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, despite a cyber event impacting a key vendor.

• The Change Healthcare cyber incident led to increased AR, reduced cash, and a $9.5M Q1 revenue impact, with full-year EBITDA guidance lowered by $22.5M; most effects are expected to be contained within 2024, though some denials may extend into Q1 2025.

• Another customer, Ascension, experienced a cyberattack, causing temporary disconnection and manual processing; this is expected to shift base fees from Q4 to Q1, with the full impact still being assessed.

• Managed care reimbursement timelines have stabilized after peaking in 2022, with ongoing technology investments and process improvements to maintain efficiency.

Strategic initiatives and integration

• Integration of recent large wins, including Providence and Acclara, is progressing well, with expected synergies of $50M over several years and a focus on both end-to-end and modular business growth.

• The company is selective about new business, prioritizing strategic fit and operational capacity, while modular solutions continue to grow at a double-digit rate.

• Past integration challenges were attributed to rapid growth and external pressures, but current deployment capacity is not seen as a constraint.

Financial health and guidance

• Hospital customers remain under financial pressure, but conditions are stabilizing; bad debt reserves were increased in 2022 and 2023 and are expected to remain somewhat elevated.

• Sutter's phase II is on hold due to management changes, but phase I is progressing well; Providence integration is on track with revenue and margin targets.

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

• Key to higher share price includes consistent execution, revenue growth, EBITDA maturity, and improved cash conversion.