R1 RCM (RCM) Jefferies Global Healthcare Conference summary

Operational performance and recent events

• Strong Q1 performance with effective cost containment and successful integration of a major acquisition, Acclara, and a significant new customer win with Providence, totaling $14 billion in NPR.

• The Change Healthcare cyber event in Q1 impacted cash flow and AR, reducing incentive fees and leading to a $9.5 million revenue impact in Q1 and $25 million for the year, with some denials expected to affect Q4 2024 and Q1 2025.

• A separate cyberattack on customer Ascension led to temporary disconnection and manual processing, causing expected timing shifts in base and incentive fees, with the full impact still being assessed.

Strategic initiatives and integration

• Integration of Providence and Acclara is progressing well, with $300 million in expected revenue over several years and $50 million in anticipated cost synergies.

• Modular business continues to grow at double digits, and integration of previous large wins is on track, with no current constraints on new business deployment.

• Sutter phase I is performing well operationally, though phase II is on hold due to management changes at Sutter.

Financial outlook and guidance

• 2024 guidance assumes a ramp in EBITDA in the second half, driven by seasonality, Providence rollout, modular business growth, and synergy realization from acquisitions.

• Bad debt reserves were increased in 2022 and 2023 due to customer pressures, with levels expected to remain somewhat elevated but stable.

• Focus remains on converting EBITDA to free cash flow, with ongoing efforts to improve cash generation.