SEC Info - R1 RCM Inc./DE - ‘10-K’ for 12/31/22


Item 9B.			Other Information

None.


Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None.

PART III


Item 10.			Directors, Executive Officers, and Corporate Governance

The information required by this item with respect to our directors and executive officers will be contained in our 2023 Proxy Statement under the caption “Information About Our Directors, Officers and 5% Stockholders” and is incorporated in this report by reference.

The information required by this item with respect to corporate governance matters will be contained in our 2023 Proxy Statement under the caption “Corporate Governance” and is incorporated in this report by reference.

Code of Integrity

We have adopted a global code of integrity that applies to all employees, including our directors and officers (our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). Copies of our Code of Integrity: Living Our Values are available without charge upon written request directed to Corporate Secretary, R1 RCM Inc., 434 W. Ascension Way, Murray, Utah 84123. Additionally, copies are available without charge online at https://www.r1rcm.com/hubfs/Code%20of%20Integrity%202021%20Final%20External.pdf.


Item 11.			Executive Compensation

Information required to be furnished by Item 402 of Regulation S-K and paragraphs (e)(4) and (e)(5) of Item 407 of Regulation S-K regarding executive compensation will be included in our 2023 Proxy Statement under the caption “Executive Compensation” and is herein incorporated by reference.


Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We maintain an Amended and Restated Stock Option Plan (“2006 Plan”), and a Third Amended and Restated 2010 Stock Incentive Plan (the “2010 Amended Plan”), and together with the 2006 Plan (the “Plans”). Under the 2010 Amended Plan, we may issue up to a maximum of 55,974,756 shares of common stock, including 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 us without the issuance of shares thereunder. We 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, RSUs, and and other share-based awards. As of December 31, 2022, 7,348,028 shares were available for future grants of awards under the 2010 Amended Plan. However, 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.

On June 21, 2022, the Board adopted the R1 RCM Inc. 2022 Inducement Plan (the “Inducement Plan”) to accommodate equity grants to new employees hired in connection with the 2022 Transactions. Under the Inducement Plan, we may grant RSUs (including PBRSUs) with respect to up to a total of 6,225,000 shares of common stock to new employees. Pursuant to Rule 5635(c)(4) of the NASDAQ Listing Rules, the Inducement Plan was adopted without stockholder approval. The Inducement Plan only provides for the grant of RSUs (including PBRSUs), and its terms are otherwise substantially similar to the 2010 Amended Plan, including with respect to treatment of equity awards in the event of a “change in control” as defined under the Inducement Plan. In accordance with Rule 5635(c)(4) of the NASDAQ Listing Rules, awards under the Inducement Plan can only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company or in connection with a merger or acquisition, to the extent permitted by Rule 5635(c)(3) of the NASDAQ Listing Rules. As of December 31, 2022, 259,372 shares were available for future grants of awards under the Inducement Plan. However, to the extent that previously granted awards under the Inducement Plan expire, terminate or are otherwise surrendered, canceled or forfeited, the number of shares available for future awards under the Inducement Plan will increase.

The following table summarizes information about the securities authorized for issuance under our equity compensation plans as of December 31, 2022:


	(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)	14,124,381	$	3.38	7,348,028
Equity compensation plans not approved by stockholders (2)	5,965,628	$	—	259,372
Total	20,090,009			7,607,400

(1) Includes 3,104,413 outstanding stock options, 3,105,930 RSUs, and 7,914,038 PBRSUs awarded under the Plans. The number of shares included for PBRSUs represents the maximum shares that could vest. Since the RSUs and PBRSUs have no exercise price, they are not included in the weighted-average exercise price calculation in column b.

(2) Represents RSU and PBRSU inducement awards made in conjunction with the Cloudmed Acquisition. The number of shares included for PBRSUs represents the maximum shares that could vest. Since the RSUs and PBRSUs have no exercise price, there is no weighted-average exercise price calculation in column b.

The information required by this item with regard to security ownership of certain beneficial owners and management will be contained in our 2023 Proxy Statement under the caption “Information About Our Directors, Officers and 5% Stockholders - Security Ownership of Certain Beneficial Owners and Management” and is incorporated in this report by reference.


Item 13.			Certain Relationships and Related Transactions, and Director Independence

The information required by this item will be contained in our 2023 Proxy Statement under the captions “Related Party Transactions” and “Corporate Governance” and is incorporated in this report by reference.


Item 14.			Principal Accountant Fees and Services

The information required by this item will be contained in our 2023 Proxy Statement under the caption “The Auditor Ratification Proposal” and is incorporated in this report by reference.

PART IV


Item 15.			Exhibits and Financial Statement Schedules

a) The following documents are filed as a part of this report:

(1) Financial Statements: The financial statements and notes thereto annexed to this report beginning on page F-1.

(2) Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts Disclosure schedules have been omitted because they are not required or because the required information is in the Consolidated Financial Statements and notes thereto.

(3) Exhibits:


Exhibit Number			Description

2.1+			Agreement and Plan of Merger by and among Intermedix Holdings, Inc., O l d R1 RCM , Project Links Parent, Inc., Project Links Merger Sub, Inc. and solely in its capacity as Securityholder Representative, Thomas H. Lee Equity Fund VI, L.P. dated as of February 23, 2018 (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (F ile No. 001-34746) filed on February 26, 2018)
2.2+			Stock Purchase Agreement, dated as of January 9, 2020, by and among Ol d R1 RC M , Clearsight Intermediate Holdings, Inc. and Clearsight Group Holdings, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (F ile No. 001-34746) filed on January 13, 2020)
2.3+			Transaction Agreement and Plan of Merger, dated as of January 9, 2022 among Old R1 RCM, Project Roadrunner Parent Inc., Project Roadrunner Merger Sub Inc., Coyco 1, L.P., and Coyco 2, L.P. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K/A (File No. 001-34746) filed on Januar y 11, 2022)











3.1			Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
3.2			Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)

4.1			Description of Securities



4.2			Second Amended and Restated Registration Rights Agreement, dated as of June 21, 2022, by and among the Company, Old R1 RCM, TCP-ASC ACHI Series LLLP, IHC Health Services, Inc., Shared Business Services, LLC and the Sellers (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
4.3			Amended and Restated Investor Rights Agreement, dated June 21, 2022, by and among the Company, Old R1 RCM and TCP-ASC ACHI Series LLLP (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
4.4			Investor Rights Agreement, dated June 21, 2022, by and among the Company and the Sellers (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
4.5			Warrant Assignment and Assumption Agreement, dated June 21, 2022, by and between the Company and IHC Health Services, Inc. (incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
4.6			Warrant, dated January 23, 2018, by and between Old R1 RCM and IHC Health Services, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-34746) filed on January 24, 2018)
4.7			Warrant Assignment and Assumption Agreement, dated June 21, 2022, by and between the Company and TCP ASC ACHI Series LLLP (incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
4.8			Warrant, dated February 16, 2016, by and between Old R1 RCM and TCP-ASC ACHI Series LLLP (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-34746) filed on May 10, 2016)


10.1*			Amended and Restated Stock Option Plan, as amended (incorporated by reference to Exhibit 10.1 to Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-162186) filed on April 26, 2010)
10.2*			Form of Acknowledgment of Grant, used to evidence option grants under the Amended and Restated Stock Option Plan (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (File No. 333-162186) filed on September 29, 2009)
10.3*			Restricted Stock Plan, as amended (incorporated by reference to Exhibit 10.3 to Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-162186) filed on April 26, 2010)
10.4*			Form of Restricted Stock Award Agreement under the Restricted Stock Plan, as amended (incorporated by reference to Exhibit 10.4 to the Registration Statemen t on Form S-1 (File No. 333-162186) filed on September 29, 2009)
10.5*			Form of Indemnification Agreement, entered into between Old R1 RCM and each director and executive officer (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 001-34746) filed on February 16, 2016)
10.6*			Form of Incentive Stock Option Agreement under the 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.24 to Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-162186) filed on April 26, 2010)
10.7*			Form of Restricted Stock Unit Grant Agreement under the Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-34746) filed on November 2, 2016)
10.8*			Form of Performance Based Restricted Stock Unit Grant Agreement under the Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-34746) filed on November 2, 2016)
10.9*			Form of Nonstatutory Stock Option Agreement under the Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 (File No. 001-34746) filed on November 2, 2016)
10.10*			Accretive Health, Inc. Second Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on December 12, 2016)
10.11*			Form of Grant of Performance Based Restricted Stock Unit Awards pursuant to the Second Amended and Restated 2010 Stock Incentive Plan (to be used for awards to a senior vice president or executive vice president) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on 10-Q (File No. 001-34746) filed on October 31, 2017)
10.12*			Form of Grant of Performance Based Restricted Stock Unit Awards pursuant to the Second Amended and Restated 2010 Stock Incentive Plan (to be used for awards to a vice president or director-level employee) (incorporated by reference to Exhibit 10.3 to the Quarterly Repor t on 10-Q (File No. 001-34746) filed on October 31, 2017)
10.13*			Form of Letter Agreement (to be used for executive vice presidents) (incorporated by reference to Exhibit 10.4 to the Quarterly Report on 10-Q (File No. 001-34746) filed on October 31, 2017)
10.14			Third Amended and Restated Stockholders’ Agreement, dated as of February 22, 2009, among Old R1 RCM and the parties named therein, as amended (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-1 (File No. 333-172707) filed on March 9, 2011)
10.15*			Form of Nonstatutory Stock Option Agreement under the 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.25 to Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-162186) filed on April 26, 2010)
10.16^			Amended and Restated Master Professional Services Agreement by and between Ascension Health and Old R1 RCM effective as of February 16, 2016 (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-34746) filed on May 10, 2016)
10.17^			Amendment No. 1 to the Amended and Restated Master Professional Services Agreement by and between Old R1 RCM and Ascension Health, dated May 4, 2017 (incorporated by reference to Exhibit 10.1 to Quarterly Report on 10-Q for the quarter ended June 30, 2017 (File No. 001-34746) filed on August 2, 2017)
10.18*			Offer Letter, dated April 27, 2013, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.18 to Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 001-34746) filed on December 30, 2014)


10.19*			Restricted Stock Award, dated June 3, 2013, betwee n Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.19 to Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 001-34746) filed on December 30, 2014)
10.20*			Nonstatutory Stock Option Award Agreement, dated June 3, 2013, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.20 to Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 001-34746) filed on December 30, 2014)
10.21*			Amendment to Offer Letter, dated April 29, 2014, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.25 to Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 001-34746) filed on December 30, 2014)
10.22*			Nonstatutory Stock Option Award Agreement, dated April 29, 2014, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.26 to Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 001-34746) filed on December 30, 2014)
10.23*			Restricted Stock Award Agreement, dated April 29, 2014, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.27 to Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (File No. 001-34746) filed on December 30, 2014)

10.24*			Form of Restricted Stock Award Agreement under the Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.43 to Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (File No. 001-34746) filed on March 10, 2016)
10.25*			Letter Agreement, dated December 7, 2015, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.46 to Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-34746) filed on March 10, 2016)
10.26*			Restricted Stock Award Agreement, dated December 31, 2015, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.48 to Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 001-34746) filed on March 10, 2016)
10.27			Securities Purchase Agreement, dated as of December 7, 2015, by and among Accretive Health, Inc., TCP-ASC ACHI Series LLLP, and, solely for the purposes set forth therein, Ascension Health Alliance d/b/a Ascension (incorporated by reference to Exhibit 10.1 to Current Report on 8-K (File No. 001-34746) filed December 8, 2015)



10.28			Agreement by and between TCP-ASC ACHI Series LLLP and Old R1 RCM dated September 9, 2016 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on September 9, 2016)
10.29*			Non-Statutory Stock Option Award Grant Agreement, dated as of October 3, 2016, by and between Joseph G. Flanagan and Old R1 RCM (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-34746) filed on October 5, 2016)
10.30*			Non-Statutory Stock Option Award Grant Agreement, dated as of October 3, 2016, by and between Joseph G. Flanagan and Old R1 RCM (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-34746) filed on October 5, 2016)
10.31*			Employment Offer Letter Agreement, dated June 19, 2017, by and between Old R1 RCM and Gary Long (incorporated by reference to Exhibit 10.55 to Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (File No. 001-34746) filed on March 9, 2018)
10.32*			Amended and Restated Grant of Performance Based Awards pursuant to the R1 RCM Inc. Second Amended and Restated 2010 Stock Incentive Plan to Joseph Flanagan (incorporated by reference to Exhibit 10.1 to the Current Report on 8-K/A (File No. 001-34746) filed on January 18, 2018)

10.33			Securities Purchase Agreement between Old R1 RCM and IHC Health Services, Inc. dated as of January 23, 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on January 24, 2018)





10.34*			Form of Grant of Performance Based Restricted Stock Unit Awards - 2018 Form pursuant to the Second Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on 8-K (File No. 001-34746) filed on May 31, 2018)

10.35^			Supplement 26 to Amended and Restated Master Professional Services Agreement between Old R1 RCM and Ascension Health dated as of June 24, 2018 (incorporated by reference to Exhibit 10.5 to the Quarterly Report on 10-Q (File No. 001-34746) filed on August 9, 2018)
10.36^			Amendment No. 2 to Amended and Restated Master Professional Services Agreement between Old R1 RCM and Ascension Health dated as of June 24, 2018 (incorporated by reference to Exhibit 10.6 to the Quarterly Report on 10-Q (File No. 001-34746) filed on August 9, 2018)


10.37^			Amendment No. 3 to Amended and Restated Master Professional Services Agreement between Old R1 RCM and Ascension Health dated as of July 5, 2018 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on 10-Q (File No. 001-34746) filed on November 7, 2018)

10.38*			Form of Grant of Performance-Based Restricted Stock Unit Awards Agreement pursuant to the Second Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on April 10, 2019)
10.39*			Amendment No. 2 to Offer Letter, dated March 6, 2019, between Old R1 RCM and Joseph Flanagan (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34746) filed on May 9, 2019)


10.40^			Amendment No. 4 to Amended and Restated Master Professional Services Agreement between Old R1 RCM and Ascension Health dated as of December 20, 2019 (incorporated by reference to Exhibit 10.61 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (File No. 001-34746) filed on February 20, 2020)


10.41*			Form of Grant of Performance-Based Restricted Stock Unit Awards Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on July 15, 2020)
10.42*			Offer Letter Agreement between Old R1 RCM and Rachel Wilson dated April 29, 2020 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34746) filed on August 5, 2020)


10.43			Preferred Stock Agreement, dated as of January 5, 2021, between Old R1 RCM and TCP-ASC ACHI Series LLLP (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on January 6, 2021)


10.44*			Form of Restricted Stock Unit Award Agreement under Old R1 RCM ’s Second Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.71 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (File No. 001-34746) filed on February 18, 2021)
10.45*			Amended and Restated Offer Letter Agreement between Old R1 RCM and Joseph Flanagan dated March 23, 2021 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34746) filed on May 4, 2021)

10.46*			R1 RCM Inc. Third Amended and Restated Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on May 21, 2021)
10.47^			Amendment No. 5 to the Amended & Restated Master Professional Services Agreement between Old R1 RCM and Ascension Health effective May 1, 2021 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-34746) filed on August 3, 2021)

10.48			Voting Agreement, dated as of January 9, 2022, between Old R1 RCM, Revint Holdings, LLC, and TCP-ASC ACHI Series LLLP (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K/A (File No. 001-34746) filed on January 11, 2022)
10.49*			Form of Grant of Performance Based Restricted Stock Unit Awards under the R1 RCM Inc. Third Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-34746) filed on June 14, 2022)
10.50*			Form of Grant of Performance Based Restricted Stock Unit Awards (Pull-forward) under the R1 RCM Inc. Third Amended and Restated 2010 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-34746) filed on June 14, 2022)
10.51			Second Amended and Restated Credit Agreement, dated June 21, 2022, by and among Old R1 RCM Inc., as the Initial Borrower), the Company, as the Ultimate Borrower, the other Persons party thereto that are designated as a “Credit Party,” Bank of America, N.A., as Agent for the several financial institutions from time to time party thereto and the Lenders (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
10.52*			Employment Agreement, dated June 21, 2022, by and between the Company and Lee Rivas (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
10.53*			R1 RCM Inc. 2022 Inducement Plan (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
10.54*			Form of Standard PBRSU Award Agreement under R1 RCM Inc. 2022 Inducement Plan (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)


10.55*			Form of Pull-forward PBRSU Award Agreement under R1 RCM Inc. 2022 Inducement Plan (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
10.56*			Form of RSU Award Agreement under R1 RCM Inc. 2022 Inducement Plan (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K (File No. 001-41428) filed on June 21, 2022)
10.57^			Amendment No. 6 to the Amended & Restated Master Professional Services Agreement, dated as of July 1, 2022, by and between Ascension Health and R1 RCM Holdco Inc. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q (File No. 001-41428) filed on November 8, 2022)
10.58			Director Nomination Agreement, dated as of August 2, 2022, by and between R1 RCM Inc. and Sutter Health (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-41428) filed on August 8, 2022) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q (File No. 001-41428) filed on November 8, 2022)
10.59*			Offer Letter Agreement , dated as of November 7, 2022, by and between R1 RCM Inc. and John Sparby (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-41428) filed on November 8, 2022)
10.60*			Amended and Restated Offer Letter Agreement, dated as of November 7, 2022, by and between R1 RCM Inc. and Joseph Flanagan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-41428) filed on November 8, 2022)
10.61*			Amended and Restated Offer Letter Agreement, dated as of November 7, 2022, by and between R1 RCM Inc. and Lee Rivas (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-41428) filed on November 8, 2022)
10.62*			Offer Letter Agreement, dated as of January 5, 2023, by and between R1 RCM. Inc. and Jennifer Williams (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No. 001-41428) filed on January 5, 2023)
10.63*			Form of Employment Terms & Restrictive Covenant Agreement (for Executive Vice Presidents) (incorporated by reference to Exhibit 10.1 to the Current report on Form 8-K (File No. 001-41428) filed on December 22, 2022)
21.1			Subsidiaries of the Registrant
23.1			Consent of Ernst & Young LLP
31.1			Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


*			Management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of Form 10-K.
+			Certain portions of this exhibit have been redacted pursuant to Item 601(b)(2)(ii) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon request.
^			Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon request.


Item 16.			Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			R1 RCM INC.

By:			/s/ *Lee Rivas*
			Lee Rivas
			Chief Executive Officer

By:			/s/ *Jennifer Williams*
			Jennifer Williams
			Chief Financial Officer and Treasurer

Date: February 16, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Lee Rivas
Lee Rivas

Chief Executive Officer and Director
(Principal Executive Officer)

/s/ Jennifer Williams
Jennifer Williams

Chief Financial Officer and Treasurer
(Principal Financial Officer)

/s/ Richard B. Evans, Jr.
Richard B. Evans, Jr.

Corporate Controller
(Principal Accounting Officer)

/s/ Bradford Kyle Armbrester

Bradford Kyle Armbrester

Director

/s/ Agnes Bundy Scanlan

Agnes Bundy Scanlan

Director

/s/ Brian K. Dean

Brian K. Dean

Director

/s/ Jeremy Delinsky

Jeremy Delinsky

Director

/s/ David M. Dill

David M. Dill

Director

/s/ Michael C. Feiner

Michael C. Feiner

Director

/s/ Joseph Flanagan

Joseph Flanagan

Director

/s/ John B. Henneman III
John B. Henneman III

Lead Director

/s/ Matthew Holt
Matthew Holt

Director

/s/ Neal Moszkowski
Neal Moszkowski

Director

/s/ Ian Sacks
Ian Sacks

Director

/s/ Jill Smith

Jill Smith

Director

/s/ Anthony J. Speranzo

Anthony J. Speranzo

Chair of the Board

/s/ Anthony R. Tersigni

Director

/s/ Janie Wade

Director

R1 RCM Inc.

Index to Consolidated Financial Statements



									Page
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: i 42)									F-2
Consolidated Balance Sheets									F-6
Consolidated Statements of Operations and Comprehensive Income (Loss)									F-7
Consolidated Statements of Stockholders’ Equity									F-8
Consolidated Statements of Cash Flows									F-9
Notes to Consolidated Financial Statements									F-10

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of R1 RCM Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of R1 RCM Inc. (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 16, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2


						Revenue recognition - Incentive fee arrangements
Description of the Matter						As described in Note 2 to the consolidated financial statements, the Company recognizes revenue related to financial performance-based incentive fees ratably as the performance obligation for revenue cycle management services is satisfied. Incentive fees are structured to reflect quarterly or annual performance and are evaluated on a contract-by-contract basis. Auditing the Company’s recognition and measurement of variable incentive fees revenues is subjective due to the estimation uncertainty in the calculations for amounts recognized but unbilled at year end. In these situations, the Company performs an assessment of the estimated total incentive fees expected and the related revenues to be recognized. Further, the nature and terms of each individual customer agreement for end-to-end revenue cycle management services varies, and each contract requires separate analysis to ensure that incentive fee revenue recognition is appropriate.

How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the review of customer agreements and related amendments and incentive fee calculations, including management’s internal controls over unbilled incentive fees at year end and the assessment of the estimated constraint applied to the incentive fee revenues, if any. To test the appropriateness of the timing of recognition and measurement of incentive fee revenues at year end, our audit procedures included, among others, obtaining and reviewing the customer contracts and any related amendments, and independently confirming the unbilled incentive fee amounts recognized at year end directly with external customers. In addition, we compared historically estimated and recognized incentive fees to the actual amounts billed and collected in subsequent periods to assess the accuracy of management’s estimation process.

						Cloudmed business combination – valuation of developed technology
Description of the Matter						As described in Note 3 to the consolidated financial statements, the Company completed its acquisition of all the outstanding equity interests of Revint Holdings, LLC (“Cloudmed”) for consideration of approximately $3.3 billion on June 21, 2022. The transaction was accounted for as a business combination. Auditing the Company’s accounting for its acquisition of Cloudmed was complex due to the significant estimation required by management to determine the preliminary fair value of the acquired identified intangible assets of $1,366.6 million, the most significant of which is developed technology of $1,025.0 million. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair value to the key assumptions included in the valuation. The Company used a discounted cash flow model to measure the fair value of the developed technology intangible assets. The significant assumptions used to estimate the fair value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results (e.g., revenue and cost growth rates and technology obsolescence curves). These significant assumptions are forward looking and could be affected by future economic and market conditions.

F-3


How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls addressing the risks of material misstatement over its accounting for the Cloudmed acquisition including, among others, management’s process to establish the significant assumptions and measure the acquired developed technology intangible asset. This included testing controls over management’s review of the significant assumptions and other inputs used in the determination of fair value. The testing was inclusive of key management review controls to evaluate the acquired developed technology and estimated future sales, and controls to ensure that the data used to evaluate and support the significant assumptions was complete, accurate and, where applicable, verified to appropriate data sources. To test the Company’s accounting for the Cloudmed acquisition, our audit procedures included, among others, inspecting the terms of the executed agreement, evaluating the Company’s selection of the valuation methodology, evaluating the methods and significant assumptions used by the Company’s valuation specialist, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We involved our valuation specialists to assist with the evaluation of methodologies used by the Company and the significant assumptions included in the fair value estimates. We also evaluated the Company’s disclosures in the consolidated financial statements.

						Cloudmed contract asset
Description of the Matter						As described in Note 2 to the consolidated financial statements, a majority of revenue arising from the recently-acquired Cloudmed business relates to services provided to identify and deliver opportunities for the Company’s healthcare provider customers for incremental reimbursement from their respective payors. As the majority of the ultimate revenue earned for the services provided will be dependent on the amount of incremental reimbursements collected by Cloudmed’s customers in a future period, the variable consideration must be estimated to reflect the Company’s expectations about the amount it will be entitled to receive from its customers. As the revenue recognized is not finalized and billed until a future period, accounting for revenue in the Cloudmed business results in the recognition of a contract asset. At the date of the Cloudmed acquisition the acquired contract asset was $92.4 million and the balance was $115.9 million at December 31, 2022. Auditing the Company’s contract asset involved challenging judgment because the calculation involves certain subjective management assumptions, notably the realization rate to estimate the total amount that the Company’s customers are likely to collect from their payors after the services have been provided. The Company’s variable consideration is estimated based on the Company’s historical experience at the customer and service line level.

How We Addressed the Matter in Our Audit						To test the appropriateness of the contract asset, at acquisition and at the balance sheet date, our audit procedures included, among others, obtaining and reviewing the customer agreements, evaluating the significant assumptions used by management (see above) and testing the accuracy and completeness of the underlying data used in management’s calculation. This included testing management’s estimate of their customers’ expected incremental reimbursements from the payors through inspection of source documentation such as evidence of actual subsequent collections. In addition, we evaluated the estimates made based on the Company’s historical experience and performed sensitivity analyses to evaluate the impact to the recognized contract asset that would result from changes in the significant assumptions.

F-4

/s/ i Ernst & Young LLP

We have served as the Company’s auditor since 2004.

i Chicago, Illinois

F-5

R1 RCM Inc.

Consolidated Balance Sheets

(In millions, except per share data)

December 31,

2022

2021

Assets

Current assets:

Cash and cash equivalents

i 110.1

i 130.1

Accounts receivable, net of $ i 15.1 million and $ i 2.4 million allowance as of December 31, 2022 and 2021, respectively

i 235.2

i 131.3

Accounts receivable, net of $ i 0.1 million and $ i 0.1 million allowance - related party as of December 31, 2022 and 2021, respectively

i 25.0

i 26.1

Current portion of contract assets, net

i 83.9

i —

Prepaid expenses and other current assets

i 110.3

i 77.2

Total current assets

i 564.5

i 364.7

Property, equipment and software, net

i 164.8

i 94.7

Operating lease right-of-use assets

i 80.5

i 48.9

Non-current portion of contract assets, net

i 32.0

i —

Non-current portion of deferred contract costs

i 26.7

i 23.4

Intangible assets, net

i 1,514.5

i 265.4

Goodwill

i 2,658.2

i 554.7

Non-current deferred tax assets

i 10.4

i 51.8

Other assets

i 88.2

i 45.7

Total assets

i 5,139.8

i 1,449.3

Liabilities

Current liabilities:

Accounts payable

i 33.4

i 17.7

Current portion of customer liabilities

i 57.5

i 41.5

Current portion of customer liabilities - related party

i 7.4

i 7.9

Accrued compensation and benefits

i 109.0

i 97.0

Current portion of operating lease liabilities

i 18.0

i 13.5

Current portion of long-term debt

i 53.9

i 17.5

Accrued expenses and other current liabilities

i 70.6

i 59.1

Total current liabilities

i 349.8

i 254.2

Non-current portion of customer liabilities

i 5.0

i 3.3

Non-current portion of customer liabilities - related party

i 13.7

i 15.4

Non-current portion of operating lease liabilities

i 94.4

i 53.4

Long-term debt

i 1,732.6

i 754.9

Non-current deferred tax liabilities

i 200.7

i 4.2

Other non-current liabilities

i 23.1

i 17.2

Total liabilities

i 2,419.3

i 1,102.6

Stockholders’ equity:

Common stock, $ i i 0.01 / par value, i 750,000,000 shares authorized, i 439,950,125 shares issued and i 416,597,885 shares outstanding at December 31, 2022; i 500,000,000 shares authorized, i 298,320,928 shares issued and i 278,226,242 shares outstanding at December 31, 2021

i 4.4

i 3.0

Additional paid-in capital

i 3,123.2

i 628.5

Accumulated deficit

( i 121.9)

( i 64.3)

Accumulated other comprehensive loss

( i 3.4)

( i 5.3)

Treasury stock, at cost, i 23,352,240 shares as of December 31, 2022; i 20,094,686 shares as of December 31, 2021

( i 281.8)

( i 215.2)

Total stockholders’ equity

i 2,720.5

i 346.7

Total liabilities and stockholders’ equity

i 5,139.8

i 1,449.3

See accompanying notes to consolidated financial statements.

F-6

R1 RCM Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In millions, except per share data)

Year Ended December 31,

2022

2021

2020

Net services revenue ($ i 881.0 million, $ i 893.5 million and $ i 809.5 million from related party for the years ended December 31, 2022, 2021, and 2020, respectively)

i 1,806.4

i 1,474.6

i 1,270.8

Operating expenses:

Cost of services

i 1,445.1

i 1,162.8

i 1,021.1

Selling, general and administrative

i 174.8

i 120.0

i 102.4

Other expenses

i 183.5

i 46.1

i 67.3

Total operating expenses

i 1,803.4

i 1,328.9

i 1,190.8

Income from operations

i 3.0

i 145.7

i 80.0

Gain on business disposition

i —

i 55.7

Net interest expense

( i 64.0)

( i 18.9)

( i 17.3)

Income (loss) before income tax provision (benefit)

( i 61.0)

i 126.8

i 118.4

Income tax provision (benefit)

( i 3.4)

i 29.6

i 1.3

Net income (loss)

( i 57.6)

i 97.2

i 117.1

Net income (loss) per common share:

Basic

( i 0.16)

( i 1.86)

i 0.41

Diluted

( i 0.16)

( i 1.86)

i 0.33

Weighted average shares used in calculating net income (loss) per common share:

Basic

i 352,337,767

i 266,183,565

i 115,729,645

Diluted

i 352,337,767

i 266,183,565

i 174,573,270

Consolidated statements of comprehensive income (loss)

Net income (loss)

( i 57.6)

i 97.2

i 117.1

Other comprehensive income (loss):

Net change on derivatives designated as cash flow hedges, net of tax

i 9.2

i 2.1

( i 1.7)

Foreign currency translation adjustments

( i 7.3)

( i 0.9)

( i 0.3)

Total other comprehensive income (loss), net of tax

i 1.9

i 1.2

( i 2.0)

Comprehensive income (loss)

( i 55.7)

i 98.4

i 115.1

Basic:

Net income (loss)

( i 57.6)

i 97.2

i 117.1

Less dividends on preferred shares

i —

( i 592.3)

( i 22.4)

Less income allocated to preferred shareholders

i —

( i 47.3)

Net income (loss) available/allocated to common shareholders - basic

( i 57.6)

( i 495.1)

i 47.4

Diluted:

Net income (loss)

( i 57.6)

i 97.2

i 117.1

Less dividends on preferred shares

i —

( i 592.3)

( i 22.4)

Less income allocated to preferred shareholders

i —

( i 37.7)

Net income (loss) available/allocated to common shareholders - diluted

( i 57.6)

( i 495.1)

i 57.0

See accompanying notes to consolidated financial statements.

F-7

R1 RCM Inc.

Consolidated Statements of Stockholders’ Equity

(In millions, except per share data)

Common Stock

Treasury Stock

Additional
Paid-In
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Total

Amount

Balance at December 31, 2019

i 127,807,546

i 1.3

( i 13,786,266)

( i 73.6)

i 372.7

( i 277.8)

( i 4.5)

i 18.1

Impact of credit-loss standard adoption, net of tax of $ i 0.3

—

( i 0.8)

—

( i 0.8)

Adjusted balance at January 1, 2020

i 127,807,546

i 1.3

( i 13,786,266)

( i 73.6)

i 372.7

( i 278.6)

( i 4.5)

i 17.3

Share-based compensation expense

—

i 24.2

—

i 24.2

Issuance of common stock related to share-based compensation plans

i 6,848,859

i 0.1

—

( i 0.1)

—

i —

Exercise of vested stock options

i 3,156,154

i —

—

i 19.3

—

i 19.3

Dividends paid/accrued on preferred stock

—

( i 22.4)

—

( i 22.4)

Acquisition of treasury stock related to share-based compensation plans

—

( i 2,882,255)

( i 65.6)

—

( i 65.6)

Net change on derivatives designated as cash flow hedges, net of tax of $ i 0.6

—

( i 1.7)

Foreign currency translation adjustments

—

( i 0.3)

Net income

—

i 117.1

—

i 117.1

Balance at December 31, 2020

i 137,812,559

i 1.4

( i 16,668,521)

( i 139.2)

i 393.7

( i 161.5)

( i 6.5)

i 87.9

Share-based compensation expense

—

i 74.9

—

i 74.9

Issuance of common stock related to share-based compensation plans

i 2,325,918

i —

—

i —

—

i —

Issuance of common stock

i 324,212

—

i 7.0

—

i 7.0

Exercise of vested stock options

i 1,819,039

—

i 8.0

—

i 8.0

Acquisition of treasury stock related to share-based compensation plans

—

( i 796,908)

( i 19.1)

—

( i 19.1)

Repurchase of common stock

—

( i 2,629,257)

( i 56.9)

—

( i 56.9)

Net change on derivatives designated as cash flow hedges, net of tax of i 0.7

—

i 2.1

Foreign currency translation adjustment

—

( i 0.9)

Conversion of preferred shares

i 117,706,400

i 1.2

—

i 250.3

—

i 251.5

Inducement dividend

—

( i 592.3)

—

( i 592.3)

Issuance of common stock related to inducement

i 21,582,800

i 0.2

—

i 487.1

—

i 487.3

Exercise of warrants pursuant to cashless provisions

i 16,750,000

i 0.2

—

( i 0.2)

—

i —

Net income

—

i 97.2

—

i 97.2

Balance at December 31, 2021

i 298,320,928

i 3.0

( i 20,094,686)

( i 215.2)

i 628.5

( i 64.3)

( i 5.3)

i 346.7

Share-based compensation expense

—

i 62.3

—

i 62.3

CoyCo 2 share-based compensation expense

—

i 5.1

—

i 5.1

Issuance of common stock related to share-based compensation plans

i 2,954,694

—

Issuance of common stock

i 137,389,275

i 1.4

—

i 2,411.4

—

i 2,412.8

Replacement awards issued in conjunction with acquisitions

—

i 11.3

—

i 11.3

Exercise of vested stock options

i 1,285,228

—

( i 2,282)

( i 0.1)

i 4.6

—

i 4.5

Acquisition of treasury stock related to share-based compensation plans

—

( i 1,174,754)

( i 27.6)

—

( i 27.6)

Repurchases of common stock

—

( i 2,080,518)

( i 38.9)

—

( i 38.9)

Net change on derivatives designated as cash flow hedges, net of tax of $ i 3.1

—

i 9.2

Foreign currency translation adjustment

—

( i 7.3)

Net loss

—

( i 57.6)

—

( i 57.6)

Balance at December 31, 2022

i 439,950,125

i 4.4

( i 23,352,240)

( i 281.8)

i 3,123.2

( i 121.9)

( i 3.4)

i 2,720.5

See accompanying notes to consolidated financial statements.

F-8

R1 RCM Inc.

Consolidated Statements of Cash Flows

(In millions)

Year Ended December 31,

2022

2021

2020

Operating activities

Net income (loss)

( i 57.6)

i 97.2

i 117.1

Adjustments to reconcile net income (loss) to net cash (used in) provided by operations:

Depreciation and amortization

i 172.0

i 77.5

i 68.7

Amortization of debt issuance costs

i 3.6

i 1.2

i 1.0

Share-based compensation

i 62.0

i 74.3

i 24.1

CoyCo 2 share-based compensation

i 5.1

i —

Gain on sale of Emergency Medical Services business

i —

( i 55.7)

Loss/(gain) on disposal and right-of-use asset write-downs

i 21.1

( i 0.4)

i 17.0

Provision for credit losses

i 11.8

i 0.7

i 0.6

Deferred income taxes

( i 6.8)

i 23.0

( i 1.2)

Non-cash lease expense

i 14.0

i 9.7

i 7.3

Other

i 6.5

( i 1.9)

i 4.7

Changes in operating assets and liabilities:

Accounts receivable and related party accounts receivable

( i 51.8)

( i 33.2)

( i 56.5)

Contract assets

( i 24.1)

i —

Prepaid expenses and other assets

( i 39.4)

( i 18.0)

( i 12.9)

Accounts payable

( i 16.0)

i 0.1

( i 3.4)

Accrued compensation and benefits

( i 77.7)

i 42.0

( i 40.3)

Lease liabilities

( i 18.9)

( i 12.7)

( i 13.6)

Other liabilities

( i 1.5)

( i 13.3)

i 25.3

Customer liabilities and customer liabilities - related party

( i 12.2)

i 18.6

( i 20.4)

Net cash (used in) provided by operating activities

( i 9.9)

i 264.8

i 61.8

Investing activities

Purchases of property, equipment, and software

( i 93.5)

( i 51.7)

( i 49.3)

Payment for business acquisitions, net of cash acquired

( i 847.7)

( i 294.7)

( i 196.0)

Proceeds from sale of Emergency Medical Services business, net of cash disposed

i —

i 128.3

Other

( i 8.3)

i 6.0

i —

Net cash used in investing activities

( i 949.5)

( i 340.4)

( i 117.0)

Financing activities

Issuance of senior secured debt, net of discount and issuance costs

i 1,016.6

i 698.6

i 190.6

Borrowings on revolver

i 50.0

i 120.0

i 50.0

Payment of debt issuance costs

( i 1.0)

( i 1.9)

i —

Repayment of senior secured debt

( i 25.5)

( i 488.9)

( i 23.4)

Repayments on revolver

( i 30.0)

( i 110.0)

( i 20.0)

Payment of contingent consideration liability

i —

( i 4.8)

i —

Deferred payment related to acquisition of RevWorks

i —

( i 12.5)

i —

Inducement of preferred stock conversion

i —

( i 105.0)

i —

Payment of equity issuance costs

( i 2.0)

i —

Exercise of vested stock options

i 4.6

i 8.9

i 18.4

Purchase of treasury stock

( i 39.3)

( i 56.5)

i —

Shares withheld for taxes

( i 30.2)

( i 16.3)

( i 71.9)

Other

( i 0.2)

( i 5.8)

Net cash provided by financing activities

i 943.0

i 31.4

i 137.9

Effect of exchange rate changes in cash

( i 3.6)

( i 0.5)

( i 0.4)

Net (decrease) increase in cash, cash equivalents, and restricted cash

( i 20.0)

( i 44.7)

i 82.3

Cash, cash equivalents, and restricted cash at beginning of period

i 130.1

i 174.8

i 92.5

Cash, cash equivalents, and restricted cash at end of period

i 110.1

i 130.1

i 174.8

Supplemental disclosures of cash flow information

Accrued dividends payable to preferred stockholders

i —

i 5.8

Property, equipment and software purchases not paid

i 26.9

i 19.5

i 11.0

Assets obtained in exchange for common stock

i 24.3

i 7.0

i —

Interest paid

i 61.0

i 17.3

i 15.8

Income taxes paid

i 8.6

i 5.2

i 4.2

Income taxes refunded

i —

i 0.2

i 0.4

See accompanying notes to consolidated financial statements.

F-9

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

1. i Description of Business

R1 RCM Inc. (the “Company”) is a leading provider of technology-driven solutions that transform the patient experience and financial performance of healthcare 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 patient registration, insurance and benefit verification, scheduling, 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 domain experience, innovative technology and intelligent automation, and process excellence. The Company assists its revenue cycle management (“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 largest service offering consists of end-to-end RCM services for health systems, hospitals, and physician groups, 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 supplement them with the Company’s infused management, subject matter specialists, proprietary technology solutions, and other resources. Under the operating partner model, the Company’s employees are the revenue cycle personnel providing services and the Company typically controls third party vendors either through direct contracts or the assumption of the customer’s vendor contracts. As a result, under the operating partner model the Company records higher expenses as well as higher revenues related to the negotiated cost to collect. Under the co-managed model, the revenue cycle personnel and third party vendors remain with the customer and those costs do not impact the Company’s financial results. For the years ended December 31, 2022, 2021, and 2020, substantially all of the Company’s net operating and incentive fees from end-to-end RCM services were generated under the operating partner model.

The Company also offers modular solutions, allowing customers to engage the Company to address specific revenue cycle improvement opportunities, such as revenue intelligence solutions (which were enhanced through the acquisition of Revint Holdings, LLC (“Cloudmed”)), automation solutions, revenue integrity solutions, PM, accounts receivables and denials recovery, PAS, CDI, coding management, business office services, and patient experience.

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 “2016 Transaction”). As part of the 2016 Transaction, the Company amended and restated its Master Professional Services Agreement (“A&R MPSA”) with Ascension Health (“Ascension”) effective February 16, 2016 with an initial term of i 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.

F-10

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

On April 30, 2021, the Company and Ascension entered into Amendment No. 5 to the A&R MPSA, effective as of May 1, 2021, extending the agreement to April 30, 2031, among other amendments.

Cloudmed Acquisition

On June 21, 2022, pursuant to the Transaction Agreement and Plan of Merger (the “Transaction Agreement”), dated as of January 9, 2022, among R1 RCM Inc. (f/k/a Project Roadrunner Parent Inc.), R1 RCM Holdco Inc. (f/k/a R1 RCM Inc.), now a wholly-owned subsidiary of the Company (“Old R1 RCM”), Project Roadrunner Merger Sub Inc., formerly a wholly-owned subsidiary of the Company (“R1 Merger Sub”), Cloudmed, CoyCo 1, L.P. (“CoyCo 1”), CoyCo 2, L.P. (“CoyCo 2” and, together with CoyCo 1, the “Sellers”), and, solely for certain purposes set forth therein, NMC Ranger Holdings, LLC, the Company purchased Cloudmed, a leader in Revenue Intelligence™ solutions for healthcare providers, and affiliated entities (collectively, the “Cloudmed entities”), through (i) a merger of R1 Merger Sub with and into Old R1 RCM with Old R1 RCM as the surviving entity, which resulted in Old R1 RCM becoming a wholly-owned subsidiary of the Company (the “Holding Company Reorganization”) and (ii) the Sellers contributing i 100% of the equity of a blocker parent corporation of the Cloudmed entities in exchange for an aggregate of i 135,929,742 shares of common stock, of the Company subject to certain adjustments following the closing as set forth in the Transaction Agreement (the “Cloudmed Acquisition,” and together with the Holding Company Reorganization, the “2022 Transactions”). In October 2022, the Company finalized those adjustments, resulting in an additional i 55,846 shares issued to the Sellers. For further details on the total consideration paid, refer to Note 3, Acquisitions.

Cloudmed’s revenue intelligence platform combines cloud-based data architecture and deep domain expertise with intelligent automation to analyze large volumes of medical records, payment data, and complex medical insurance models to identify opportunities to deliver additional revenue to customers. The Company believes this transaction will enable the Company to further its ability to deliver transformative value to healthcare providers through a more fulsome platform of differentiated capabilities by creating a scaled leader across both end-to-end RCM and technology-driven revenue intelligence.

Holding Company Reorganization

Pursuant to the Transaction Agreement, immediately prior to the completion of the Cloudmed Acquisition, Old R1 RCM implemented the Holding Company Reorganization, which resulted in the Company owning all of the capital stock of Old R1 RCM. Each share of Old R1 RCM’s common stock that was issued and outstanding immediately prior to the Holding Company Reorganization was automatically exchanged into an equivalent corresponding share of Company Common Stock, having the same designations, rights, powers, and preferences and the qualifications, limitations, and restrictions as the corresponding share of common stock of Old R1 RCM being converted. Accordingly, upon consummation of the Holding Company Reorganization, all Old R1 RCM stockholders became stockholders of the Company. Immediately prior to the consummation of the Holding Company Reorganization, the name of Old R1 RCM was changed to “R1 RCM Holdco Inc.” and the name of the Company was changed to “R1 RCM Inc.” The Company is the successor issuer to Old R1 RCM pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The shares of Company Common Stock, as successor to Old R1 RCM, began trading on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “RCM” on June 22, 2022.

Emergency Medical Services Disposition

As part of our portfolio analysis and strategic initiatives, the Company disposed the emergency medical services (“EMS”) business on October 30, 2020 for $ i 140.0 million, inclusive of a $ i 5.0 million hold-back amount subject to the completion of certain transition services, to be paid approximately i one year from the date of the disposition (the “EMS Disposition”). The total sale price net of costs to sell was $ i 132.7 million, which included customary adjustments for working capital, indebtedness, cash, and transaction expenses. R1 allocated goodwill to the disposed business based on the relative fair value methodology. The total goodwill allocated to the EMS Disposition was $ i 7.1 million. The gain recognized on the EMS Disposition was $ i 55.7 million.

F-11

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

2. i Summary of Significant Accounting Policies

i 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.

Revenue Recognition

The Company’s largest source of revenue is its operating partner arrangement to provide end-to-end RCM services. The Company also generates revenue through modular RCM solutions, where customers will engage the Company for only specific components of its end-to-end RCM service offering on a fixed-fee or volumetric basis.

Revenue Cycle Management

RCM services fees are primarily variable and performance related, and are generally viewed as a series of distinct services in which there are identifiable increments within a long-term service contract. 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 RCM services include 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 modular 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 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 i 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. Net operating fees for physician groups are invoiced on a monthly basis and payment terms are typically 30 days.

F-12

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

Incentive Fees

Incentive fees are structured to reflect quarterly or annual performance and are evaluated on a contract-by-contract basis. The Company estimates incentive fee revenue based on contractually agreed-upon financial or operating metrics. 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 typically billed and paid on a quarterly basis.

Modular and Other

The Company recognizes revenue related to modular and other RCM fees as RCM services are provided. Fees are typically variable in nature and revenue is recognized as services are provided or when any uncertainty associated with the variable fee is subsequently resolved. The customer simultaneously receives and consumes the benefits provided by the services and the fees are typically billed on a monthly basis and payment terms are typically 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 upon request. These services are provided under a fixed price per unit arrangement. 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 solutions 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 three to i ten years (subject to the parties’ respective termination rights) but varies from customer to customer. Modular RCM agreements generally vary in length between one and i 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. Revenue for the individual services is recognized ratably as services are performed, which is materially within the same accounting period for the services in the bundle. 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.

F-13

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

Cost of Services

Cost of services consist of (i) on-site personnel and technology costs, (ii) global business services costs, and (iii) other costs. On-site personnel 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. Global business services costs relate to the Company’s global business 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 global business services centers and non-payroll costs associated with operating its global business services centers. Other expenses consist of costs related to managing other services. These expenses consist primarily of wages, bonuses, benefits, rent, share-based compensation, amortization of intangible assets, assumed vendor contracts for onboarded customers, and other costs.

Costs associated with generating the Company’s net services revenue are expensed as incurred, with the exception of deferred contract costs, which are certain costs associated with the initial phases of customer contracts and the related transition of customer hospitals and physician groups that 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:

Prepaid expenses and other current assets

i 5.1

i 3.7

Non-current portion of deferred contract costs

i 26.7

i 23.4

Total deferred contract costs

i 31.8

i 27.1

The associated assets are amortized as services are transferred to the customer over the remaining life of the contracts. For the years ended December 31, 2022 and 2021, total amortization was $ i 8.3 million and $ i 4.6 million, respectively, and there were i i no / associated impairment losses.

Comprehensive Income

Comprehensive income is the net income of the Company combined with other changes in stockholders’ equity 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.

Cloud Computing Arrangements

The Company capitalizes qualifying set-up and implementation costs related to the Company’s cloud computing arrangements. The deferred costs are amortized over the term of the associated cloud computing arrangement on a straight-line basis unless another systematic and rational basis is more representative of the pattern in which the Company expects to benefit from access to the cloud computing arrangement.

F-14

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

Capitalized cloud computing implementation costs are presented in prepaid expenses and other current assets and other assets on the Consolidated Balance Sheets. As of December 31, 2022 and 2021, the Company had net capitalized cloud computing implementation costs of $ i 6.8 million and $ i 8.6 million, respectively.

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. 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:


Buildings and land						i 30 years and indefinite
Computers and other equipment						i 3 years
Leasehold improvements						Shorter of i 10 years or lease term
Office furniture						i 5 years
Software						i 3 to i 5 years

/ i

Property, equipment and software consist of the following:

Buildings and land

i 24.3

i —

Computer and other equipment

i 75.6

i 60.4

Leasehold improvements

i 24.1

i 23.3

Software

i 243.2

i 177.0

Office furniture

i 12.4

i 6.5

Property, equipment and software, gross

i 379.6

i 267.2

Less accumulated depreciation and amortization

( i 214.8)

( i 172.5)

Property, equipment and software, net

i 164.8

i 94.7

Property, equipment and software, net, located internationally was $ i 20.3 million and $ i 13.9 million as of December 31, 2022 and 2021, respectively. The remaining property, equipment and software was located in the U.S.

The following table summarizes the allocation of depreciation and amortization expense between cost of services and selling, general and administrative expenses:


	Year Ended December 31,
	2022		2021		2020
Cost of services	$	i 53.4	$	i 51.8	$	i 46.6
Selling, general and administrative	i 1.2		i 2.8		i 4.0
Total depreciation and amortization	$	i 54.6	$	i 54.6	$	i 50.6

F-15

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

i Impairment of Long-Lived Assets

Property, equipment, software, right-of-use (“ROU”) assets, deferred contract costs, 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 i i i no / / material impairment of property, equipment, software, deferred contract costs, or other acquired intangible assets for the years ended December 31, 2022, 2021, and 2020. For the years ended December 31, 2022, 2021, and 2020, we impaired ROU assets and related leasehold improvements related to leased facilities which we exited. See Note 8, Leases, and Note 14, Other, for more information.

i 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.

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:

•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, 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.

The carrying amounts of the Company’s financial instruments, which include financial assets and liabilities such as cash and cash equivalents, restricted cash equivalents, accounts receivable, net, accounts payable, accrued service costs, accrued compensation and benefits, and certain other current assets and accrued expenses, approximate their fair values, due to their short-term nature. See Note 11, Derivative Financial Instruments, for a discussion of the fair value of the Company’s forward currency derivative contracts and interest rate swaps.

The Company believes the carrying value of the senior revolver and term loans (see Note 10, Debt) approximates fair value as they are variable rate bank debt.

Other than the items discussed above, the Company does i i no / t have any financial assets or liabilities that are required to be measured at fair value on a recurring basis.

F-16

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

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.

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.

i 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. As of December 31, 2022 and 2021, the Company had net assets of $ i 81.5 million and $ i 51.0 million in foreign entities, respectively. 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. Performance-based stock awards are recognized in expense when the performance metrics are probable to be achieved. Changes in the estimate of achievement of the performance metrics are recognized in the period of the change through a cumulative catch-up. The Company assesses the performance metrics in its awards on a quarterly basis to determine if a cumulative catch-up is necessary. The fair value of stock options is calculated using the Black-Scholes option pricing model. For the year ended December 31, 2022, the number of options granted ( i 24,344) was immaterial.

As part of the transactions contemplated by the Transaction Agreement, equity awards held by certain employees of Cloudmed (“Former Class P Units”) were modified, through a series of transactions, into awards (“Management Units”) of CoyCo 2. Certain Former Class P Units that were subject to performance-based vesting conditions did not become vested upon the closing of the Cloudmed Acquisition (“Unvested Units”). The Management Units issued by CoyCo 2 are treated as share-based compensation under ASC 718, Compensation - Stock Compensation.

F-17

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

The Unvested Units are not awards of the Company and the participants will receive no additional shares of the Company upon satisfaction of the vesting criteria described in Note 13, Share-Based Compensation. However, GAAP requires the Company recognize the cost of share-based compensation granted by an investor (CoyCo 2) to the Company’s employees and service providers for services that benefit the Company’s operations (hereafter, “CoyCo 2 share-based compensation expense”), and a corresponding capital contribution because the costs are incurred on the Company’s behalf. A Monte Carlo simulation was used to estimate the fair value of the Unvested Units.

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 forfeitures during the period.

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.

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 formerly but no longer in issue (as defined in Note 12) participates in dividends alongside the Company’s common stock (per their participating dividends), the preferred stock would constitute participating securities under ASC 260-10, Earnings Per Share, 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 by adjusting the denominator used in the basic net income per share computation by potentially dilutive securities outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, restricted stock units (“RSUs”), performance-based restricted stock units (“PBRSUs”), and shares issuable upon conversion of preferred stock.

Recently Issued Accounting Standards and Disclosures

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities obtained in a business combination. The ASU amendments will generally result in the recognition of contract assets and contract liabilities by the acquirer at amounts consistent with those recorded by the acquiree immediately before the acquisition date. The Company prospectively adopted ASU 2021-08 effective April 1, 2022 and preliminarily recognized contract assets of $ i 92.4 million and contract liabilities of $ i 3.3 million as part of the Cloudmed Acquisition.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that a contractual sale restriction on an equity security should not be considered in measuring the security’s fair value. The Company will adopt ASU 2022-03 prospectively effective January 1, 2024 and is currently evaluating the impact of the standard on its consolidated financial statements.

F-18

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

3. i Acquisitions

Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair value on the date of the acquisition. The difference between the purchase price amount and the net fair value of assets acquired and liabilities assumed is recognized as goodwill on the balance sheet if the purchase price exceeds the estimated net fair value or as a bargain purchase gain on the income statement if the purchase price is less than the estimated net fair value. The allocation of the purchase price may be modified up to one year after the acquisition date as more information is obtained about the fair value of assets acquired and liabilities assumed.

Cloudmed

On June 21, 2022, the Company completed the acquisition of Cloudmed for a purchase price of $ i 3.3 billion. i The following table summarizes the fair value of the total consideration paid:


	Fair Value
Stock consideration transferred to the Sellers (1)	$	i 2,390.5
Cash consideration (2)	i 879.8
Replacement awards issued to Cloudmed equity award holders (3)	i 11.3
Total consideration	$	i 3,281.6

(1) The stock consideration fair value includes a i 12.5% discount for lack of marketability factor related to an i 18-month lock-up period during which the Sellers may not sell their Company common stock.

(2) Cash consideration includes the repayment of Cloudmed’s pre-existing credit facility that was paid off at closing and was not assumed by the Company.

(3) Represents the pre-acquisition service portion of the fair value of i 1,536,220 replacement RSUs issued to Cloudmed equity award holders at closing.

The Company funded the cash consideration component and the Company’s associated transaction expenses with a combination of cash on hand and the incurrence of additional indebtedness (see Note 10, Debt).

The purchase price has been provisionally allocated to assets acquired and liabilities assumed based on their fair value as of the acquisition date. The fair value estimate of assets acquired and liabilities assumed is pending the completion of various elements, including gathering further information about the identification and completeness of all assets and liabilities acquired, the finalization of an independent appraisal and valuation of the fair value of the assets acquired and liabilities assumed, and final review by the Company’s management. Some of the more significant amounts that are not yet finalized relate to the fair value of intangible assets (including goodwill), contract assets, and income and non-income related taxes. Accordingly, management considers the balances shown in the following table to be preliminary, and there could be adjustments to the consolidated financial statements, including changes in our amortization expense related to the valuation of intangible assets acquired and their respective useful lives, among other adjustments.

i The preliminary fair value of assets acquired and liabilities assumed is:

F-19

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)



	Purchase Price Allocation
Total purchase consideration	$	i 3,281.6

Allocation of consideration to assets acquired and liabilities assumed:
Cash and cash equivalents	$	i 32.1
Accounts receivable	i 61.8
Current portion of contract assets	i 68.5
Property, equipment and software	i 5.0
Operating lease right-of-use assets	i 25.3
Non-current portion of contract assets	i 23.9
Intangible assets	i 1,366.6
Goodwill	i 2,103.6
Other assets	i 6.7
Accounts payable	( i 31.9)
Customer liabilities	( i 3.3)
Accrued compensation and benefits	( i 93.0)
Operating lease liabilities	( i 25.4)
Deferred income tax liabilities	( i 245.4)
Other liabilities	( i 12.9)


Net assets acquired	$	i 3,281.6

The intangible assets identified in conjunction with the Cloudmed Acquisition and their preliminary fair values are as follows:

Useful Life

Gross Carrying Value

Customer Relationships

i 18 years

i 318.0

Technology

i 7 years

i 1,025.0

Tradename

i 5 years

i 23.5

Favorable leasehold interests

Life of lease

i 0.1

The goodwill recognized is primarily attributable to growth and cost reduction synergies that are expected to be achieved from the integration of Cloudmed. None of the goodwill is expected to be deductible for income tax purposes.

Included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2022 are net sales of $ i 260.0 million and net loss before income taxes of $ i 10.7 million related to the operations of Cloudmed since the acquisition date of June 21, 2022.

F-20

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

Measurement period adjustments

The Company had various measurement period adjustments due to an updated valuation report and additional information received since the Cloudmed Acquisition. The significant adjustments during the three months ended December 31, 2022 included a $ i 3.5 million decrease to intangible assets related to updated assumptions and information included in the valuation report, an increase to the deferred income tax liability of $ i 103.4 million related to updated tax return information, and an offset of these changes to goodwill. In conjunction with the adjustments, the Company adjusted amortization expense in the three months ended December 31, 2022.

Prior Acquisitions

During 2021, the Company acquired the following business:


Company Name	Description of the Business	Description of the Acquisition


iVinci Partners, LLC d/b/a VisitPay (“VisitPay”)	Provider of digital payment solutions	Purchased all outstanding equity interests

In 2020, the Company purchased certain assets related to the RevWorks services business from Cerner Corporation. In accordance with the purchase agreement, the Company paid the first deferred payment of $ i 12.5 million in the third quarter of 2021. The remaining deferred payment of $ i 12.5 million was payable on the second anniversary of the closing date (August 2022) and is included in other accrued expenses on the Consolidated Balance Sheet as of December 31, 2022 as it had not been paid as of such date.

The i two deferred payments related to the RevWorks acquisition were contractual obligations of the Company; however, they are refundable to the Company if certain RevWorks customer revenue targets defined in the purchase agreement for the first i two years following the acquisition are not achieved. The parties are currently engaged in arbitration to finalize the remaining deferred payment and contingently refundable consideration amounts. The contingently refundable consideration is stated at an amount approximating the amount expected to be realized.

Pro Forma Results (Unaudited)

The following table summarizes, on a pro forma basis, the combined results of the Company as though the Cloudmed Acquisition had occurred as of January 1, 2021 and the VisitPay acquisition had occurred as of January 1, 2020. These pro forma results are not necessarily indicative of the actual consolidated results had the acquisitions occurred as of those dates or of the future consolidated operating results for any period. Pro forma results are:


	Year Ended December 31,
	2022		2021
Net services revenue	$	i 2,009.7	$	i 1,813.5
Net loss	$	( i 55.0)	$	( i 177.5)

Adjustments were made to earnings to adjust depreciation and amortization to reflect the fair value of identified assets acquired, to adjust share-based compensation expense for awards granted in connection with the acquisitions, to record the effects of extinguishing the debt of the acquired companies and replacing it with the debt of the Company, to adjust timing of acquisition related costs incurred by the Company, and to record the income tax effect of these adjustments.

F-21

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

4. i Intangible Assets

The following table provides the gross carrying value and accumulated amortization for each major class of definite-lived intangible assets at December 31, 2022 and December 31, 2021:

Gross Carrying Value

Accumulated Amortization

Net Book Value

Gross Carrying Value

Accumulated Amortization

Net Book Value

Customer relationships

i 418.0

( i 36.3)

i 381.7

i 100.0

( i 20.8)

i 79.2

Technology

i 1,240.5

( i 129.3)

i 1,111.2

i 215.5

( i 30.2)

i 185.3

Tradename

i 24.5

( i 3.0)

i 21.5

i 1.0

( i 0.1)

i 0.9

Favorable leasehold interests

i 0.1

i —

i 0.1

i —

Total intangible assets

i 1,683.1

( i 168.6)

i 1,514.5

i 316.5

( i 51.1)

i 265.4

The fair value of the identifiable intangible assets was derived utilizing an income approach to derive the present value of future cash flows from developed technology, customer relationships, tradename, and favorable leasehold interests.

Intangible asset amortization expense was $ i 117.4 million, $ i 22.9 million, and $ i 18.1 million for the years ended December 31, 2022, 2021, and 2020 respectively. Amortization expense for intangible assets is included in cost of services on the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss). The Company has no indefinite-lived intangible assets.

Estimated annual amortization expense related to intangible assets with definite lives as of December 31, 2022 is as follows:


2023	$	i 197.2
2024	i 195.3
2025	i 193.7
2026	i 193.7
2027	i 191.2
Thereafter	i 543.4
Total	$	i 1,514.5

5. i i Goodwill /

Goodwill represents the difference between the purchase price of acquired companies and the related fair value of the net assets acquired, which applies the acquisition method of accounting.

Changes in the carrying amount of goodwill for the year ended December 31, 2022 were:


	Goodwill
Balance as of December 31, 2021	$	i 554.7
Cloudmed Acquisition	i 2,103.6
Change in foreign currency rates	( i 0.1)
Balance as of December 31, 2022	$	i 2,658.2

F-22

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

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, an impairment charge would be recorded. The Company has determined there to be i one reporting unit, consistent with its single operating and reportable segment. As part of its annual impairment analysis, the Company performed a qualitative assessment and determined there was i no impairment of goodwill for the year ended December 31, 2022.

6. i Revenue Recognition

Disaggregation of Revenue

In the following table, revenue is disaggregated by source of revenue:

Year Ended December 31,

2022

2021

2020

Net operating fees

i 1,309.7

i 1,211.8

i 1,093.8

Incentive fees

i 106.8

i 143.8

i 70.6

Modular and other (1)

i 389.9

i 119.0

i 106.4

Net services revenue

i 1,806.4

i 1,474.6

i 1,270.8

(1) Modular and other revenue primarily consists of service fees related to Cloudmed and revenue integrity solutions, PM services, PAS, and software subscription revenue.

Contract Balances

The following table provides information about contract assets, net and contract liabilities from contracts with customers:


	December 31, 2022		December 31, 2021
Contract assets, net
Current	$	i 83.9	$	i —
Non-current	i 32.0		i —
Total contract assets, net	$	i 115.9	$	i —

Contract liabilities
Current (1)	$	i 9.7	$	i 10.3
Non-current (2)	i 18.7		i 18.7
Total contract liabilities	$	i 28.4	$	i 29.0

(1) Current contract liabilities include $ i 7.6 million and $ i 7.8 million classified in the current portion of customer liabilities and $ i 2.1 million and $ i 2.5 million classified in the current portion of customer liabilities - related party as of December 31, 2022 and 2021, respectively.

(2) Non-current contract liabilities include $ i 5.0 million and $ i 3.3 million classified in the non-current portion of customer liabilities and $ i 13.7 million and $ i 15.4 million classified in the non-current portion of customer liabilities - related party as of December 31, 2022 and 2021, respectively.

The contract assets, net balance will increase or decrease based on the timing of invoices and recognition of revenue. Prior to the Cloudmed Acquisition, the Company did not have significant contract assets. Significant changes in the carrying amount of contract assets, net for the six months ended December 31, 2022 were as follows:

F-23

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)


	Contract Assets
Balance as of June 30, 2022	$	i 89.6
Revenue recognized	i 172.9
Amounts billed	( i 151.0)
Other (1)	i 4.4
Balance as of December 31, 2022	$	i 115.9

(1) Other primarily includes measurement period adjustments to the contract assets acquired from the Cloudmed Acquisition.

A contract asset is recorded when the Company has recognized revenue but does not yet have the right to invoice. 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.

The Company recognized revenue of $ i 94.8 million and $ i 98.0 million during the years ended December 31, 2022 and 2021, which amounts were included in contract liabilities on January 1 of the respective periods. These revenue amounts include $ i 85.8 million and $ i 88.1 million for the years ended December 31, 2022 and 2021, respectively, related to advanced billings which become accounts receivable and contract liabilities on the first day of the respective service period.

Refer to Note 3, Acquisitions, for the preliminary contract assets acquired and contract liabilities assumed as part of the Cloudmed Acquisition.

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. The estimated revenue does not include amounts of variable consideration that are constrained.

Net operating fees

Incentive fees

2023

i 115.4

i 27.0

2024

i 82.5

i —

2025

i 39.3

i —

2026

i 38.2

i —

2027

i 34.1

i —

Thereafter

i 124.9

i —

Total

i 434.4

i 27.0

The amounts presented in the table above include variable fee estimates of the Company’s physician groups RCM services contracts, fixed fees, and forecasted incentive fees. Fixed fees are typically recognized ratably as the performance obligation is satisfied and forecasted incentive fees 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.

F-24

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

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 modular RCM solutions 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. i 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 solutions 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.

7. i Accounts Receivable and Allowance for Credit Losses

Accounts receivable is comprised of unpaid balances pertaining to modular solutions 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 evaluates its accounts receivable for expected credit losses quarterly. The Company maintains an estimated allowance for credit losses 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, the status of any ongoing operations with each applicable customer, and business and industry factors such as significant shifts in the healthcare environment which the Company believes may have impacted or will impact its customers’ financial health and ability to pay.

During the year ended December 31, 2022, the Company increased the allowance for credit losses related to a physician customer by $ i 9.6 million due to the customer facing financial challenges and its resulting inability to make a contractually required payment during the year. As a result of reviewing the potential expected outcomes related to this customer, the Company holds an allowance for credit losses of $ i 10.1 million related to an overall receivable balance of $ i 32.6 million as of December 31, 2022.

The Company has presented the rollforward below on a consolidated basis as the currently expected credit losses for its large integrated healthcare system customers are not anticipated to be material.

i Movements in the allowance for credit losses related to accounts receivable are as follows:

F-25

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)


	Year Ended December 31,
	2022		2021
Beginning balance	$	i 2.5	$	i 3.8
Cumulative effect of Cloudmed ASC 326 adoption	i 1.8		i —
Provision (recoveries)	i 11.1		i 0.7

Write-offs	( i 0.2)		( i 2.0)
Ending balance	$	i 15.2	$	i 2.5

The Company acquired contract assets through the Cloudmed Acquisition. As of December 31, 2022, there was an allowance of credit losses of $ i 2.2 million against total contract assets.

8. i Leases

The Company determines if an arrangement is a lease at inception. The Company has operating leases for corporate offices, operational facilities, global business services centers, and certain equipment. Operating leases with terms greater than one year at commencement are included in operating lease ROU assets and operating lease liabilities (current and non-current) on the Consolidated Balance Sheets.

Operating ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the incremental borrowing rate, determined based on the information available at the lease commencement date, is used in calculating the present value of lease payments. ROU assets also include any lease prepayments made and excludes any lease incentives. The Company’s leases may include options to extend the lease term and the Company’s determination of the likely lease term incorporates these options when it is reasonably certain that they will be exercised.

The Company elected to not separate lease and non-lease components for building and equipment leases. The Company will account for the lease and non-lease components, such as fixed service charges, as a single lease component. For leases with an initial term of 12 months or less, expense is recognized on a straight-line basis over the lease term.

Leases have remaining lease terms of up to i 11 years, some of which include options to extend the leases for up to i 10 years. In circumstances where there are significant foreign tax incentives, the Company has determined it to be reasonably certain to exercise the renewal options. The Company subleases certain office spaces to third parties.

The components of lease costs are as follows:

Year Ended December 31,

2022

2021

Operating lease cost

i 22.1

i 15.8

Sublease income

( i 1.6)

( i 2.3)

Total lease cost

i 20.5

i 13.5

The following table summarizes the supplemental information related to operating leases:

F-26

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

Year Ended December 31,

2022

2021

Weighted average remaining lease term

i 7 years

Weighted average incremental borrowing rate

i 6.52

i 8.10

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

i 27.0

i 22.8

ROU assets obtained or acquired in exchange for operating lease obligations (1)

i 67.7

i 20.3

(1) This amount includes ROU assets acquired from the Cloudmed Acquisition. For details on the preliminary ROU assets acquired and liabilities assumed, refer to Note 3, Acquisitions.

The Company presents all non-cash charges related to any modification or reassessment events triggering remeasurement, and obtaining new leases for non-cash consideration that result in adjustments to the lease liability or ROU asset as non-cash transactions. As part of evaluating its footprint, the Company exited certain leased facilities. During the three months ended December 31, 2022, the Company recorded ROU asset and related leasehold improvement impairments of $ i 17.0 million as a result of decisions to exit various leases acquired as part of the Cloudmed Acquisition.

Maturities of lease liabilities as of December 31, 2022 are as follows:

Operating Leases

2023

i 24.6

2024

i 23.9

2025

i 22.6

2026

i 16.8

2027

i 10.7

Thereafter

i 40.7

Total

i 139.3

Less:

Imputed interest

i 26.9

Present value of lease liabilities

i 112.4

F-27

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

9. i 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) customer deposits (consisting of amounts due as a refund to the Company’s customers on base fees and incentive fees), (iv) refund liabilities (amounts potentially due as a refund to the Company’s customers on incentive fees), and (v) deferred revenue (contract liabilities) (fixed or variable fees amortized to revenue over the service period).

Customer liabilities consist of the following:


	December 31, 2022		December 31, 2021
Accrued service costs, current	$	i 21.9	$	i 32.3
Collections payable to clients, current	i 29.1		i 3.0

Customer deposits, current	i 1.5		i —
Refund liabilities, current	i 2.7		i 3.8
Deferred revenue (contract liabilities), current	i 9.7		i 10.3
Current portion of customer liabilities (1)	i 64.9		i 49.4


Deferred revenue (contract liabilities), non-current	i 18.7		i 18.7
Non-current portion of customer liabilities (1)	i 18.7		i 18.7
Total customer liabilities	$	i 83.6	$	i 68.1

(1) Current and non-current portion of customer liabilities include amounts for a related party. See Note 19, Related Party Transactions, for further discussion.

10. i Debt

The carrying amounts of debt consist of the following:

Senior Revolver (1)

i 100.0

i 80.0

Term A Loans

i 1,211.4

i 695.6

Term B Loan

i 498.7

i —

Unamortized discount and issuance costs

( i 23.6)

( i 3.2)

Total debt

i 1,786.5

i 772.4

Less: Current maturities

( i 53.9)

( i 17.5)

Total long-term debt

i 1,732.6

i 754.9

(1) As of December 31, 2022, the Company had $ i 100.0 million in borrowings, $ i 0.9 million letters of credit outstanding, and $ i 499.1 million of availability under the senior secured revolving credit facility (“Senior Revolver”).

Second Amended and Restated Senior Secured Credit Facilities

On July 1, 2021, the Company and certain of its subsidiaries entered into an amended and restated senior credit agreement (the “A&R Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders named therein, and governing credit facilities consisting of a $ i 700.0 million senior secured term loan facility and a $ i 450.0 million senior revolver.

F-28

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

The proceeds from the A&R Credit Agreement, in addition to cash on hand, were used to refinance, in full, all debt under the existing credit agreement, which consisted of a $ i 325.0 million senior secured term loan facility and a $ i 100.0 million senior secured revolving credit facility, and to fund the VisitPay acquisition. For the year ended December 31, 2021, the carrying amounts of debt presented in the table above were incurred under the A&R Credit Agreement.

On June 21, 2022, the Company and certain of its subsidiaries entered into a second amended and restated senior credit agreement (the “Second A&R Credit Agreement”) with Bank of America, N.A., as administrative agent, and the lenders named therein, governing the Company’s second amended and restated senior secured credit facilities (the “Senior Secured Credit Facilities”), was executed and consisted of the $ i 691.3 million existing senior secured term loan A facility (the “Existing Term A Loan”), a $ i 540.0 million senior secured incremental term loan A facility (the “Incremental Term A Loan,” and together with the Existing Term A Loan, the “Term A Loans”), a $ i 500.0 million senior secured term loan B facility (the “Term B Loan,” and together with the Term A Loans, the “Senior Term Loans”), and a $ i 600.0 million Senior Revolver. In conjunction with entering into the Second A&R Credit Agreement, the Company incurred $ i 7.2 million and capitalized $ i 6.4 million of debt issuance costs.

The Incremental Term A Loan has a i five-year maturity and the Term B Loan has a i seven-year maturity. The Existing Term A Loan and Senior Revolver mature on July 1, 2026. The Second A&R Credit Agreement provides that the Company may make i 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.

Borrowings under the Senior Secured Credit Facilities bear interest, at the Company’s option, at: (i) an Alternate Base Rate (“ABR”) equal to the greater of (a) the prime rate of Bank of America, N.A., (b) the federal funds rate plus i 0.50% per annum, and (c) the Term Secured Overnight Financing Rate (“SOFR”) for an interest period of one-month beginning on such day plus i 100 basis points, plus between i 0.25% and i 1.50% dependent on the Company’s total net leverage ratio (provided that the Term SOFR rate applicable to the Term A Loans shall not be less than i 0.00% per annum, and the Term SOFR rate applicable to the Term B Loan shall not be less than i 0.50% per annum); or (ii) the Term SOFR rate (provided that the Term SOFR rate applicable to the Term A Loans shall not be less than i 0.00% per annum, and the Term SOFR rate applicable to the Term B Loan shall not be less than i 0.50% per annum), plus between i 1.25% and i 2.50%, dependent on the Company’s total net leverage ratio. The interest rate as of December 31, 2022 was i 6.57% for the Term A Loans and Senior Revolver and i 7.32% for the Term B Loan. The Company is also required to pay an unused commitment fee to the lenders under the Senior Revolver at a rate between i 0.20% and i 0.40% of the average daily unutilized commitments thereunder dependent on the Company’s total net leverage ratio.

The Second A&R Credit Agreement requires the Company to make mandatory prepayments, subject to certain exceptions, with: (i) beginning with fiscal year ending December 31, 2023, i 50% (which percentage will be reduced upon the Company’s achievement of certain total net leverage ratios) of the Company’s annual excess cash flow, (ii) i 100% of net cash proceeds of all non-ordinary course asset sales or other dispositions of property or casualty events, subject to certain exceptions and thresholds, and (iii) i 100% of the net cash proceeds of any debt incurrence, other than debt permitted under the Second A&R Credit Agreement.

The Second A&R Credit Agreement contains several financial and non-financial covenants. The Company was in compliance with all of the covenants in the Second A&R Credit Agreement as of December 31, 2022. The obligations under the Second A&R Credit Agreement are secured by a pledge of i 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 certain domestic subsidiaries.

F-29

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

The proceeds from the new Senior Secured Credit Facilities were or will be used, in addition to cash on hand, (1) to refinance, in full, all existing indebtedness under the A&R Credit Agreement, and amend and restate all commitments thereunder (the “Refinancing”), (2) to pay certain fees and expenses incurred in connection with the entry into the Second A&R Credit Agreement and the Refinancing, (3) to fund the 2022 Transactions, and to pay the fees, premiums, expenses, and other transaction costs incurred in connection therewith, and (4) to finance working capital needs of the Company and its subsidiaries for general corporate purposes.

Debt Maturities

Scheduled maturities of the Company’s long-term debt for each of the five years succeeding December 31, 2022 and thereafter are summarized as follows:


	Scheduled Maturities
2023	$	i 53.9
2024	i 67.0
2025	i 67.0
2026	i 718.3
2027	i 430.2
Thereafter	i 473.7
Total	$	i 1,810.1

11. i i Derivative Financial Instruments /

The Company actively manages the risk of changes in foreign currency exchange rates and change in interest rates through non-deliverable foreign currency forward contracts and interest rate swap contracts traded in over-the-counter markets governed by International Swaps and Derivatives Association, Inc. (ISDA) agreements. Positions are monitored using techniques such as market value and sensitivity analyses. The Company does not enter into derivative transactions for speculative purposes.

The change in fair value of a hedging instrument is recorded in accumulated other comprehensive loss as a separate component of stockholders’ equity and is reclassified into either cost of services or interest expense in the consolidated statement of operations and comprehensive income during the period in which the hedged transaction impacts earnings. 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 Company utilizes cash flow hedges to manage its currency risk arising from its global business services centers. As of December 31, 2022, the Company has recorded $ i 0.4 million of unrealized losses in accumulated other comprehensive income related to foreign currency hedges. The Company estimates that $ i 0.4 million of losses reported in accumulated other comprehensive income are expected to be reclassified into earnings within the next 12 months. Amounts reclassified into cost of services were a net loss of $ i 1.4 million and a net gain of $ i 1.4 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company’s foreign currency forward contracts have maturities extending no later than December 31, 2023, and had total notional value of $ i 126.4 million. As of December 31, 2021, the total notional amount of the Company’s foreign currency forward contracts was $ i 84.3 million.

F-30

R1 RCM Inc.

Notes to Consolidated Financial Statements

(Dollars in millions, except per share data)

The Company also utilizes cash flow hedges to reduce variability in interest cash flows from its outstanding debt. As of December 31, 2022, the Company has recorded $ i 13.7 million of unrealized gains in accumulated other comprehensive income related to interest rate swaps. The Company estimates that $ i 8.7 million of gains reported in accumulated other comprehensive income are expected to be reclassified into earnings within the next 12 months. Amounts reclassified into interest expense were a net loss of $ i 0.2 million and $ i 1.5 million for the years ended December 31, 2022 and 2021. As of December 31, 2022, the Company’s interest rate swaps extend no later than June 30, 2025 and had total notional amounts of $ i 500.0 million. As of December 31, 2021, the total notional amount of the Company’s interest rate swaps was $ i 100.0 million.

The location and fair value of derivative instruments designated as hedges in the Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021 are as follows: