0001910851falseR1 RCM Inc. /DE00019108512023-01-052023-01-05
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________
FORM 8-K
________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 5, 2023
____________
R1 RCM Inc.
(Exact Name of Registrant as Specified in Charter)
____________
| | | | | | | | |
| Delaware | 001-41428 | 87-4340782 |
(State or Other Jurisdiction
of Incorporation) | (Commission
File Number) | (IRS Employer
Identification No.) |
| | | | | |
| 434 W. Ascension Way | 84123 |
| 6th Floor |
| Murray |
| Utah |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (312) 324-7820
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, par value $0.01 per share | RCM | NASDAQ |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
To the extent the information in Item 7.01 or Exhibit 99.1 relates to a completed fiscal period, such information is incorporated by reference into this Item 2.02.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Chief Financial Officer Succession
On January 5, 2023, the Board of Directors (the “Board”) of R1 RCM Inc. (the “Company”) appointed Jennifer Williams to succeed Rachel Wilson as Chief Financial Officer and Treasurer of the Company, effective immediately. Ms. Wilson will remain employed by the Company in an advisory role to assist with the transition.
Incoming Chief Financial Officer
Ms. Williams, age 46, has served as Executive Vice President, Business Chief Financial Officer since June 21, 2022 when the Company closed the acquisition of Revint Holdings, LLC (“Cloudmed”). Prior to joining the Company, Ms. Williams served as Chief Financial Officer of Cloudmed beginning in July 2020. Prior to Cloudmed, Ms. Williams served as Senior Vice President, Finance and Chief Financial Officer of Corporate functions for Change Healthcare from October 2017 to July 2020 and led the financial integration of the Change Healthcare and McKesson joint venture and its subsequent initial public offering. Earlier in her career, Ms. Williams was the corporate controller and global finance leader at First Advantage and held various leadership positions at LexisNexis Risk Solutions. Ms. Williams began her career with Ernst & Young. Ms. Williams holds B.S. and Master of Accountancy degrees from Auburn University and is a certified public accountant.
In connection with Ms. Williams’ appointment as Chief Financial Officer and Treasurer, Ms. Williams and the Company entered into an Employment Terms & Restrictive Covenant Agreement, dated as of January 5, 2023 (the “Williams Employment Agreement”), providing for at-will employment for an indefinite term, an annual base salary of $575,000, an annual discretionary target bonus opportunity of 100% of base salary, and eligibility to participate in the employee benefit programs of the Company generally available to senior executives of the Company. Beginning in 2023, Ms. Williams will be entitled to participate in the Company’s long-term incentive program, for which the target amounts of annual equity grants will equal 360% of her base salary. In the event that Ms. Williams’ employment with the Company is terminated by the Company without Cause (as defined in the Williams Employment Agreement), Ms. Williams will be entitled to post-departure compensation and benefits generally available to executive vice presidents as disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2022 (the “Standard EVP Agreement”).
In addition, the Company has entered into an indemnification agreement with Ms. Williams in the form that the Company has entered into with its other executive officers, which provides that the Company will indemnify Ms. Williams to the fullest extent permitted by law for claims arising in her capacity as an officer of the Company, provided that she acted in good faith and in a manner that she reasonably believed to be in, or not opposed to, the Company’s best interests and, with respect to any criminal proceeding, had no reasonable cause to believe that her conduct was unlawful. In the event that the Company does not assume the defense of a claim against Ms. Williams, the Company will be required to advance her expenses in connection with her defense of that claim, provided that she undertakes to repay all amounts advanced if it is ultimately determined that she is not entitled to be indemnified by the Company.
There are no arrangements or understandings between Ms. Williams and any other person pursuant to which Ms. Williams was appointed as Chief Financial Officer and Treasurer of the Company. Ms. Williams does not have any family relationship with any director, executive officer or person nominated or chosen by the Company to become a director or executive officer of the Company. The Company is not aware of any related person transactions (within the meaning of Item 404(a) of Regulation S-K promulgated by the SEC) between Ms. Williams and the Company.
The foregoing is not a complete description of the parties’ rights and obligations under the Williams Employment Agreement and is qualified by reference to the full text and terms of the agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Outgoing Chief Financial Officer
In connection with Ms. Wilson’s departure, it is expected that the Company and Ms. Wilson will enter into a Separation Agreement and General Release (the “Wilson Agreement”). Under the Wilson Agreement, Ms. Wilson will be entitled to post-departure compensation and benefits in accordance with the Standard EVP Agreement as well as a one-time lump sum cash payment of $250,000, all payable following receipt of a standard general release. Ms. Wilson’s departure will be treated as a “Good Leaver Termination” (as such term is defined in the applicable PBRSU award agreement) for purposes of the outstanding PBRSUs held by Ms. Wilson as of the date of her departure.
Chief Commercial Officer Succession
On January 5, 2023, the Board also appointed Kyle Hicok to succeed Gary Long as Chief Commercial Officer of the Company, effective immediately. Mr. Hicok will enter into the Standard EVP Agreement in connection with his new position.
Mr. Long will remain employed by the Company in an advisory role to assist with the transition. In connection with Mr. Long’s departure, it is expected that the Company and Mr. Long will enter into a Separation Agreement and General Release (the “Long Agreement”). Under the Long Agreement, Mr. Long will be entitled to post-departure compensation and benefits in accordance with the Standard EVP Agreement. In addition, Mr. Long will be entitled to any remaining payments under the terms of the 2022 R1 Sales Incentive Plan. Mr. Long’s departure will be treated as a “Good Leaver Termination” (as such term is defined in the applicable PBRSU award agreement) for purposes of the outstanding PBRSUs held by Mr. Long as of the date of his departure.
Item 7.01 Regulation FD Disclosure
On January 5, 2023, the Company issued a press release announcing the leadership changes described above, reaffirming guidance for the year 2022 and announcing guidance for the year 2023. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Items 2.02 and 7.01 of this Current Report on Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
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| (d) | Exhibit Number | Description |
| | |
| | |
| 104 | Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | | | | | | | | |
| | R1 RCM INC. |
| | | |
| Date: January 5, 2023 | | |
| | | |
| | By: /s/ M. Sean Radcliffe |
| | Name: M. Sean Radcliffe |
| | Title: Executive Vice President, General Counsel |
Exhibit 10.1
R1 RCM Inc.
434 Ascension Way
Murray, UT 84123
January 5, 2023
Jennifer Williams
Re: CFO Appointment and Employment Terms
Dear Jennifer:
On behalf of R1 RCM Inc. and R1 RCM Holdco Inc. (“R1”), I am delighted to confirm that, effective January 5, 2023, and upon your acceptance of this Agreement (as defined below), you will be appointed as Executive Vice President & Chief Financial Officer, reporting to R1’s Chief Executive Officer. The terms and conditions of your employment with R1 are set forth in further detail below and in the Employment Terms & Restrictive Covenant Agreement, attached hereto as Exhibit A (collectively, the “Agreement”). This Agreement will supersede any and all prior employment agreements or offer letters with R1 and/or its parent, subsidiaries, or predecessors.
Salary and Annual Bonus
Your starting base salary will be $575,000 per year, paid semi-monthly. Beginning in 2023, you will be eligible to participate in the R1 annual cash incentive bonus program with an annual bonus target equal to 100% of your base salary. The bonus is discretionary and will be earned each calendar year based upon achievement of corporate and individual performance objectives established for that calendar year, as determined in the sole discretion of R1.
Long Term Incentive Program
Beginning in 2023, you will be eligible to participate in the long-term incentive (“LTI”) program along with other R1 executives. Awards under the LTI program are at the sole discretion of the R1 Human Capital Committee. Based on the current program, the award will be issued as PBRSUs and the target value of annual equity awards will be 360% of your base salary amount, subject to the terms and conditions of an award agreement issued pursuant to the relevant R1 stock incentive plan.
Health & Welfare Benefits
You will be eligible to participate in R1’s benefit programs on the same terms and conditions as similarly situated executives, including R1’s Executive Health program.
Additional Employment Terms Agreement
This appointment is also contingent on your agreement to the Employment Terms & Restrictive Covenant Agreement, attached as Exhibit A, which is required of all Executive Vice Presidents of R1.
Jennifer, we truly believe that we are building the best team in the industry. To accept this offer, please sign this letter, below, as well as Exhibit A, and return executed copies of both to me.
Sincerely,
/s/ Kate Sanderson
Kate Sanderson
Executive Vice President, Chief HR Officer
R1 RCM Inc.
Agreed and Accepted:
/s/ Jennifer Williams
Jennifer Williams
Date: January 5, 2023
R1 RCM Announces Leadership Appointments; Reaffirms 2022 Guidance and Announces 2023 Outlook
Jennifer Williams Appointed Chief Financial Officer; Kyle Hicok Appointed Chief Commercial Officer
MURRAY, Utah, January 5, 2023 -- R1 RCM Inc. (NASDAQ: RCM) (“R1” or the “Company”), a leading provider of technology-driven solutions that transform the patient experience and financial performance of healthcare providers, today announced the appointments of Jennifer Williams as Chief Financial Officer and Kyle Hicok as Chief Commercial Officer, effective immediately. Ms. Williams and Mr. Hicok succeed Rachel Wilson and Gary Long, respectively, who will step down from their roles and remain with the Company in advisory roles to ensure a seamless transition.
Ms. Williams, who previously served as Chief Financial Officer of Cloudmed, brings more than 20 years of financial planning, accounting, M&A and operational finance leadership experience across several healthcare revenue management, data analytics and technology businesses, including Change Healthcare, First Advantage, LexisNexis Risk Solutions and Ernst & Young. During her career, she has led several growth transformations, large scale integrations and an initial public offering.
Mr. Hicok has more than two decades of healthcare revenue cycle management experience with expertise in consulting, software and technology development and revenue enhancement at companies including StockAmp, Huron Consulting and MedeAnalytics. He was previously Cloudmed’s President and General Manager where he led Cloudmed’s commercial team, focusing on growth, client services and performance for all solutions. As Vice President of Revenue Cycle Management at Optum360, Mr. Hicok was responsible for transition, change management and third-party technology implementation activities for end-to-end clients.
“As we head into 2023, we are focused on executing our strategic plan, including advancing our technology investments and driving our best-in-class commercial engine to deliver value for our customers and team members,” said Lee Rivas, Chief Executive Officer of R1. “Jennifer and Kyle are experienced leaders with firsthand knowledge of our business and share R1’s commitment to operational excellence. Kyle’s extensive revenue cycle management experience and customer-centric mindset, coupled with Jennifer’s financial and operational acumen will be essential to ensure continued execution of R1’s goals. We recognize both Rachel and Gary for their many contributions and appreciate their efforts to help ensure an orderly transition for our customers and team.”
Ms. Williams said, “I am honored to take on this new role and continue working with Lee and the leadership team to drive R1’s growth and profitability. R1 is well-positioned with many exciting opportunities ahead to continue delivering for our clients, employees, and shareholders.”
Mr. Hicok said, “I am excited to build on the commercial success of R1 to continue on our growth trajectory. I look forward to strengthening our market position and achieving strong results for our clients across the healthcare industry.”
Financial Outlook
The Company is re-affirming 2022 full year guidance:
•Revenue of $1,790 million to $1,800 million
•GAAP operating loss of $8 million to $13 million
•Adjusted EBITDA of $420 million to $425 million
For 2023, R1 expects to generate:
•Revenue of $2,280 million to $2,330 million
•GAAP operating income of $115 million to $140 million
•Adjusted EBITDA of $595 million to $630 million
As previously announced, members of R1’s management team will present at the 41st Annual J.P. Morgan Healthcare Conference on Tuesday, January 10, 2023, at 7:30 am PT.
About Jennifer Williams
Jennifer Williams joined R1 following the acquisition of Cloudmed, where she served as Chief Financial Officer since July 2020. Prior to Cloudmed, Ms. Williams served as Senior Vice President and Chief Financial Officer of Corporate functions for Change Healthcare. Earlier in her career, she was the corporate controller and global finance leader at First Advantage and held financial leadership positions at LexisNexis Risk Solutions for over 10 years. She began her career with Ernst & Young.
Ms. Williams has a B.S. and Master of Accountancy degrees from Auburn University and is a certified public accountant.
About Kyle Hicok
Kyle Hicok joined R1 following the acquisition of Cloudmed, where he served as President and General Manager. Prior to Cloudmed, Mr. Hicok has served in numerous positions where he was responsible for multi-state revenue cycle operations, national consulting and shared service operations, including as, Vice President of Revenue Cycle Management at Optum360 from 2014 to 2017; in various roles at MedeAnalystics from 2011 to 2013; Huron Consulting Group Practice from 2008 and 2009; and Stockamp from 2001 to 2008.
Mr. Hicok has a B.A. in Financial Economics from Gustavus Adolphus College and a Master’s in Business Administration from the University of Florida.
About R1 RCM
R1 is a leading provider of technology-driven solutions that transform the patient experience and financial performance of hospitals, health systems, and medical groups. R1’s proven and scalable operating models seamlessly complement a healthcare organization’s infrastructure, quickly driving sustainable improvements to net patient revenue and cash flows while reducing operating costs and enhancing the patient experience. To learn more, visit: r1rcm.com.
Non-GAAP Financial Measures
In order to provide a more comprehensive understanding of the information used by R1’s management team in financial and operational decision making, the Company supplements its GAAP consolidated financial statements with certain non-GAAP financial measures, including adjusted EBITDA. Adjusted EBITDA is defined as GAAP net income before net interest income/expense, income tax provision/benefit, depreciation and amortization expense, share-based compensation expense, CoyCo 2, L.P. (“Coyco 2”) share-based compensation expense, and certain other items, including business acquisition costs, integration costs, strategic initiatives, and the global business services center expansion project in the Philippines. Adjusted EBITDA guidance is reconciled to operating loss/income guidance, the most closely comparable available GAAP measure.
Our board of directors and management team use adjusted EBITDA as (i) one of the primary methods for planning and forecasting overall expectations and for evaluating actual results against such expectations and (ii) a performance evaluation metric in determining achievement of certain executive incentive compensation programs, as well as for incentive compensation programs for employees.
Table 1 presents a reconciliation of Adjusted EBITDA guidance to operating loss/income. Non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP.
Forward-Looking Statements
This press release includes information that may constitute “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events and relationships, plans, future growth, and future performance. These statements are often identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “designed,” “may,” “plan,” “predict,” “project,” “target,” “contemplate,” “would,” “seek,” “see,” and similar expressions or variations or negatives of these words, although not all forward-looking statements contain these identifying words. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of the Company’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, assurance, prediction or definitive statement of fact or probability. Actual outcomes and results may differ materially from those contemplated by these forward-looking statements as a result of uncertainties, risks, and changes in circumstances, including but not limited to risk and uncertainties related to: (i) geopolitical, economic, and market conditions, including heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, and challenges in the supply chain; (ii) the Company’s ability to timely and successfully achieve the anticipated benefits and potential synergies of the acquisition of Cloudmed; (iii) the Company’s ability to retain existing customers or acquire new customers; (iv) the development of markets for the Company’s revenue cycle management offering; (v) variability in the lead time of prospective customers; (vi) competition within the market; (vii) breaches or failures of the Company’s information security measures or unauthorized access to a customer’s data; (viii) delayed or unsuccessful implementation of the Company’s technologies or services, or unexpected implementation costs; (ix) disruptions in or damages to the Company’s global business services centers and third-party operated data centers; and (x) the ongoing impact of the COVID-19 pandemic on the Company’s business, operating results, and financial condition. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the heading “Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2021, and any other periodic reports that the Company may file with the United States Securities and Exchange Commission. The foregoing list of factors is not exhaustive. All forward-looking statements included herein are expressly qualified in their entirety by these cautionary statements as of the date hereof and involve many risks and uncertainties that could cause the Company’s actual results to differ materially from those expressed or implied in the Company’s forward-looking statements. Subsequent events and developments, including actual results or changes in the Company’s assumptions, may cause the Company’s views to change. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law. You are cautioned not to place undue reliance on such forward-looking statements.
Contact:
R1 RCM Inc.
Investor Relations:
Atif Rahim
312.324.5476
investorrelations@r1rcm.com
Media Relations:
Morgan Mathis
310.528.6306
morgan@highwirepr.com
Table 1
R1 RCM Inc.
Reconciliation of GAAP Operating Income Guidance to Non-GAAP Adjusted EBITDA
Guidance (Unaudited)
(In millions)
| | | | | | | | |
| 2022 | 2023 |
| GAAP Operating Income Guidance | $(8) – (13) | $115 – 140 |
| Plus: |
| Depreciation and amortization expense | $170 – 175 | $260 – 280 |
| Share-based compensation expense | $70 – 75 | $75 – 85 |
| CoyCo 2 share-based compensation expense | $5 – 7 | $10 – 15 |
| Strategic initiatives, severance and other costs | $180 – 185 | $110 – 135 |
| Adjusted EBITDA Guidance | $420-425 | $595-630 |
