ah-20230630

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 June 30, 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 July 31, 2023, the registrant had 418,958,515 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) (Unaudited)	5
	Consolidated Statements of Stockholders' Equity (Unaudited)	6
	Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

Part II.	Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	36
Item 6.	Exhibits	37

SIGNATURES		38

PART I — FINANCIAL INFORMATION


Item 1.			Financial Statements

R1 RCM Inc.

Consolidated Balance Sheets

(In millions, except share and per share data)


	(Unaudited)
	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	123.1	$	110.1

Accounts receivable, net of $31.5 million and $15.1 million allowance as of June 30, 2023 and December 31, 2022, respectively	245.2		235.2
Accounts receivable, net of $0.1 million allowance - related party as of June 30, 2023 and December 31, 2022	18.4		25.0
Current portion of contract assets, net	89.9		83.9
Prepaid expenses and other current assets	108.3		110.3

Total current assets	584.9		564.5
Property, equipment and software, net	181.8		164.8
Operating lease right-of-use assets	74.8		80.5
Non-current portion of contract assets, net	37.8		32.0
Non-current portion of deferred contract costs	30.1		26.7
Intangible assets, net	1,413.2		1,514.5
Goodwill	2,647.4		2,658.2
Deferred tax assets	10.5		10.4

Other assets	93.7		88.2
Total assets	$	5,074.2	$	5,139.8
Liabilities
Current liabilities:
Accounts payable	$	26.1	$	33.4
Current portion of customer liabilities	41.9		57.5
Current portion of customer liabilities - related party	7.8		7.4
Accrued compensation and benefits	93.1		109.0
Current portion of operating lease liabilities	19.4		18.0
Current portion of long-term debt	62.6		53.9
Accrued expenses and other current liabilities	74.3		70.6

Total current liabilities	325.2		349.8
Non-current portion of customer liabilities	4.9		5.0
Non-current portion of customer liabilities - related party	12.7		13.7
Non-current portion of operating lease liabilities	89.3		94.4
Long-term debt	1,691.5		1,732.6

Deferred tax liabilities	184.0		200.7
Other non-current liabilities	23.6		23.1
Total liabilities	2,331.2		2,419.3


Stockholders’ equity:
Common stock, $0.01 par value, 750,000,000 shares authorized, 443,374,297 shares issued and 418,811,379 shares outstanding at June 30, 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	3,159.3		3,123.2
Accumulated deficit	(121.3)		(121.9)
Accumulated other comprehensive income (loss)	0.4		(3.4)
Treasury stock, at cost, 24,562,918 shares as of June 30, 2023; 23,352,240 shares as of December 31, 2022	(299.8)		(281.8)
Total stockholders’ equity	2,743.0		2,720.5
Total liabilities and stockholders’ equity	$	5,074.2	$	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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net services revenue ($216.3 million and $433.1 million for the three and six months ended June 30, 2023, respectively, and $223.0 million and $439.7 million for the three and six months ended June 30, 2022, respectively, from related party)	$	560.7	$	391.9	$	1,106.3	$	777.6
Operating expenses:
Cost of services	445.9		310.1		880.6		606.6
Selling, general and administrative	62.6		30.9		109.6		59.8
Other expenses	28.3		88.9		58.5		106.0
Total operating expenses	536.8		429.9		1,048.7		772.4
Income (loss) from operations	23.9		(38.0)		57.6		5.2

Net interest expense	32.5		6.9		63.2		11.6
Income (loss) before income tax benefit	(8.6)		(44.9)		(5.6)		(6.4)
Income tax benefit	(8.9)		(24.5)		(6.2)		(15.4)
Net income (loss)	$	0.3	$	(20.4)	$	0.6	$	9.0
Net income (loss) per common share:
Basic	$	—	$	(0.07)	$	—	$	0.03
Diluted	$	—	$	(0.07)	$	—	$	0.03
Weighted average shares used in calculating net income (loss) per common share:
Basic	418,525,625		294,658,635		417,939,489		286,746,902
Diluted	455,245,607		294,658,635		454,097,654		328,169,238
Consolidated statements of comprehensive income (loss)
Net income (loss)	$	0.3	$	(20.4)	$	0.6	$	9.0
Other comprehensive income (loss):
Net change on derivatives designated as cash flow hedges, net of tax	4.9		(1.2)		3.2		(1.1)
Foreign currency translation adjustments	0.1		(3.2)		0.6		(4.6)
Total other comprehensive income (loss), net of tax	$	5.0	$	(4.4)	$	3.8	$	(5.7)
Comprehensive income (loss)	$	5.3	$	(24.8)	$	4.4	$	3.3

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 Income (Loss)	Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	439,950,125	$	4.4	(23,352,240)	$	(281.8)	$	3,123.2

SEC Form 10-Q filed by R1 RCM Inc.