ah-20230331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 001-41428

R1 RCM INC.

(Exact name of registrant as specified in its charter)


Delaware			87-4340782
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)

433 W. Ascension Way			84123
Suite 200
Murray
Utah
(Address of principal executive offices)			(Zip code)

(312) 324-7820

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	RCM	NASDAQ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April 28, 2023, the registrant had 418,202,601 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents


Part I.	Financial Information
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations and Comprehensive Income (Loss)	5
	Consolidated Statements of Stockholders' Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32

Part II.	Other Information
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 5.	Other Information	34
Item 6.	Exhibits	35

SIGNATURES		36

PART I — FINANCIAL INFORMATION


Item 1.			Financial Statements

R1 RCM Inc.

Consolidated Balance Sheets

(In millions, except share and per share data)


	(Unaudited)
	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	104.2	$	110.1

Accounts receivable, net of $16.0 million and $15.1 million allowance as of March 31, 2023 and December 31, 2022, respectively	229.4		235.2
Accounts receivable, net of $0.1 million and $0.1 million allowance - related party as of March 31, 2023 and December 31, 2022, respectively	24.9		25.0
Current portion of contract assets, net	81.8		83.9
Prepaid expenses and other current assets	105.2		110.3

Total current assets	545.5		564.5
Property, equipment and software, net	173.8		164.8
Operating lease right-of-use assets	81.0		80.5
Non-current portion of contract assets, net	37.3		32.0
Non-current portion of deferred contract costs	28.2		26.7
Intangible assets, net	1,464.4		1,514.5
Goodwill	2,648.5		2,658.2
Deferred tax assets	10.5		10.4

Other assets	83.4		88.2
Total assets	$	5,072.6	$	5,139.8
Liabilities
Current liabilities:
Accounts payable	$	24.6	$	33.4
Current portion of customer liabilities	45.6		57.5
Current portion of customer liabilities - related party	9.4		7.4
Accrued compensation and benefits	84.7		109.0
Current portion of operating lease liabilities	18.8		18.0
Current portion of long-term debt	58.3		53.9
Accrued expenses and other current liabilities	76.7		70.6

Total current liabilities	318.1		349.8
Non-current portion of customer liabilities	5.2		5.0
Non-current portion of customer liabilities - related party	13.2		13.7
Non-current portion of operating lease liabilities	92.7		94.4
Long-term debt	1,707.0		1,732.6

Deferred tax liabilities	192.1		200.7
Other non-current liabilities	24.9		23.1
Total liabilities	2,353.2		2,419.3


Stockholders’ equity:
Common stock, $0.01 par value, 750,000,000 shares authorized, 442,439,169 shares issued and 418,176,363 shares outstanding at March 31, 2023; 750,000,000 shares authorized, 439,950,125 shares issued and 416,597,885 shares outstanding at December 31, 2022	4.4		4.4
Additional paid-in capital	3,136.2		3,123.2
Accumulated deficit	(121.6)		(121.9)
Accumulated other comprehensive loss	(4.6)		(3.4)
Treasury stock, at cost, 24,262,806 shares as of March 31, 2023; 23,352,240 shares as of December 31, 2022	(295.0)		(281.8)
Total stockholders’ equity	2,719.4		2,720.5
Total liabilities and stockholders’ equity	$	5,072.6	$	5,139.8

See accompanying notes to consolidated financial statements.

R1 RCM Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(In millions, except share and per share data)


	Three Months Ended March 31,
		2023		2022
Net services revenue ($216.8 million and $216.7 million for the three months ended March 31, 2023 and 2022, from related party, respectively)		$	545.6	$	385.7
Operating expenses:
Cost of services		434.7		296.5
Selling, general and administrative		47.0		28.9
Other expenses		30.2		17.1
Total operating expenses		511.9		342.5
Income from operations		33.7		43.2

Net interest expense		30.7		4.7
Income before income tax provision		3.0		38.5
Income tax provision		2.7		9.1
Net income		$	0.3	$	29.4
Net income per common share:
Basic		$	—	$	0.11
Diluted		$	—	$	0.09
Weighted average shares used in calculating net income per common share:
Basic		417,346,840		278,747,261
Diluted		452,925,789		321,043,371
Consolidated statements of comprehensive income (loss)
Net income		$	0.3	$	29.4
Other comprehensive income (loss):
Net change on derivatives designated as cash flow hedges, net of tax		(1.7)		0.1
Foreign currency translation adjustments		0.5		(1.4)
Total other comprehensive income (loss), net of tax		$	(1.2)	$	(1.3)
Comprehensive income (loss)		$	(0.9)	$	28.1

See accompanying notes to consolidated financial statements.

R1 RCM Inc.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(In millions, except share and per share data)


	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	439,950,125	$	4.4	(23,352,240)	$	(281.8)	$	3,123.2	$	(121.9)	$	(3.4)	$	2,720.5
Share-based compensation expense	—	—		—	—		10.7		—		—		10.7
CoyCo 2 share-based compensation expense	—	—		—	—		1.8		—		—		1.8
Issuance of common stock related to share-based compensation plans	2,308,591	—		—	—		—		—		—		—


Exercise of vested stock options	180,453	—		—	—		0.5		—		—		0.5

Acquisition of treasury stock related to share-based compensation plans	—	—		(910,566)	(13.2)		—		—		—		(13.2)


Net change on derivatives designated as cash flow hedges, net of tax of $0.5 million	—	—		—	—		—		—		(1.7)		(1.7)
Foreign currency translation adjustments	—	—		—	—		—		—		0.5		0.5



Net income	—	—		—	—		—		0.3		—		0.3
Balance at March 31, 2023	442,439,169	$	4.4	(24,262,806)

SEC Form 10-Q filed by R1 RCM Inc.