Executive Summary

Q1 revenue $603.9M (+10.7% Y/Y) and adjusted EBITDA $152.2M (+7.0% Y/Y); GAAP net loss was $(35.1)M and diluted EPS $(0.08) as Change Healthcare cyberattack and a modular client bankruptcy weighed on results .
2024 guidance lowered: revenue to $2.60–$2.64B (from $2.625–$2.675B), GAAP operating income to $85–$105M (from $105–$135M), and adjusted EBITDA to $625–$650M (from $650–$670M), chiefly reflecting outage-related timing and incentive fee impacts and integration choices at Acclara .
Management expects intra-year timing: base-fee revenue depressed in Q3 and elevated in Q4 as claims backlog clears; incentive fees hit again in Q4 due to elevated denials, with total FY impact ≈ $20M revenue and ≈ $25M adj. EBITDA .
Catalysts: execution on Providence onboarding (management “materially in line”), recovery of claims by August, demand tailwinds for denials/AR recovery, and progress harmonizing Acclara to lift margins into 2025 .

What Went Well and What Went Wrong

What Went Well

Flexible engagement model and strong modular bookings; cross‑sell expanded to >3 modular solutions per customer, with increased demand in physician advisory, DRG validation, charge capture, and underpayments .
Rapid response to Change Healthcare outage: migrated 100% of affected customers to alternative clearinghouses within weeks; built mitigation automations to preserve cash collections .
AI execution: launched clinical appeal summarization LLM, designed to reduce denial appeal drafting time ≈75% (from ~60 to ~15 minutes); more GenAI solutions expected in 2024 .

What Went Wrong

Change Healthcare cyberattack drove Q1 shortfall: revenue and adj. EBITDA impacted by ~$9.5M; incentive fees of $15.6M were below expectations (balance sheet metrics hit), with further FY impact expected .
Modular customer bankruptcy: no revenue recognized for unpaid Q1 work; AR fully reserved; ~$45M modular revenue still included in FY outlook given “critical vendor” designation, but uncertainty persists .
2024 outlook reduced: revenue, GAAP operating income, and adj. EBITDA cut; interest expense guidance raised to $175–$180M on higher debt post‑Acclara .

Financial Results

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	$572.8	$575.1	$603.9
YoY Revenue Growth %	15.5%	7.8%	10.7%
Adjusted EBITDA ($M)	$161.5	$167.7	$152.2
Adjusted EBITDA Margin %	28.2% (161.5/572.8)	29.2% (167.7/575.1)	25.2% (152.2/603.9)
GAAP Net Income (Loss) ($M)	$1.3	$1.4	$(35.1)
Diluted EPS ($)	$— (≈$0.00)	$— (≈$0.00)	$(0.08)

Segment revenue mix

Segment ($M)	Q3 2023	Q4 2023	Q1 2024
Net Operating Fees	$368.0	$369.1	$381.5
Incentive Fees	$30.1	$23.9	$15.6
Modular & Other	$174.7	$182.1	$206.8
Total Revenue	$572.8	$575.1	$603.9

KPIs and balance sheet/liquidity

KPI	Q3 2023	Q4 2023	Q1 2024
Cash & Cash Equivalents ($M)	$164.9	$173.6	$178.0
Liquidity ($M)	$703.7	$772.4	$696.8
Net Debt ($M)	$1,568.1	$1,482.7	$2,133.3
Net Debt Leverage (x)	n/a	2.25x	2.9x

Notes: Q1 reflects ~$9.5M impact from Change Healthcare on revenue and adj. EBITDA and additional impact from a modular client bankruptcy .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2024	$2.625–$2.675B	$2.600–$2.640B	Lowered
GAAP Operating Income (a/k/a Net Operating Income)	FY 2024	$105–$135M	$85–$105M	Lowered
Adjusted EBITDA	FY 2024	$650–$670M	$625–$650M	Lowered
Acclara Revenue	FY 2024	~$290–$295M	~$275–$280M	Lowered
Acclara Adj. EBITDA	FY 2024	~$25M	~$25M (unchanged)	Maintained
Interest Expense	FY 2024	$160–$165M	$175–$180M	Raised
Other Expenses	FY 2024	$105–$125M	$105–$120M	Slightly Lower
Capex	FY 2024	≈5% of revenue	≈5% of revenue	Maintained
D&A	FY 2024	$330–$350M	$330–$350M	Maintained

Management also expects: outage-driven FY impact ≈ $20M revenue and ≈ $25M adj. EBITDA; timing shift with Q3 base fees down and Q4 up as backlog normalizes by August .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’23, Q4’23)	Current Period (Q1’24)	Trend
AI/Automation	Q3: Announced collaboration to accelerate GenAI; introduced LLM apps (denials automation, next‑action prediction, E/M coding) . Q4: “Accelerated technology through GenerativeAI” .	Launched clinical appeal summarization LLM (75% time reduction); more GenAI solutions planned in 2024 .	Expanding deployment and new use cases .
Commercial momentum (modular)	Q3: Strong modular bookings; cross‑sell momentum . Q4: Demand and pipeline described as strong .	Flexible model resonating; >3 modular solutions per customer; heightened demand for denials/AR recovery post‑outage .	Strengthening, with post‑outage tailwinds .
Change Healthcare outage	Not applicable (pre‑outage).	Not applicable in Q4 results (outage late Feb; impacts discussed prospectively) .	Significant Q1 impact (~$9.5M); FY headwind ($20M rev/$25M EBITDA); timing shift and elevated denials .
Providence onboarding	Q3: Converting $4B NPR opportunity; pipeline building . Q4: Expected $45–$50M net operating fees in 2H24; ~($45)M adj. EBITDA (ramp costs) .	“Materially in line” with prior guidance; onboarding “on track” .	On plan; near‑term investment, longer‑term revenue ramp .
Acclara integration	Q3: Cloudmed synergies; portfolio momentum . Q4: 2024 rev ~$290–$295M; ~$25M adj. EBITDA .	Harmonizing lines/contracts lowers 2024 rev to ~$275–$280M; EBITDA unchanged; setup for better 2025 margins .	Mix optimization; margin focus .

Management Commentary

Strategic positioning: “Our vision is to be the automation platform of choice for the provider industry… with our combination of technology, global scale and industry expertise” .
Outage response: “In a matter of weeks, the team was able to successfully migrate 100% of affected customers to alternative clearinghouses” .
AI execution: “We anticipate launching several new solutions throughout 2024… clinical appeal summarization LLM… reduce the time… by 75%” .
Demand outlook: “We believe the continued strength of our commercial engine… and ongoing investments in AI‑driven technology… will further support our growth” .

Q&A Highlights

Outage cadence and FY impact: Management expects biggest base‑fee timing swing between Q3 and Q4; FY impact ≈ $20M revenue and ≈ $25M adj. EBITDA; incentive fees step up modestly in Q2/Q3 but another hit in Q4 from elevated denials .
Providence ramp: Onboarding “on track,” guidance “materially in line”; near‑term onboarding costs to occur in Q2/Q3 after some Q1 timing benefit .
Acclara harmonization: Proactively exiting/realigning lower‑margin lines and aligning revenue between end‑to‑end and Acclara; neutral to EBITDA in 2024, better setup for 2025 .
Modular client bankruptcy: ~$45M FY revenue exposure across Acclara/Cloudmed; revenue still in outlook given “critical vendor” status; Q1 AR fully reserved and no revenue recognized for unpaid work .
Vendor diversification/insurance: R1 will avoid single‑threaded vendor dependencies going forward; pursuing insurance options related to switching costs (no specifics) .

Estimates Context

S&P Global consensus for Q1 2024 (revenue/EPS/EBITDA) was unavailable via our data connector at the time of analysis, so we cannot formally score beats/misses. Management indicated Q1 adj. EBITDA was “in line with our internal expectations,” but this is not a substitute for Street consensus .
We will update beat/miss analysis once S&P Global mapping is restored.

Key Takeaways for Investors

Near‑term noise, intra‑year timing: Expect base‑fee “air pocket” in Q3 and rebound in Q4 as claims settle by August; model incentive fees weaker in Q4 on elevated denials .
Guidance reset largely outage‑driven: 2024 revenue/EBITDA trimmed; watch execution on migration automations and denials normalization to contain the $20M/$25M FY headwind .
Providence: Execution tracking as planned; onboarding costs shift into Q2/Q3, with a larger revenue contribution in 2H24 and into 2025; monitor margin trajectory as ramp completes .
Acclara: Top‑line trimmed to $275–$280M as contracts are harmonized; unchanged ~$25M EBITDA suggests healthy margin focus; look for 2025 improvement .
Structural demand tailwind: Post‑outage denials/AR recovery demand and cross‑sell should support modular growth; AI deployments (appeal summarization, denials automation) can drive productivity and yields .
Balance sheet: Net debt rose to ~$2.13B (2.9x) post‑Acclara; liquidity remains solid at ~$697M; interest expense higher at $175–$180M in 2024—update interest lines in models accordingly .

All document-based facts and figures are cited inline to SEC filings, the Q1’24 press release/deck, and the earnings call transcript.

R1 RCM Inc. /DE (RCM)·Q1 2024 Earnings Summary