Christopher Senyek • Wolfe Research

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Executive Jeff Thiede acknowledged some revenue was pulled forward into Q1 and cited macroeconomic uncertainties and tariffs as reasons for maintaining current guidance. He detailed a proactive tariff mitigation strategy involving early procurement and protective contract terms. Executive Maximillian Marcy clarified that Q1 corporate costs were slightly light and will increase modestly to meet the unchanged full-year target for incremental stand-alone costs.

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Executive Jeff Thiede acknowledged some revenue was pulled forward into Q1 but affirmed full-year guidance due to it being early in the year and macro uncertainties. He stated that the company mitigates tariff risk proactively through early procurement and protective contract terms. Executive Maximillian Marcy clarified that Q1 corporate costs were slightly light and will increase through the year to meet the previously guided $28 million in total incremental stand-alone costs.

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Executive Maximillian Marcy advised modeling the $28 million as the ongoing run rate for stand-up costs. He noted that the largest component is stand-alone insurance, which is unlikely to decrease. He clarified there is no expected cost-saving opportunity as the TSA tails off because the company is concurrently hiring full-time staff to replace those services. The expectation is for this cost to become a smaller percentage of revenue as the company grows, rather than decreasing in absolute terms.

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CEO Tim Oliver and CFO R. Wamser confirmed that free cash flow will be back-end loaded, consistent with historical patterns, expecting a significant ramp in the second half with conversion around 60% in Q3 and Q4. Wamser also stated that the ATM-as-a-Service CapEx of $30-$40 million is expected to be balanced across all geographies.

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CEO Timothy Oliver responded that the priority is debt reduction to under 3x net leverage, expected by mid-2025. After reaching that goal, the board will consider capital return options, including buybacks. He affirmed that while AaaS adoption has seen a slight lag, the company is tracking close to its original long-term model for recurring revenue percentage and remains confident in the targets.

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CEO Tim Oliver explained that 2024 margin expansion was largely recovering from separation dis-synergies to a ~20% exit rate. He anticipates further margin expansion in 2025, driven by direct cost savings, forecasting 8-10% EBITDA growth on 3-4% revenue growth. CFO Paul Campbell confirmed the company remains on track to achieve its long-term recurring revenue mix goals.

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K.R. Sridhar (Founder, Chairman, and CEO) declined to provide a specific backlog number, citing a policy of annual disclosure. However, he emphasized that reiterating the full-year guidance signals strong confidence in the commercial pipeline. When asked about the source of the next deal, he simply replied, 'Hopefully, both.'

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CFO Dan Berenbaum confirmed that, in general, product revenue is recognized upon shipment, a policy that is clearly detailed in the company's SEC filings. However, he maintained the company's policy of not commenting on the specific timing of shipments or revenue recognition for any individual customer.

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CFO Dan Berenbaum confirmed that, in general, product revenue is recognized upon shipment, a long-standing policy detailed in SEC filings. He maintained the company's practice of not commenting on the specific timing of shipments or revenue related to individual customers.

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CFO Dan Berenbaum clarified that the SK Eternix order is for 2025 revenue. He stated that confidence in the 2024 guidance is based on visibility into "very specific projects" in various stages of contracting for Q4. He attributed quarter-to-quarter variability to the nature of a large, project-based business.

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Paul Middleton, executive, clarified that no new conditions have been added to the DOE loan, which was finalized in January. The current process involves finalizing standard ancillary agreements. CEO Andrew Marsh estimated construction would begin in Q4, at which point, as Paul Middleton explained, the company will submit monthly invoices to the DOE for advancement of funds.

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CEO Andy Marsh and CFO Paul Middleton stressed their focus on closing the loan before any administration change, noting the funds are already committed to the program. For the 45V PTC, Marsh stated the ideal rule would align with the law's original intent: no 'additionality' requirement, a phased-in time-matching approach similar to Europe's, and the establishment of 4-5 large geographic regions for compliance.

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Executive Maximillian Marcy advised modeling the $28 million as a continuing run rate. He explained that the largest component is stand-alone insurance, which is unlikely to decrease soon. He also noted that as the Transition Services Agreement (TSA) with MDU Resources winds down, the company is hiring full-time staff, preventing significant cost savings. The expectation is for these costs to become a smaller percentage of revenue as the company grows.

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CEO Bryan Hanson explained that while the revenue cycle management business was steady, the HIS segment saw continued pressure in clinical productivity solutions due to historical underinvestment and a temporary softness in the performance management business, which is not expected to recur. CFO Wayde McMillan stated that FX guidance is based on recent rates and a headwind is expected in Q4. He noted that while HIS is almost all U.S.-based, the other three segments have significant international exposure, making the company subject to typical FX moves.

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CEO Bryan Hanson explained that the HIS segment saw steady performance in its core revenue cycle management business but continued to face pressure in clinical productivity solutions due to historical underinvestment. The softness in the quarter was an anomaly in the performance management business, which he does not expect to recur. CFO Wayde McMillan stated that FX guidance is based on recent rates, which point to a Q4 headwind. He noted that while the HIS business is almost all U.S.-based, the other three segments have significant international exposure and a global manufacturing footprint, making the company subject to typical FX moves.

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