R1 RCM (RCM) Q2 2024 earnings summary

Executive summary

• Revenue rose 12% year-over-year to $627.9 million for Q2 2024, driven by the Acclara acquisition and growth despite cyberattack and outage impacts.

• Adjusted EBITDA increased 9% year-over-year to $156.1 million, slightly ahead of expectations despite disruptions.

• GAAP net loss widened to $7.6 million from $1.0 million year-over-year, reflecting higher interest and integration costs.

• Successfully onboarded over 1,900 associates for a major new customer, with revenue ramping expected in the second half.

• Announced definitive agreement to be acquired by TowerBrook and CD&R for $14.30 per share in cash, with closing expected by year-end.

Financial highlights

• Q2 2024 revenue: $627.9 million, up 12% year-over-year; six months: $1,231.8 million, up 11% year-over-year.

• Adjusted EBITDA for Q2: $156.1 million, up 9% year-over-year; margin was 24.9%.

• Net operating fees grew 5% year-over-year to $374.6 million; modular and other revenue increased 35% to $231.6 million.

• Cost of services increased 14% year-over-year in Q2, mainly due to Acclara; non-GAAP cost of services rose by $57 million.

• Cash and cash equivalents at June 30, 2024: $163 million; available liquidity: $682 million; net debt: $2.13 billion.

Outlook and guidance

• No formal 2024 guidance provided due to the pending take-private transaction.

• Full-year revenue impact from the Ascension outage expected between $75 million-$95 million, mostly a timing shift into 2025.

• Incremental costs from the Ascension incident projected at $10 million-$15 million in the second half of 2024.

• Recovery of most delayed revenue and return to normal cash cycles anticipated in 2025.

• Management expects continued investment in technology and global operations, with sufficient liquidity for the next 12 months and beyond.