R1 RCM (RCM) Q4 2023 earnings summary

Executive summary

• FY’23 revenue rose 24.8% to $2,254.2M; adjusted EBITDA increased 45.0% to $614.3M, and GAAP net income was $3.3M versus a $63.3M net loss in 2022.

• Cloudmed integration synergies reached ~$30M; execution included stabilizing key client metrics, advancing generative AI and expanding global infrastructure.

• 2024 priorities include growth, customer-aligned go-to-market, onboarding, technology execution, operational delivery, margin improvement and cash flow discipline.

Financial highlights

• Q4’23 revenue was $575.1M, up 7.8% YoY; adjusted EBITDA was $167.7M, up 33.5%.

• Q4 GAAP net income was $1.4M versus a $36.6M net loss in Q4 2022; operating income was $49.1M versus an operating loss of $3.8M.

• FY’23 operating income was $147.9M versus an operating loss of $2.8M in 2022.

• Q4 adjusted cost of services declined 1.9% YoY to $357.8M; adjusted SG&A rose 15.1% to $49.6M, reflecting credit allowances and technology investment, partly offset by synergies.

• FY’23 adjusted cost of services increased 16.2% to $1,449.2M; adjusted SG&A rose 40.9% to $190.7M, including Cloudmed impact and customer credit allowances.

Outlook and guidance

• FY’24 guidance: revenue $2,625–$2,675M, GAAP operating income $105–$135M and adjusted EBITDA $650–$670M.

• Assumptions include low-single-digit growth in base net operating fees and cash collections, offset by APP and Pediatrix attrition and facility divestitures; existing-customer fees use Q4’23 run rate, excluding Providence and Acclara.

• Modular and other revenue growth is expected in the low double digits; legacy Cloudmed solutions in the mid-teens and legacy R1 modular solutions in the low single digits.

• Acclara is expected to contribute $290–$295M revenue and ~$25M adjusted EBITDA; Providence is expected to add $45–$50M in net operating fees in H2 and reduce adjusted EBITDA by ~$45M.

• FY’24 assumptions include capex of ~5% of revenue, other expenses of $105–$125M, interest expense of $160–$165M and D&A of $330–$350M; other expenses include Acclara integration.