
|
$
|
9.51
|
|
|
—
|
|
|
$
|
49.0
|
|
(1)
|
Includes strategic repurchases and repurchases of our stock related to employees’ tax withholding upon vesting of restricted stock. See Note 13, Share-Based Compensation, to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
|
(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 8, Stockholders' Equity (Deficit), to our consolidated financial statements included in this Quarterly Report on Form 10-Q.
|
Item 6.
|
Exhibits
|
Exhibit
Number
|
Exhibit Description
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Schema Document
|
101.CAL
|
XBRL Calculation Linkbase Document
|
101.LAB
|
XBRL Labels Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Document
|
101.PRE
|
XBRL Presentation Linkbase Document
|
|
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
|
I.
|
Base Fee for Dependent Services
. Effective as of July 1, 2018,
Exhibit 4-A
to the MPSA is hereby amended as follows:
|
a.
|
Sections 1.1
and
1.2
of
Exhibit 4-A
are hereby deleted in their entirety and replaced with the following:
|
1.1
|
a single [**]
fee with respect to the Steady State Eligible Recipients, which will be calculated in the aggregate (to be invoiced in accordance with
Exhibit 4-D
) equal to the product of:
|
(i)
|
the sum of the [**]-Month Rolling Average Cash Collections with respect to such month for all of the Steady State Eligible Recipients in the aggregate,
|
(ii)
|
the result of:
|
a.
|
the Blended Ascension Cost to Collect Factor (as defined in
Section 1.3(vii)
)
|
b.
|
[**];
|
1.2
|
with respect to each Additional Book Eligible Recipient that is not a Steady State Eligible Recipient that has commenced receiving Dependent Services from Supplier, a [**] fee (to be invoiced in accordance with
Exhibit 4-D
) equal to the product of:
|
(i)
|
the [**]-Month Rolling Average Cash Collections with respect to such month for such Additional Book Eligible Recipient,
|
(ii)
|
the result of:
|
a.
|
the Additional Book Cost to Collect Factor (as defined in
Section 3.2
) applicable to such Additional Book Eligible Recipient,
|
b.
|
[**].
|
b.
|
Section 1.3(ii)
of
Exhibit 4-A
is hereby deleted in its entirety and replaced with the following:
|
c.
|
The following definitions are hereby added to
Section 1.3
of
Exhibit 4-A
:
|
d.
|
The first sentence of the third paragraph of
Section 2.1
of
Exhibit 4-A
is hereby deleted in its entirety and replaced with the following:
|
(i)
|
the applicable Initial Current Book Cost to Collect Factor, and
|
(ii)
|
the aggregated value of all CB Adjustments (as defined in
Section 2.2
) for the applicable Current Book Eligible Recipient, as approved by the Cost Board in connection with the applicable CB Re-Assessment.
|
e.
|
The first sentence of the third paragraph of
Section 3.2
of
Exhibit 4-A
is hereby deleted in its entirety and replaced with the following:
|
(i)
|
the applicable initial Additional Book Cost to Collect Factor, and
|
(ii)
|
the aggregated value of all AB Adjustments (as defined in
Section 3.4
) for the applicable Additional Book Eligible Recipient, as approved by the Cost Board in connection with the applicable AB Re-Assessment.”
|
f.
|
A new
Section 4.3
to
Exhibit 4-A
is hereby added as follows:
|
g.
|
The following is hereby added as
Section 6
(Blended Base Fee) of
Exhibit 4-A
:
|
6.2
|
Timing of Calculations. The Blended Ascension Cost to Collect Factor for each Ascension Health Fiscal Year will be calculated no later than January 31 of the immediately preceding Ascension Health Fiscal Year and will be fixed for the entirety of the upcoming Ascension Health Fiscal Year; provided that the Parties will re-calculate the Blended Ascension Cost to Collect Factor after it is fixed on a particular January 31 in the event that: (1) the Parties amend the Current Book Cost to Collect Factor, the Additional Book Cost to Collect Factor, the Ascension Wisconsin Cost to Collect Factor, the HIM Cash Collection Factor or the NRIT Cash Collection Factor, as applicable or (2) Ascension Health divests or sells a Steady State Eligible Recipient during such Ascension Health Fiscal Year. For clarity, the allocation of expenses that apply under the Supplement applicable to each Steady State Eligible Recipient or any other agreement between the Parties [**] will continue to apply pursuant to the terms of the particular Supplement or agreement, but will be aggregated for each Steady State Base Fee invoice provided in accordance with
Exhibit 4-D
.
|
II.
|
Base Fee Invoice.
Effective as of July 1, 2018,
Exhibit 4-D
is hereby amended as follows:
|
III.
|
Calculation of Service Level Credits.
Effective as of July 1, 2018,
Exhibit 3
is hereby amended as follows:
|
7.3
|
“If Supplier’s performance for a Service Level does not achieve the Target Level in a Measurement Window, resulting in a Service Level Default for such Service Level, then Supplier shall apply a Service Level Credit for the applicable Eligible Recipient equal to the product of:
|
(i)
|
The quotient of:
|
a.
|
[**] percent ([**]%),
|
b.
|
the number of Service Levels with respect to such Eligible Recipient that have commenced their respective Service Level Effective Date and for which this Exhibit contains both a metric (in
Article 3
) and a target (in
Article 4
),
|
(ii)
|
(A) with respect to Steady State Eligible Recipients, the portion of the Steady State Base Fee attributable to such Eligible Recipient based on
|
7.4
|
If more than one Service Level has experienced a Service Level Default for a Measurement Window with respect to an Eligible Recipient, Supplier will apply the sum of the Service Level Credit amounts for each of the Service Levels with respect to such Eligible Recipient that had Service Level Defaults during such Measurement Window in the same manner as described in
Section 7.3
above. There shall be, with respect to each Eligible Recipient, up to [**]
percent ([**]%) of the portion of the Base Fee attributable to such Eligible Recipient (calculated as set forth in
Section 7.3
) at risk with respect to such Measurement Window (and Supplier shall in no event be liable for Service Level Credits in excess of such at risk amount).”
|
IV.
|
Counterparts.
This Amendment may be executed in several counterparts, all of which taken together will constitute one single agreement between the Parties.
|
Ascension Health
|
R1 RCM Inc.
|
By:
/s/ Rhonda C. Anderson
Name: Rhonda C. Anderson
Title: SVP & CFO Ascension Healthcare
|
By:
/s/ John Sparby
Name: John Sparby
Title: EVP Customer Operations, R1 RCM
|
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.
|