R1 RCM (RCM) Q1 2024 earnings summary

Executive summary

• Q1 revenue rose 10.7% YoY to $603.9M; adjusted EBITDA increased 7% to $152.2M, while GAAP results swung to a $35.1M net loss.

• Acclara contributed to growth; the Change Healthcare cyberattack reduced Q1 revenue by $9.5M, with a modular-client bankruptcy also affecting results.

Financial highlights

• Net operating fees rose 6% to $381.5M, incentive fees fell 34% to $15.6M, and modular and other fees grew 28% to $206.8M.

• Operating income was $8.0M versus $33.7M a year earlier; operating expenses rose 16% to $595.9M and net interest expense increased 35% to $41.3M.

• GAAP net loss was $35.1M versus net income of $1.6M; diluted loss per share was $0.08 versus diluted earnings per share of $0.08.

• Q1 other expenses were $33.9M, including $15.7M acquisition costs, $8.7M integration costs and $6.8M technology transformation costs.

Outlook and guidance

• FY24 guidance was reduced to revenue of $2.60B–$2.64B, GAAP net operating income of $85M–$105M and adjusted EBITDA of $625M–$650M.

• Change Healthcare is expected to reduce FY24 revenue by ~$20M and adjusted EBITDA by $25M; impacts include lower incentive fees and base-fee timing shifts.

• FY24 Acclara revenue is expected to be $275M–$280M following business and contract harmonization; adjusted EBITDA outlook for Acclara is unchanged.

• Assumptions include low-single-digit base net operating fee growth, low-double-digit modular and other revenue growth excluding Acclara, and capex of ~5% of revenue.