Q4 2021 R1 RCM Inc Earnings Call

February 17, 2022

Okay.

Thank you for your patience. Please stay on the line for the next available operator.

Good morning, My name is Chris and I'll be your conference operator today at this time I would like to welcome everyone to the <unk> RCM Q4 of 2021 earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.

Okay.

To withdraw your question. Please press star one again.

A key for him head of Investor Relations you may begin.

Thank you for your patience. Please stay on the line for the next available operator.

Good morning, everyone and welcome to the call certain statements made during this call maybe considered forward looking statements made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 in particular any statements about our future growth.

Okay.

Plans and performance, including statements about our strategic and cost saving initiatives.

Yes.

Okay.

In addition, our global opportunities and.

Thanks.

Okay.

Since your financial performance are forward looking statements.

Okay.

These statements are often identified by the use of words, such as anticipate believe estimate expect intend design May plan project will.

Okay.

Thank you for your patience. Please stay on the line for the next available operator.

And similar expressions or variations.

Okay.

Investors are cautioned not to place undue reliance on such forward looking statements. All forward looking statements made on today's call involve risks and uncertainties. While we may elect to update these forward looking statements at some point in the future. We have no current intention of Gainesville, except to the extent required by applicable law.

Okay.

Thanks.

Okay.

Yes.

[music].

Actual results and outcomes could differ materially from those included in these forward looking statements as a result of various factors, including but not limited to the potential acquisition of cloud, which may not be completed on our anticipated timeline or at all.

Thank you for your patience. Please stay on the line for the next available operator.

<unk> strategy the impact of the COVID-19, pandemic and factors discussed under the heading risk factors in our most recent annual report on Form 10-K , and the latest Form 10-Q , we will also be referencing non-GAAP metrics on this call.

Thanks.

Thank you for your patience. Please stay on the line for the next available operator.

Reconciliation of non-GAAP amounts mentioned to the equivalent GAAP amounts. Please refer to our press release the information needed to cloud that is based on data available to us and has not been audited and is subject to change now I'd like to turn the call over to Joe.

[music].

Thanks, Scott Good morning, everyone and thank you for joining us I'm pleased to report 2021 was another strong year for our work with revenue and adjusted EBITDA ahead of our expectations at the start of the year I'd like to recognize our global team for their continued resilience and hard work for what has been a challenging operating.

Okay.

Yes.

Thanks.

Our solid execution would not have been possible without the tremendous dedication of our 22000 person strong team.

Thank you for your patience. Please stay on the line for the next available operator.

Thanks.

For the fourth quarter, we generated revenue of $398 9 million and adjusted EBITDA of $95 1 million representing.

Okay.

Yes.

<unk> represented 22% and 52% growth respectively.

Okay.

[music].

Return to normal patient volumes, new customer wins strong kpis performance and benefits from our Digitization efforts all contributed to.

Thanks.

The strong fourth quarter results.

No.

Thank you for your patience. Please stay on the line for the next available operator.

On the call today I'd like to cover four topics I'll start with highlights from 2021, followed by incremental color on the pending <unk> acquisition based on questions. We received from investors.

Okay.

[music].

I will then cover our key priorities for 2022, and lastly update you on our ones ESG journey.

Okay.

2021 was a successful year for all one across multiple fronts. In addition to exceeding the financial goals, we laid out at the start of the year, we made progress across several areas to position the company for sustained long term growth star.

Okay.

Thanks.

Okay.

Yes.

Okay.

Yeah.

Thank you for your patience. Please stay on the line for the next available operator.

Starting with technology automation.

Automation and patient engagement have been two key focus areas over the past few years.

Okay.

We accelerated the pace of automation to 10 million tasks per quarter and exited.

Thanks.

Okay.

Yes.

[music]. Thank you for your patience. Please stay on the line for the next available opera.

A rider.

Thanks.

[music].

Thank you for your patience. Please stay on the line for the next available operator.

[music].

Okay.

Yes.

This is David.

Okay.

Yes.

Okay.

[music]. Thank you for your patience. Please stay on the line for the next available operator.

Thanks.

[music].

Yeah.

[music].

Yes.

Yeah.

Okay.

No.

Thank you for your patience. Please stay on the line for the next available operator.

Okay.

[music].

Okay.

Yeah.

Thank you for your patience. Please stay on the line for the next available operator.

Okay.

Thanks.

[music].

Yes.

Thank you for your patience. Please stay on the line for the next available operator.

Thanks.

[music].

Thank you for your patience. Please stay on the line for the next available operator.

[music].

Got it.

Yes.

Okay.

[music]. Thank you for your patience. Please stay on the line for the next available operator.

Thanks.

[music].

Okay.

Thanks.

Thank you for your patience. Please stay on the line for the next available operator.

Yeah.

Yes.

[music].

Okay.

Thank you for your patience. Please stay on the line for the next available operator.

Okay.

Yes.

Yeah.

[music].

Thank you for your patience. Please stay on the line for the next available operator.

Thanks.

Yes.

Sure.

Thank you for your patience. Please stay on the line for the next available operator.

[music].

Yes.

Okay.

Thanks.

Thank you for your patience. Please stay on the line for the next available operator.

Yeah.

Okay.

[music].

We are sorry, but there is no operator available to assist you at this time. Please check with your conference coordinator for the correct time and date of your.

So our top overarching priority is to successfully complete the acquisition and integrate cloud HIFU.

Our high quality outcome here is of Paramount importance to us with three key goals in mind.

Post integration, we want to one.

Drive commercial success, given our enhanced value proposition unlocking and accelerating the growth potential presented by the modular channel too.

To establish <unk> as the technology and data platform leader in the industry and three be recognized as the Premier brand to serve health care providers revenue cycle management needs.

Great and planning is well underway and we expect to launch our plans immediately post close.

We want to ensure that our core execution and remains on track and we fully capture the market opportunity presented to us.

Our end to end pipeline remains extremely active and was up 30% at the end of the fourth quarter compared to Q3 'twenty one on top of the 50% sequential growth in Q3 two.

Two of our key goals in 2022 are to reduce the cycle time to onboard new customers and to increase our onboarding capacity to $7 billion in NPR annually.

We expect incremental near term costs as a result of this with a significant return on investment given the long term nature of our contracts.

Looking to the next stage of automation as a results of the planned acquisition of cloud met we expect to have the broadest coverage on revenue cycle processes automation.

We expect our data footprint increased tenfold, enabling further advancements in machine learning, which will in turn create a more powerful value proposition for customers.

Once automation efforts, which.

Has historically been internally focus is highly complementary with cloud <unk> capabilities, which are sold directly to providers on a standalone basis building.

Building on our combined capabilities, we plan launching.

Multiyear AI driven strategy to unlock the full potential of this expanded dataset presents to US. We expect these efforts will significantly expand automated decision, making and increase the universe of automated processes increase.

Increasing automated decision, making will benefit multiple outcomes and working capital conversion and higher patient satisfaction.

Ultimately <unk> workflows and is helping us navigate tight labor markets. While we are not immune to the current labor environment as we sit today with the efficiencies created by automation and entry our labor needs are 10% to 15% lower than providers in house revenue cycle operations.

This technology driven productivity combined with our global scale footprint is increasingly recognized by providers as a superior alternative to their standalone efforts or other solutions in the market.

And we believe this is contributing to the growth in our end to end pipeline.

Yes.

Lastly, before I turn it over to regional I'd like to update you on all once ESG journey.

In March of last year, we published our inaugural report in which we highlighted how we're enhancing the interests of all stakeholders through our ESG commitments.

Continue to build on these commitments over the course of 2021.

And I'm, particularly proud of a few initiatives I'd like to highlight.

With the launch of engine.

We significantly advanced our commitment to improve access to health care.

Role in the health care ecosystem positions us to transform the patient experience by integrating the numerous revenue cycle touch points and disparate support systems found across care settings.

Speaker 1: numerous revenue cycle touchpoints and disparate support systems found across care centers.

Speaker 1: By combining our innovative technology with our financial advocacy for patients, we are making health care simpler by increasing patient access to health care, and we're pleased to be removing barriers to high-quality health care for patients.

By combining our innovative technology with our financial advocacy for patients, we are making health care simpler by increasing patient access to health care and we're pleased to be removing barriers to high quality health care for patients.

Speaker 1: Second, we continue to invest heavily in our people. We introduced a number of new learning and development resources, including new educational content for our people leaders to enable them to build effective working relationships and a certification program for our hourly staff to advance career and pay progression.

We continued to invest heavily in our people, we introduced a number of new learning and development resources, including new educational content for our people leaders to enable them to build effective working relationships and a certification program for our hourly staff to advance career NPA progression.

We also evaluated minimum wage floors on a geographically differentiated basis and increased base pay in select markets with the intent to continue similar evaluations and actions more broadly in 2022 and beyond.

Speaker 1: We also evaluated minimum wage floors on a geographically differentiated basis and increased base pay in select markets.

Speaker 1: with the intent to continue similar evaluations and actions more broadly in 2022 and beyond.

Speaker 1: Third, we enhanced our protection of vital information with robust internal controls as independently verified through SOC 1 and SOC 2 certifications.

Third we enhanced our protection of vital information with robust internal controls as independently verified through stock one and stock two certifications.

Speaker 1: I'm very proud of our team for actively embracing and advancing these initiatives, which overarchingly be tied to our core mission to make health care simpler. We plan to publish our 2021 ESG report in early March, and I encourage you to review a copy on our website. In closing, I'm very pleased with our progress in 2021, which positions us for a strong 2021

I am very proud of our team for actively embracing in advancing these initiatives, which overarching we tied to our core mission to make healthcare simpler we plan to publish our 2021 ESG report in early March and I encourage you to review a copy on our website.

In closing I am very pleased with our progress in 2021, which positions us for a strong 2022 with the pending acquisition of cloud nine we stand to significantly advance our value proposition post closing and improve our competitive position. We're very excited about the journey ahead of us and look forward to ups.

Speaker 1: With the pending acquisition of CloudNED, we stand to significantly advance our value proposition post-closing and improve our competitive position. We're very excited about the journey ahead of us and look forward to updating you on our progress on future calls. Now I'd like to turn the call over to Rachel. Thank you.

Having you on our progress on future calls now I would like to turn the call over to rich.

Thank you Kevin and good morning, everyone. We're pleased to report solid fourth quarter results with revenue up.

Speaker 1: We're pleased to report solid fourth quarter results with revenue up 21.5% year-over-year to $398.9 million and adjusted EBITDA up 51.7% to $95.1 million. For the full year, revenue grew 16% to $1.475 billion and adjusted EBITDA grew 43.2% to $343.6 million.

5% year over year to $398 9 million and adjusted EBITDA up 51, 7% and $95 1 million for the full year revenue grew 16% to $1 75 billion and adjusted EBITDA grew 43, 2% to $343 6 million.

Speaker 1: Adjusted EBITDA margin for the year was 23.3% up 440 basis points from 18.9% in 2020, driven by higher incentive fees from strong execution, our digitization efforts, and synergies from acquisition.

Adjusted EBITDA margin for the year was 23, 3%.

140 basis points from 18, 9% in 2020, driven by higher incentive fees from strong execution Argentinean basin effort and synergies from acquisitions.

Are you in the fourth quarter results in more detail net operating fees at 332 million grew $60 6 million year over year, primarily driven by recovery in volumes.

Speaker 1: Reviewing the fourth quarter results in more detail, net operating fees of $332 million grew $60.6 million year-over-year, primarily driven by recovery in patient volume and the onboarding of new end-to-end customers signed over the past 18 months. On a sequential basis, net operating fees increased $23.5 million, primarily driven by recently onboarded customers.

Onboarding of new end to end customers signed over the past 18 months or so.

Rental basis.

<unk> increased $23 5 million, primarily driven by recently Onboarding customers.

Speaker 1: Incentive fees of $35.8 million were up $8.4 million over the prior year and down $5.7 million sequentially, driven by strong operational execution and offset in part by a shift in incentive fees from the American Physician Partners contract, which moved to a net operating fee arrangement, as discussed last quarter.

Incentive fee of $35 8 million were up $8 4 million over the prior year and down five 7 million sequentially driven by strong operational execution and offset in part by a shift in incentive fee from the American physician partners contract, which moved to a net operating fee arrangements as discussed last quarter.

Speaker 1: Other revenue, which consists largely of modular services, was $31.1 million, up $1.5 million for the prior year, and up $1.4 million sequentially, driven by improvement in Physician Advisory Services revenue.

Other revenue, which consists largely of modular services with $31 1 million up one 5 million over the prior year and up one 4 million sequentially driven by improvement in advisory services revenue.

Speaker 1: The non-gas cost of services in Q4 was $279.1 million, up $36.2 million year-over-year, and $11.6 million sequentially, driven by incremental costs serving customers, and offset in part by our automation and digitization efforts.

The non-GAAP cost of services in Q4 was $279 9 million up $32 million year over year, and $11 6 million sequentially, driven by incremental costs certain customer and offset in part by our automation and digitization effort.

non-GAAP SG&A expenses of 24%.

Speaker 1: Non-debt ST&A expenses of 24.6% reflecting our cost discipline despite incremental cost to support new customers.

Reflecting our cost discipline, despite incremental cost to support new customers.

And acquisition.

Speaker 1: Adjusted EBITDA for the quarter was $95.1 million, up $32.4 million year-over-year, and $5.8 million sequentially. Adjusted EBITDA margin improved 475 basis points year-over-year, driven by strong operational execution, contribution from new customers, and lower costs as a result of our automation and digitization initiative.

Adjusted EBITDA for the quarter with $95 1 million up 32, 4 million year over year, and $5 8 million sequentially.

The EBITDA margin improved 475 basis points year over year, driven by strong operational execution contribution from customers and lower cost as a result of our automation and Digitization initiative.

Speaker 1: Lastly, we incurred $11.9 million in other costs in Q4, primarily related to strategic initiatives and COVID-related expenses.

Lastly, we incurred $11 $9 million and other costs in Q4, primarily related to strategic initiatives and COVID-19 related expenses.

Speaker 1: Turning to the balance sheet, cash and cash equivalents at the end of December were $130.1 million compared to $158.7 million at the end of September . While we generated $46 million in cash from operations in 4Q, the sequential decrease in our cash balance was driven by the use of $27 million for shareholder purchases, $24.3 million for debt paydowns, $18.3 million for CapEx, and $10.7 million for deferred payroll taxes related to the CARES Act.

Turning to the balance sheet cash and cash equivalents at the end of December were $130 1 million compared to $158 7 million at the end of September while we generated $46 million in cash from operation in <unk>. The sequential decrease in our cash balance was driven by the use of $27 million of share repurchases $24 3 million for debt Paydown.

$18 3 million for Capex, and $10 7 million for deferred payroll taxes related to the cares Act.

Speaker 1: For the full year, we generated $264.8 million in cash from operating activities, up from $61.8 million in 2020, which reflects our adjusted EBITDA progression.

Full year, we generated $264 8 million in cash from operating activity.

From $61 8 million in 2020, which reflects adjusted EBITDA progression.

Speaker 1: Net debt at the end of December was $645.5 million compared to $640.8 million at the end of September . Our net debt to adjusted EBITDA leverage ratio at the end of December was 1.9 times, down from 2.1 times at the end of September . Our liquidity position remains very strong overall, with cash on hand and availability under the revolver of approximately $500 million.

Net debt at the end of December was $645 5 million compared to $640 8 million at the end of September .

Net debt to adjusted EBITDA leverage ratio at the end of December was one nine times down from $2. One times at the end of September our.

Our liquidity position remains very strong overall, the cash on hand, and availability under the revolver of approximately $500 million.

Speaker 1: In 2021, in addition to financing the acquisition visit pay, we were purchased 2.6 million shares at an average price of $21.62 and voluntarily paid down $40 million of our revolver.

2021. In addition to financing the acquisition of <unk>, we repurchased $2 6 million shares at an average price of $21 62, and voluntarily paid down $40 million of our revolver.

Speaker 1: 2022, we expect to revert to a normal historical pattern with cash generation at a low point in Q1, primarily due to the payment of incentive compensation and taxes related to the vesting of employee equity work.

We expect to revert to a normal historical pattern and cash generation at a low point in Q1, primarily due to the payment of incentive compensation and taxes related to the vesting of employee equity awards.

Turning to our financial outlook.

Speaker 1: Turning to our financial outlook, 2022 guidance on a stand-alone basis for R1 is an expected revenue range of $1.66 to $1.7 billion and adjusted EBITDA range of $385 to $405 million.

Turning to guidance on Standalone basis for our one is an expected revenue range of one six to one.

<unk> 7 billion and adjusted EBITDA range of $385 million to $405 million.

Speaker 1: Our guidance assumes patient volumes at approximately the same as pre-COVID levels and up-front costs associated with onboarding $4.5 to $4.8 billion in new NPR. As Joe noted, given the ongoing activity in our pipeline, we will likely be increasing our level of investment in 2022 as our pipeline progresses into contracted business.

Our guidance assumes patient volumes at approximately the same as pre COVID-19 level.

Cost associated with operating from five to $4 8 billion in new NPR.

As Joe noted given the ongoing activating our pipeline will likely be increasing our level of investments in 2022 as our pipeline progresses.

Back to business.

Speaker 1: We expect adjusted EBITDA to ramp up in the second half, as was the case pre-COVID. In the first half, we started incurring upfront contracting costs associated with the 10 billion NPR customer. We expect these costs to be in the 2 to 3 million range in 1Q. Additionally, we expect approximately $5 million in higher employee health care costs from depressed levels in 1Q of 2021.

We expect adjusted EBITDA to ramp up in the second half as is the case pre COVID-19 in the first half they started incurring upfront contracting costs associated with the $10 billion NPR customer.

We expect these costs to be in the $2 million to $3 million range in Q. Additionally, we expect approximately $5 million higher employee healthcare cost from depressed levels in <unk> of 2021.

Speaker 1: With this in mind, we expect 1Q revenue of $375 to $385 million and adjusted EBITDA of $85 to $90 million.

With this in mind, we expect <unk> revenue of 375% to $95 million and adjusted EBITDA of $85 million to $90 million.

Speaker 1: We will continue to provide additional color on our quarterly progression on.

We will continue to provide additional color on our quarterly progression.

Sure earnings call.

Speaker 1: and we'll be providing updated guidance

I'll be providing updated guidance post the completion of the Crescent acquisition.

Speaker 1: In closing, I'm proud of our team's continued strong operational execution and discipline processes in forecasting and cash management, culminating in a panel over to the operator for Q&A.

In closing I'm proud of our team's continued strong operational execution and disciplined processes and forecasting and cash management, culminating in over to the operator for Q&A.

Operator.

Thank you and just as a reminder, if you'd like to ask a question. Please press Star then one on your telephone keypad.

Speaker 2: Thank you. And just as a reminder, if you'd like to ask a question, please press star, then one on your telephone keypad. Our first question is from Charles Rhee with Cal.

First question is from Charles <unk> with Cowen.

Hi, This is James on for Charles.

Speaker 3: Um, so with the announcement of cloud met the medium and long term adjusted EBITDA targets were raised, but the operating partner model steady state EBITDA margin contribution was less than change at 30%.

So with the announcement of cloud meant the medium and long term adjusted EBITDA targets were raised but the operating partner model.

The EBITDA margin contribution was left unchanged at 30% can you help us think about what the potential upside is there.

Speaker 3: Can you help us think about what the potential upside is there as a result of the cloud met acquisition?

As a result of the cloud nine acquisition.

Speaker 3: uh... particularly with respect to intelligent automation where seems like a considerable opportunity and if they are uh... strategic focus

Particularly with respect to intelligent automation, where it.

Seems like there is considerable opportunity in it.

Our strategic focus in 'twenty two.

Yes, Jay.

Speaker 4: Yeah, James, this is Joe. Thanks for the question. We're

<unk>. This is Joe thanks for the question.

We're.

One thing is.

Speaker 4: One thing is we're still pretty early in the integration planning and ultimately post-close the detailing out of more hardened, longer-term business plans.

We're still pretty early in the.

In the integration planning and ultimately post close.

Detailing out of more hard and longer term business plans.

Speaker 4: So, I would put that out for context and color. The second thing I would say is, as part of our progression of planning, and highlighted in my comments,

I would I would put that out for context and color.

The second thing I would say is as part of our progression of planning and highlighted them.

My comments, we are increasingly encouraged I.

Speaker 4: we are increasingly encouraged, i.e. bullish, on the intelligent automation potential longer term. And as I commented, when you think about contribution to our operating partner constructs,

E bullish on the intelligent automation.

<unk> longer term.

And as I commented.

When you think about its contribution to our operating partner construct.

Speaker 4: three levers of value that we think that can positively impact. One is just pure operating efficiency, the automation component of that.

Three levers of value that we think that can positively impact one is just pure operating efficiency the automation component of that.

Speaker 4: to the decision-making quality from the automation as opposed to the human, we think that will result.

<unk>.

The decision, making quality from the automation as opposed to the human.

Think that will result in.

Speaker 4: in higher revenue yield and translate into KPIs.

A higher revenue yield and translate into Kpis and then third just cash conversion cycle time, and as you know as we convert cash faster that flows through in our base fees. So so what I would say where we're at right now.

Speaker 4: And then third, just cash conversion cycle time. And as you know, as we convert cash faster, that flows through in our base fees. So.

Speaker 4: So what I would say, where we're at right now, our confidence is increasing, albeit we're still not closed on this transaction and we're, you know, doing high level integration work as you would expect.

Our confidence is increasing.

We're still not closed on this transaction and were.

Doing a high level of integration work as you would expect.

Speaker 4: But I hope as we progress through the close.

But I hope as we progressed through the close and we get into the more detailed planning and the second half of this year going into 'twenty three we're able to provide some updates along the lines of your questions.

Speaker 4: and we get into the more detailed planning in the second half of this year, going into 2023, we're able to provide some updates along the lines of your questions. That's a thesis that I have. I think we can work on.

Thats.

That's the thesis that I have I think.

Work.

More quantitatively.

Speaker 4: on the potential returns from that opportunity set.

On the potential returns from that opportunity side.

Okay great.

Speaker 3: Okay, great. And can you go into more detail on the primary drivers that are expected to reduce the cycle time to onboard new customers and and how that should impact the

Can you go into more detail on the primary drivers.

Reduce the cycle time to onboard new customers and.

And how that should impact.

Speaker 3: of the operating partner model?

Financial profile.

The operating partner model, what should we think about year one.

Margins improving in acceleration in the ramp at steady state.

Yes, I think I think that.

Speaker 3: Yeah, I think I think that's that's the way I think about it. So the reason we're putting a high degree of priority on reducing deployment cycle times is twofold. One, speed to value for our customers. That's very important. And two, speed to value or speed to earnings on our deployment. So those two attributes.

That's the way I think about it. So the reason, we're putting a high degree of priority on reducing deployment cycle times is twofold, one speed to value for our customers that's very important.

And two speeds of value or speed to earnings on our deployment. So those two attribute.

Speaker 4: You'll make that a high priority from my standpoint, and that's why you hear us talking about it routinely on on our update calls here. A couple of things I would highlight. Well, let me start with where are we at right now in that journey as we said.

Makes that a high priority from my standpoint, and that's why you hear us talking about it routinely on our update call assume a couple of things I would highlight.

Well, let me start with where are we at right now in that journey as we said.

Speaker 4: our prior deployment cycle time was around 12 months. As we sit right now, we've been able to bring that in to 9 to 10 months. And there's some variability on that depending on the complexity of footprint. What I mean by that, James, is if we have a more distributed set of hospitals or a more distributed

Our prior deployment cycle time was around 12 months as.

As we sit right now we've been able to bring that in two nine to 10 months and Theres some variability on that depending on the complexity of footprint, what I mean by that James is if we have a more distributed set of hospitals or a more distributed.

Speaker 4: EMR construct that we're integrating into that's going to push us

EMR construct that we're integrating into that's going to push us a little bit higher if it's more concentrated we'll be closer.

Speaker 4: a little bit higher. If it's more concentrated, we'll be closer to the lower end of that range. So good progression over 2021 on compressing that.

So the lower end of that range. So good progression over 2021 on compressing that.

Speaker 4: Some things that contributed to that, one is we're centralizing our core data operations practice, hosting analytics and government of data integration.

Some things that contributed to the.

One is we're centralizing our core data operations processing analytics and governance.

Permanent of data integration the reason thats.

So important is the data ingestion into our technology is a key dependency.

Speaker 4: So important is the data ingestion into our technology is a key dependency in us achieving our steady state operating system.

US achieving our steady state operating system.

Speaker 4: Second area I would highlight that we've been working heavily on is centralizing our IT program management. You have to remember, as we transition these teams of revenue cycle operators, provisioning identity management, access management into our systems, but also back into the customer's host systems.

Second area I would highlight that we've been working heavily on essentially <unk>. Our program management you have to remember as.

As we transition these teams.

Revenue cycle operators provision.

Provisioning.

The entity management access management into our systems, but also back into the customer's host systems.

Speaker 4: is a key variable that we have to work through, and it has a high degree of complexity around that. To centralize that activity, we've deployed new software programs that automate a number of those tasks. So those are a couple things that I would highlight.

The key variable that we have to work through some it has a high degree of complexity around that with centralized that activity we deployed.

New software programs that automate a number of those to us. So those are a couple of things that I would highlight.

Speaker 4: in the in the category of compressing cycle time looking in currently I'm looking forward and I do think we should be in a position over the course of this year to update based on those progressions update.

In the in the category of compressing cycle time looking currently.

Currently I'm looking forward.

And I do think we should be in a position over the course of this year to update based on those progressions update the speed to value or speak to economics thresholds.

Speaker 4: speak to value or speak to economics thresholds.

Speaker 4: that we have previously communicated to kind of round out my answer to your question, James.

That we that we have previously communicated.

To kind of round out my answer to your question James.

Speaker 3: Yeah and just as a follow-up to that, in the updated revised outlook provided last quarter, I mean last month, long-term and medium-term, is this shortened cycle time embedded within that?

Yeah, and then just as a follow up to that.

The updated revised outlook provided last quarter I mean last month.

Long term and medium term is this shortened cycle time embedded within that.

No.

Alright, thank you.

Speaker 2: Our next question is from Gikram Kasababatla with Baird. Your line is open.

Our next question is from Vikram <unk> with Baird. Your line is open.

Speaker 5: Yeah thanks for taking the question. You talked about the plan here to expand onboarding capacity to seven billion dollars exiting this year and some of the incremental investment associated with that process. I'm wondering if you can quantify the magnitude of that investment in 2022 and the extent to which that's been contemplated in the guidance for this year.

Yes. Thanks for taking the question can you just talk about the plan here. It takes spanned onboarding capacity to $7 billion exiting this year and some of the incremental investment associated with that process. I'm wondering if you can quantify the magnitude of that investment in 2022, and the extent to which that's been contemplated in the guidance for this year.

Speaker 5: And then, just as a follow-up to that, you talked about some of the momentum in the end-to-end pipeline, but I'm curious, just given that it seems like it's going to take some time for you to expand capacity here, is it reasonable to think that you can sign additional NPR in 2022 beyond the one large $10 billion customer, or do you think you're going to have to wait until you get more visibility into the onboarding timeline and process associated with that contract? Thanks.

And then just as a follow up that you talked about some of the momentum in the end to end pipeline, but I'm curious just given that it seems like it's been it takes some time for you to expand some capacity here is it reasonable to think that you can sign additional NPR in 2022.

Beyond the one large $10 billion of customer or do you think youre going to have to wait until you get more visibility into the onboarding timeline, it and process associated with that contract.

Speaker 4: So let me take the first question in terms of how should we think about

Yes.

So let me take the first question in terms of how should we think about.

Speaker 4: the investment envelope associated with the increase from $5 billion of onboarding capacity to $7 billion.

The investment envelope associated with the increase from $5 billion of Onboarding capacity to $7 billion.

Speaker 4: When we increased capacity from $3 billion to $5 billion, you may remember in our Q3 of 20 call, we referenced that investment envelope to be in the $7 to $8 million range.

When we increased capacity from $3 billion to 5 billion.

You may remember in our Q3 of 'twenty call, we reference to that investment envelope to be in the $7 million to $8 million range.

Speaker 4: We are definitely getting scale leverage in this.

Definitely getting scale leverage and this the <unk>.

Speaker 4: The investment envelope to go from 5 to 7 will be less than it was to go from 3 to 5. For all the reasons I just commented on with James, and as you would expect, with size, we get a...

Investment envelope to go from five to seven will be less than it was to go from three to five for all the reasons I just commented on what changed.

As you would expect.

With size, we get efficiency.

Speaker 3: So as you think about that envelope directionally, the first thing I would say, it's a no-brainer for us. The return is almost immediate and on a longer-term basis.

As we think about that.

That envelope.

Directionally.

So first thing I would say, it's a no brainer for US the return is almost immediate and on a longer term basis.

Speaker 3: The returns are an order of magnitude greater than that investment. And as we think about our full year guidance range, we're early in the year. I am very, very encouraged. We can comment on Q1 in a second. I am very, very encouraged with core execution on our KPIs and on our cash conversion right now. And so Rachel and I will work over the next couple of months.

The returns are in order of magnitude greater than that.

That investment.

As we think about our full year guidance range. We're early in the year I am very very encouraged that we can comment on Q1 in a second I am very very encouraged with core execution.

On our Kpis and on our cash conversion right now and so Rachel and I will work over the next couple of months as we go into our Q1 call. We should be in a position to give additional color, but we're going to work hard to absorb that in our current guidance range. If we can't we'll update you on that.

Speaker 3: As we go into our Q1 call, we should be in a position to give additional color, but we're going to work hard to absorb that in our current guidance range. If we can't, we'll update you on that, but as I said, I am encouraged with the team's focus and execution here over the first couple months, and that's probably a bigger driver for us.

But as I said I am encouraged with the team's focus and execution here over the first couple of months.

And Thats, probably a bigger driver for us.

Speaker 3: than this nominal investment in raising capacity. Now to your second question, you always hear me talk about this, in the short term, we are.

Then then this nominal investment in raising capacity now to your second question.

You always hear me talk about this in the short term we are.

Speaker 3: able to flex that up. Okay, so we've demonstrated when we were running at three billion of nominal capacity, if demand presented itself, we're able to flex that for a period of time.

Able to flex that up okay. So.

<unk> demonstrated when we were running at 3 billion of nominal capacity if demand presented itself, we're able to flex that for a period of time.

Speaker 3: It's just we can't maintain that higher level over multiple years in a row. So as I look at this year, we are able to sign and responsibly on board additional NPR in addition to the contract that we're in the process of of executing and planning around. And so really this this is.

It's just we can't maintain that higher level over multiple years in a row.

So as I look at this year, we are able.

To sign and responsibly onboard additional MTR in addition to.

The.

The contracts that were in the process.

Of executing and planning around.

And so really this sum.

This is.

Speaker 3: us looking at the

US looking at.

<unk>.

Speaker 4: the demand the market presents itself this year, but also looking into next year and on a multi year basis. That's really what drives us

The demand in the market presents itself. This year, but also looking into next year and on a multiyear basis, that's really what drives us around our medium range capacity planning, we're always running with capacity in the short term and we intend to do that that's why we are.

Speaker 3: around our medium-range capacity planning. We're always running with capacity in the short term, and we intend to do that. That's why we're proactive on our modeling and planning around demand and supply. So yes, we are able to sign additional business and start deployment of that additional business in addition to the large contract we've talked about.

Proactive on on our modeling and planning around demand and supply. So yes, we are able to.

Signing additional business and start deployment of that additional business. In addition to.

The large contracts we've talked about.

Great. Thank you.

Our next question is from Sean Dodge with RBC capital markets. Your line is open.

Speaker 2: Our next question is from Sean Dodge with RBC Capital Markets. Your line is open.

Yeah. Thanks.

Speaker 5: Yeah, thanks. Good morning. Maybe on the technology initiative, Joe, you mentioned those expected to contribute $45 million of EBITDA savings to this year. How does that compare to what you exited this past year at? And is this net of, I think before you mentioned continuing to ramp spending on tech initiatives this year to further accelerate innovation, is that $45 million net of that planned increase in spending?

Good morning.

Maybe on the Technology initiative, Joe you mentioned that was expected to contribute $45 million of EBITDA savings for this year, how does that compare to what you exited this past year and is this net.

I think before you mentioned continuing to ramp spending on tech initiatives. This year to further accelerate innovation is that $45 million net of that planned increase in spending.

Yes.

Speaker 3: Yes, it's it's net of that planned increase in spending. And the way to look at the 45 million contribution, you know, we exited

Net of that.

The planned increase in spending.

And.

Yes.

So the way to look at the $45 million contribution.

We exited <unk>.

Speaker 3: 2020 with 20 million in contribution, and in 21, you know, we were ahead of, clearly ahead of that. So you can think about it somewhere between that bookend of the 2020 exit and the contribution in 2022 that we've talked about. And I think more importantly, when you look at this in the context of my comments on the call.

'twenty with $20 million in contribution in <unk> and in 'twenty one.

We were ahead of it.

Clearly ahead of that so you can think about it somewhere between that book and up to 2020 exit and the contribution in 2022 that we've talked about and I think more importantly.

When you look at this in the context of my comments on the call Sean and you think about every discussion we're having with providers.

Speaker 3: Sean, and you think about every discussion we're having with providers.

The number one or high priority a high priority focus of that discussion is really around supply and demand constraints on labor and so when you breakdown theres, obviously, the financial impact on this but I can't stress enough the valve technology type technology.

Speaker 3: The number one or a high priority focus of that discussion is really around supply and demand constraints on labor. And so when you break down, there's obviously the financial impact on this.

Speaker 4: But I can't stress enough the Val technology initiative.

Speaker 4: One is core automation, and the second is our entry platform, you know, in our current run-up. So, I think that's all I have to say.

One is core automation and the second is our entrance fee platform.

In our current run rates.

Speaker 4: We've automated roughly 1,800 equivalent FTEs.

Automated roughly 1800 equivalent ftes.

Speaker 4: and around 550 registration, whether that be local or central registration staffs off of our PX platforms.

And around 550.

Registration, whether that be local or central registration staffs off of our <unk> platforms.

Speaker 4: So when you think about that, that's what manifests itself in, purely from technology, we're probably closer to 15% lower labor.

So when you when you think about that that's what manifests itself in.

Purely from technology, we're probably closer to 15%.

Lower labor requirements than than the providers on a standalone basis and in today's environment that is a very very important attribute of our value prop and we're seeing that play through in commercial discussions.

Speaker 4: than the providers on a standalone basis. And in today's environment, that is a very, very important attribute of our value prop, and we're seeing that play through in commercial discussions.

Okay and then.

Speaker 5: On QuadMed, when you announced that deal, you talked, you quantified the expected cost synergies, and in your prepared remarks, you talked about some of the revenue opportunities that come along with that, too.

On.

I'm, Craig when you announced the deal you can you quantify the expected cost synergies and then in your prepared remarks, you talked about some some of the revenue opportunities that come along with that too is there any I don't know.

Speaker 5: I don't know, quantification you can give us of what the deployment of CloudMed could mean just for your current client alone. So what I'm thinking about is how big of a lift could there be to net operating fees as you deploy this across your end-to-end base?

Quantification you can give us of what the deployment of <unk> could mean just for your current clients alone. So what I'm thinking about it is how big of a lift could there be to net operating piece and you deploy this across Europe and baked in.

Speaker 5: How much can this help kind of ratchet up your performance or incentive fees?

How much can that help kind of ratchet up.

Your performance your incentive fees.

Speaker 3: Um, yeah, there is a, um, um, there is a, a, um, uh, a very, uh, on two folds, but there's on, on, on the scope of work we have contracted in our end to end arrangements, um, there is a quantifiable lift, um, that we will be in a position to talk about. Um, and.

Yes.

There is a.

Very.

On two folds.

On the scope of work we have contracted in our end to end arrangements.

There is a quantifiable lift that we will be in a position.

And to talk about.

The reason I.

Speaker 4: I'm hesitant right now to go into specific details on that, is just with an appreciation for, we haven't closed this transaction yet, and there's certain dependencies we have to work at a more.

Im hesitant right now to go into specific details on that is just with an appreciation for wheat.

We havent closed this transaction yet.

And there are certain dependencies, we have to.

We are.

At a more deeper level with the cloud and the team on triangulating that against our contracts, but but headline there will be an impact on lift in our current contracted scope of business now in addition to that.

Speaker 4: deeper level with the CloudMed team on triangulating that against our contracts. But the headline, there will be an impact on Lyft in our current contracted scope of business. Now, in addition to that.

Speaker 4: CloudMed has solutions that are incremental in scope and of high value to our current end-to-end customers.

Cloud <unk> has solutions that are incremental in scope and of high value to our current <unk> customers.

Speaker 4: And so that's another component. It will not show up in the KPI fees or incentive fees. It will show up in net new growth into those. And we've already had a fair amount of inbound interest from customers to explore those opportunities for additional capabilities. And those are in the areas.

So thats another component it will not show up in the PPI fees or incentive.

<unk> fees it will show up in net new growth into those and we.

<unk> already had.

A fair amount of.

Inbound interest from customers to explore for.

Those.

Those opportunities for additional capabilities.

Those are those are in the areas.

Speaker 4: that I commented in my remarks. 340B technologies and solutions and some of the others.

Does that I commented in my remarks.

Dollars 40 B technologies.

And solutions.

And some of the others.

Okay.

I would highlight.

Okay, great. Thanks again.

Thanks, Sean.

Speaker 2: The next question is from Stephanie Davis with SBB. Your line is open.

The next question is from Stephanie Davis with <unk>.

Your line is open.

Hi, guys. Thank you for taking my questions.

Speaker 6: Hey, guys, thank you for taking my questions. Management mindshare, the $10 billion wins ramp will take. And since this one was at part of the end of year pipeline for 2021, is there still an opportunity to ramp at a similar pace as you have in prior years for other new wins? Or is this going to be a bit more balanced?

Mine's share the $10 billion linked to ramp will take and since it's always a part of the end of your pipeline for 2020 wine is there still opportunity to ramp at a similar pace as you have in prior years there are there any loans.

So it's going to be.

Balanced.

Speaker 4: Yeah, so management mindshare, what I would say, Stephanie, is the management mindshare has been very, very intense.

Yes, so management mind share.

What I would say Stephanie is the.

The management mind share has been very very intense.

Speaker 4: over Q4 and Q1, or Q3 and Q4 and into January here, and that's evidenced, I think, a little bit by Rachel's comments on our Q1 guide. So we've got $2 to $3 million of pure external advisor fees that have been working with.

Over.

Q4, and Q1, or Q4, Q3, and Q4 and into January here, and Thats, evidenced I think a little bit by Rachel's comments on our on our Q1 guide. So we've got $2 million to $3 million of pure external advisor fees that have been working with us on.

Speaker 4: on this contract negotiation and ultimately to get us in a position where we are today. That's just a data point to give you a sense of.

On this contract.

Negotiation and ultimately to get us in a position where we are today that's just.

Data point to give you a sense of.

Speaker 4: the complexity and it's logical that this is a complex agreement given its size and magnitude. So I would highlight that as

The complexity.

And it's logical that this is a complex agreement given its size and magnitude.

So so I would highlight that as.

Speaker 4: an area where management...

An area, where we're where management.

Speaker 4: has had a fairly bad run. As we look to deployment...

As some has had a fairly thorough as we look to deployment.

Speaker 4: One of the things I would say is, I don't want to call it routine, but we're very prescriptive on that. And so I wouldn't highlight that necessarily as an outlier in terms of demand. I would more highlight the complexity of contracting business such as this.

One of the things I would say this.

Don't want to call it routine, but we're very prescriptive on that and so so so I wouldn't highlight that necessarily as an outlier in terms of demand.

I would more highlight.

The complexity of contracting business such as this.

Speaker 4: Now, to the second part of your question, we have been intentional, so I'm very encouraged where we're landing. We should be able to, and I think the market

Now to tier two or the second part of your question.

Have been intentional so I'm very encouraged where we're landing.

We should be able to and I think the market.

Speaker 4: potentially presents this opportunity to us to bring on and contract independent of this outlier customer win or customer engagement to contract in line with what we've historically guided to.

Potentially presents this opportunity to us.

To bring on in contract independent of this outlier.

Customer win or customer engagement.

To contract in line with what we've historically guided to that.

Speaker 4: That will be a stretch, no doubt. But if, you know, the market or the pipeline activity that we see converts, we are in a position to serve that over the course of this year. And that's why I want to exit this year with the seven billion, because I can stretch the teams over the next 12 months.

That will be a stretch no doubt.

If.

The market or the pipeline activity that we see converts.

We're in a position to serve that over the course of this year and Thats why I wanted to exit this year with the 7 billion because I can stretch the teams over the next 12 months.

Speaker 4: It's very hard to responsibly to stretch the teams over eight quarters at that elevated level of activity, but I feel like

It's very hard to responsibly dispatch the teams over eight quarters at that elevated level of activity, but I feel like.

Speaker 4: We're in a good position and we've got a good plan on how we're thinking about it.

We're in a.

Good position and we've got a good plan on how we're thinking about this.

Understood. That's very helpful. On the guidance, we have touched a bit on that.

Speaker 6: Understood. That's very helpful. On the guidance point, we have touched a bit on the the 1Q guidance is a sequential step down in revenues as well. Are there any puts and takes to call out driving up?

The <unk> guidance, because I ask the question of accounting value as well are there any puts and takes to call out.

<unk>.

Speaker 4: No, I think, I think from a revenue standpoint, the only thing we've got is the normal variability and

I think I think from a revenue standpoint.

The only thing we've got is that normal variability in it.

Speaker 4: Obicron and provider volumes, nothing, nothing there that is necessarily unexpected or.

Omicron in provider volumes nothing nothing there that is necessarily.

<unk>.

Unexpected or.

Speaker 4: or a surprise for us that.

Or.

A surprise for us.

Speaker 4: That gives us, it's in line with our plans. The main things I would highlight, and Rachel commented to these on Q1, is just higher health care costs on a quarter-over-quarter basis.

That gives us.

In line with our plans, but the main the main things I would highlight and Rachel comments of these to these on on Q1 is just higher health care costs on a quarter over quarter basis.

Speaker 4: that we've known it's in our plans incorporated for, and then $2 to $3 million of incremental spend on advisors to work through this large contract. That's also planned for. That's not repetitive in nature. So those are the two things I would highlight. When you look at beneath that, we feel really encouraged on core earnings and core execution. The late impact of Omcrom utilization. Thank you guys. Appreciate it.

Not that we've known it's in our plans incorporated for.

$2 million to $3 million of incremental spend on advisors to work through this large contract. That's also planned for that's not repetitive in nature. So those are the two key things I would highlight when you look at the need that we feel really encouraged on core earnings and core X.

The rate impact of utilization.

Appreciate it thank you.

Speaker 2: The next question is from Michael Turney with Bank of America, your line is open.

The next question is from Michael Cherny with Bank of America. Your line is open.

Okay.

Speaker 5: Thanks for taking the question. Maybe, if I can follow up on that line of questioning, is there any way for us to quantify where you see the Omicron impact for 1Q and along those lines, Rachel, I know you had said you expect return to normalized utilization over the course of the year. When essentially do you hit that run rate and is there anything built in on any potential catch-up in utilization, which I know has been a point of contention given some of the delays on elective procedures and other areas?

Thanks for taking the question, maybe if I can.

Just to follow up on that line of questioning is there any way for us to quantify where you see the omicron impact for <unk> and along those lines ratio. I know you had said you expect returns to normalized utilization over the course of the year.

When essentially do you hit that run rate and is there anything built in.

The potential catch up in utilization, which I know, it's been a point of contention given some of the delays on electric procedures in other areas.

Yes.

Speaker 3: Yeah, the Omicron is really not, it's really geographic for us, that's how I would highlight it, I think, and it's something, because of the nature of our, Michael, the nature of our base fee lags, we have a lot of visibility on this, so, you know, we're

Micron is really not.

Really the geographic for us that's that's how I would highlighted I think.

And it's something because of the nature of our Michael the nature of our.

<unk>.

Base fee lags, we have a lot of visibility on this so so.

We're.

Speaker 3: You know, we're basically working three to four months in arrears on on on that lag and the visibility we have. So we're generally encouraged.

So we're basically working three to four months in arrears on that lag and the visibility we have so.

We're generally.

Encouraged with.

Speaker 3: with what we're seeing right now, and it's right in line with kind of how we expected volumes to play through. One thing I would highlight for the positive is we are seeing the ED care setting come up nicely. That's the one, if you look at this from a care setting basis, that's the one area that's lagged and that is

With what we're seeing right now and it's right in line.

With.

With kind of how we how we expected volumes to play through one thing I would highlight the positive is we are seeing the <unk> setting.

Come up nicely and Thats. The one if you look at this from a cure.

Care setting basis, that's the one area, that's lagged and that is.

Speaker 3: um, progressing nicely, and it's good to see that, uh, that pick up and whatnot. But that's really, that's really

<unk>.

Progressing nicely and it's good to see that.

That pickup.

And whatnot, but that's really that's really kind of the.

Speaker 3: the how we see Omicron right now in some of the geographies, um, that's that's the driver on

How we see omicron right now and some of the geographies.

<unk>.

That's the driver on on some of those base fee revenues.

Speaker 5: Got it. And if I can, with regards to the pipeline, you talked about the opportunity for further wins. I assume there'll be a number of competitive RFPs. Clearly, you can't go out and pitch the cloud-met capabilities because the deal's not closed. But how does that factor in, given the component that you can essentially go out and promise, or at least signal the fact that you're going to have a more robust...

Got it and if I can with regards to the <unk>.

Pipeline, you talked about the opportunity for further wins I assume there'll be a number of competitive Rfps clearly you can't go out and pitch the cloud capabilities, because the deal's not closed, but how does that factor in given the component that you can essentially go out.

Promise or at least signaled the fact that youre going to have a more robust.

Speaker 5: tech platform that's going to be bolting on, and does that do anything in terms of delaying potential decisions on the part of customers until they see exactly how it works together?

Tech platform, that's going to be bolting on and does that do anything in terms of delaying potential decisions on the part of customers until we see exactly how it works together.

Speaker 3: No, I would say it potentially, you know, it's in every discussion I've had with customers, that pending transaction has been viewed very, very favorably. It's been viewed favorably at the C-suite level, and it's also been viewed favorably at the revenue cycle leader level.

No I would say potentially.

<unk>.

Yes.

Every discussion I've had with customers.

That pending transaction has been viewed very very favorably it's been viewed favorably at the C suite level and it's also been viewed favorably at the at the revenue cycle leader level.

Speaker 3: Some of the commentary that we're hearing is, one, CloudMed is a known entity, and as a testament to the CloudMed team, highly, highly regarded by the providers for what they do. But we're hearing that across all of the commercial discussions that we're having.

Some of the commentary that we're hearing is one cloud met is a known entity.

And as a testament to the cloud and that team.

Highly highly regarded by the providers for what they do but we're hearing that across all of the commercial discussions that we're having the second thing is as customers think about our value prop.

Speaker 3: The second thing is, as customers think about our value prop, as part of that transaction,

<unk>.

As part of that transaction.

Speaker 3: They have a high degree of confidence that they're going to get a scaled, efficient, automated operation that helps them address some of the challenges that we've talked

They have a high degree of confidence that they're going to get scale.

Scaled efficient automated operation that helps them address some of the challenges that we've talked about and they are going to get the best revenue intelligence technology platform to ensure they maximize their reimbursement.

Speaker 3: and they're going to get the best revenue intelligence technology platform to ensure they maximize their reimbursement. And the combination of those two things

The combination of those two things in.

Speaker 3: In the eyes of the providers, what we're hearing is very powerful, so that, you know, from my standpoint, if anything...

In the eyes of the providers, what we're hearing is very powerful so.

From my standpoint.

If anything.

Speaker 3: it helps in that commercial discussion. I have not seen any feedback where it may delay or put a commercial discussion in a wait-and-see mode.

It helps in a commercial discussion.

I have not seen any.

Any feedback where it may.

<unk> or put a commercial discussion in a wait and see mode.

Got it thank you.

Thanks, Joe that you clearly.

Speaker 3: like Joe that you can clearly add some additional capacity but

And some additional capacity but.

Leading customer on at some point this year.

Speaker 3: customer on at some point this year you know we're just trying to get a sense for you know

Just trying to get a sense for.

No.

Speaker 3: What's your capacity is after that? I mean, I think you said that your overall pipeline is up 30% from the fiscal third quarter, which is great. I was wondering if you could maybe comment on the magnitude of that pipeline and maybe how big the late stage deals are in particular, and when you think you can start to capitalize on that given the constraints you have.

What's your capacity is after that I mean, I think you said that you are.

Overall pipeline is up 30% from the fiscal third quarter, which is great and I was wondering if you could maybe comment on the magnitude of that pipeline and maybe how big the late stage deals or in particular and when do you think you can start to capitalize on that given given the constraints you have.

Yes.

Speaker 4: Yeah, I don't want to get into too much detail. So I'm going to keep it just kind of

I don't want to get into too much detail, so I'm going to keep it just kind of.

Speaker 4: kind of out of, you know, out of respect for where we are. But, but just think about

No.

Out of respect for where we are but.

Just thinking about.

Speaker 4: That contract will be onboarded over a phased approach over a couple of years.

That contract will be on boarded over.

Sure.

A phased approach over a couple of years.

Speaker 4: And and I think that's a great thing because what that does is it allows us to

Ed.

That's a great thing because what that does is it allows us to.

Speaker 4: have capacity in our current year and in next year to support the market opportunity. And so my hope is that we can, you know, if we think about

Have capacity in.

In our current year and in next year.

To support the market opportunity.

And so.

My hope is that we can.

If we think about.

Okay.

Speaker 4: a $3 to $5 billion range. Near term, it'll be closer to the $3, but as we progress over the course of the year and add this capacity and kind of window of additional

A $3 billion to $5 billion range.

Near term it'll be closer to the three but as we progressed over the course of the year and add this capacity.

Window of additional.

Speaker 4: of capability and capacity to support new NPR, and so that's the way.

Okay.

Sure.

Capability and capacity to support new NPR and so that's that's the way.

Speaker 4: He's this large outlier contract and that paging combined with.

Is this large outlier contract.

And that phasing combined with.

Speaker 4: of the rays in our from five to seven should put us in.

The raise in our from five to seven should put us.

Speaker 4: in a position over the course of this year and next year, if you think about that two-year planning horizon, to hopefully be able to support additional business in that range.

It's been our position over the course of this year and next year. If you think about that two year planning horizon, so hopefully be able to support.

Sure.

Kind of kind of additional business in that in that range.

<unk>.

Speaker 4: Size of pipeline I'm not going to get into, but what I would say is activity and progression of activity from my standpoint looking out over the course of this year would support that incremental contracting activity.

Size of the pipeline I'm not going to get into but what I would say is activity in progression of activity from my standpoint looking out over the course of this year would support.

That incremental contracting activity.

Speaker 3: That's really helpful. I appreciate that. Maybe if I could just follow up one question on the full initiative adding $45 million in EBITDA this year. But if I look at your overall growth in EBITDA in fiscal 22 over 21, that's almost fully explained by this tech initiative.

That's really helpful. I appreciate that David if I could just follow up one one question on the portion of adding $45 million and EBITDA. This year, but if I look at your overall growth in EBITDA in fiscal 'twenty two over 'twenty, one that's almost fully explained by.

This tech initiative and I was kind of.

So I'm wondering what that implies about.

Speaker 3: wondering what that implies about, you know, the organic growth of the base operations, sort of taking into consideration your growth in NPR, you know, customer volumes hopefully continuing to improve through the end of the pandemic here, the natural maturation of contracts, and I think what we're all trying to understand is the arguably the lower than expected Q1 guide, maybe there's some incremental expenses in there, hard for us to know how much of it is one-time versus.

The organic growth of the base operation sort of taking into consideration your growth in NPR.

Consumer volumes, hopefully continuing to prove improve through the end of the pandemic here the natural maturation of contracts and I think what we're all trying to understand is the arguably the lower than expected Q1 guide maybe there's some incremental expenses in there hard for us to know how much of it is one time versus rate.

Recurring and why you're comfortable with the ramp and how we think about that organic growth underneath underneath all the details that you've given.

Speaker 3: recurring and why you're comfortable with the ramp and how we think about that organic growth underneath all the details that you've given.

Yes, I mean, if you look at our year over year Guy.

Speaker 4: Yeah, I mean, if you look at our year over year guidance, I mean, a couple of things, one in one cue.

Guidance.

Things one in <unk> from my standpoint, that's all kind of onetime in nature and Capsulate. It in those two areas that we've commented on a couple of times here.

Speaker 4: From my standpoint, that's all kind of one time in nature and encapsulated in those two areas that we've commented on a couple of times here.

Speaker 4: The second thing is, when you look at year-over-year, what you have to understand is, we have, in our business...

The second thing is when you look at year over year, while you have to understand is.

We have.

In our business.

Speaker 4: the amount of stage deployment phases. So there is a significant amount of investment.

The amount of stage deployment phases. So there is a significant amount of investment that will be occurring and is encapsulated in our guidance as part of that the second thing is.

Speaker 4: that will be occurring and is encapsulated in our guidance as part of that.

Speaker 4: The second thing is you have to remember inside of our guidance, and we've talked about this before, we have a on the Ascension renewal on a year over year basis.

You have to remember inside of our guidance and we've talked about this before.

Have a.

On the Ascension renewal on a year over year basis.

Speaker 4: in this 2022 year. It's a transition year, meaning as part of that renewal, there's some price compression, but that price compression is more than offset.

In this 2022 year.

It's a transition year meeting as part of that renewal, there's some price compression, but that price compression is more than offset.

Speaker 4: with contractual agreements that Ascension gave for us. So that goes into the equation as well. And then

Yes.

Sure.

Contractual agreements that ascension game for us so that goes into the equation as well and then.

Speaker 4: And then you have the maturation of contracts and impact of automation. So it's really a number of those holistic levers that are playing into.

And then you have the maturation of contracts and impact of automation. So it's really a.

A number of those holistic levers that are.

Playing into.

<unk>.

Speaker 4: playing into that. And the 45 million, just to kind of give a sense of that, that 45 million on automation is cumulative since we started reporting that in 19. It's not incremental to last year in year. So you have to, you know, when you look at all that, that's the, you know, that's the qualitative waterfall, if you will.

Playing into that in the 45 million.

Just to kind of give a sense of that that $45 million on automation is cumulative since we started reporting that 19, it's not incremental to last year in year. So you have a when you look at all of that.

That's the qualitative waterfall if you will.

Speaker 3: Super helpful. Thanks a lot, Joe. Again, as a reminder, please press star 1 to ask a question. The next question is from Donald Hooker with KeyBank Capital Markets. Your line is open.

Super helpful. Thanks, a lot Joe.

As a reminder, please press star one to ask a question. The next question is from Donald Hooker with Keybanc capital markets. Your line is open.

Great.

Speaker 7: Morning. What maybe one question for you is, you know, we were talking a lot here this morning about capacity, which is a good problem to have. But, you know, it sounds like your pipeline strong. You have some big deals coming on. I mean, is there any reason why 7 billion is your what you're shooting?

Good morning, Joe.

One question for you is we were talking a lot here this morning about capacity, which is.

Good problem to have but it sounds like your pipeline strong you had some big deals coming on I mean is there any reason why 7 billion as your what you're shooting.

Speaker 7: and why not 10 or 15 or it sounds like it doesn't cost a lot of cash or money expenses to sort of ramp up up that capacity can you just maybe

Why not 10 or 15 or it sounds like it doesn't cost a lot of cash or money expenses to sort of ramp up that capacity can you just maybe.

Speaker 7: Give us some texture around some of the other limiting factors in terms of capacity. Why can't you rate that more?

Give us some texture around some of the other limiting factors in terms of capacity why can't you raise that mark.

Speaker 4: We could raise it more. I think what we want to, you know, Don, is have a, I'll call it a prudent posture or a disciplined posture on kind of capacity and titrating that against our pipeline. So when we look at our pipeline and we look at the growth, what really drives Rachel and I's kind of decision.

We could raise it more I think what some what we want.

Don.

I'll call it a prudent posture or.

Disciplined posture on on kind of kind of capacity and titrated that against our pipeline. So when we look at our pipeline and we look at the growth what really drives Rachel and eyes.

Kind of decision to say, yes, we will release these funds to the teams to start to increase capacity is really that late stage activity and making sure we see that because.

Speaker 4: to say, yes, we will release these funds to the teams to start to increase capacity is really that late-stage activity and making sure we see that because, you know, the nature of our business, given the complexity and the complicated decision-making framework around these agreements.

The nature of our business given.

The complexity.

And then in a complicated decision making framework around these agreements.

Speaker 4: We just think it's the right approach. I mean, I could look at the total pipeline and think about.

We just think it's the right approach.

Look at the total pipeline.

And in <unk>.

Think about.

Speaker 4: theoretical convertibility, and I could get to a higher number, no doubt about it, Dante, to give you the bookend of that question. What we really try to look at is...

Theoretical convert ability and I could get to a higher number no doubt about it Don.

To give you the book under that question, but we really tried to look at us.

Speaker 4: striking a good balance when we're going to spend money on adding cost to the organization, we do that against the backdrop of a high degree of confidence. And so we really look to the later stage activities and use that as the input to make a decision over the near term. And so, you know, if...

Striking a good balance when we're going to spend money on adding cost to the organization, we do that against the backdrop of a high degree of confidence and so we really look to the later stage.

Activities in and use that as the as the input to make a decision over the.

Over the near term and so.

And if I.

Speaker 4: You know, I don't I don't think there's a lot of doubt. There's not a lot of downside in my perspective on on this investment in capacity. It could be that we have to raise it again at the end of the year. But but that'll be a good problem.

I don't.

I don't think Theres, a lot of doubt theres not a lot of downside in mind.

Perspective on this investment in capacity it could be.

We have to raise it again at the end of the year, but.

But that'll be a good problems out.

Speaker 7: Uh, indeed, uh, and maybe a different, different question, uh, moving, I guess, CloudNet at some point in time.

Indeed.

Maybe a different different question, excluding I guess cloud and then at some point in time.

I'm here when that closes.

Speaker 7: I'm here and that closes. Is there any signs or hope that some of these modular deals could evolve into larger co manager operating partnerships? I think you caught out like a dentist and a few few others in recent quarters. That sound like some big potential.

Is there any signs our hope is that some of these modular deals could evolve into larger co manage your operating partnerships I think you called out like a dentist in a few few others in recent quarters it sounded like some big potential <unk>.

Speaker 7: relationships that could evolve into bigger dollar revenue opportunities. Can you maybe talk about how that's going?

Relationships that could evolve in the bigger dollar revenue opportunity can you can you maybe talk about how that's going.

Speaker 4: Yeah, I think there is that there is that potential for sure. The one thing I would I would highlight what we want to what we want to be in a position to do to the providers is meet them where they are in their journey. And what I mean by that is there's some there are some provider organizations that are ready.

Yes, I think there is that there is that potential.

For sure.

The one thing I would highlight.

What we want to we want to be in a position to do.

Providers as meet them, where they are in their journey and what I mean by that is there is there are some provider organizations that are ready.

Speaker 4: to engage in an end-to-end strategic partnership over a long term and I'm you know, we have a great offering in that regard but there is a is a is a segment of this market that will want to

To engage in an end to end strategic partnership over a long term.

We have a great offering.

In that regard.

But there is a.

As a as a segment of this market that will want to.

Engage.

Speaker 4: engage with with skilled companies such as ours and they will want to start with a modular approach but they want to know they've got a partner that can evolve over time if they determine and I stress that they determine that the right progression for them is into a more strategic partnership

With with scaled.

Companies such as ours.

And they will want to start with a modular approach, but they want to know they've got a partner that can evolve over time, if they determine and I stress if they determine that the right progression for them is into a more strategic partnership and I really am excited about our positioning we are uniquely positioned.

Speaker 4: And I really am excited about our positioning. We are uniquely positioned in that regard vis-a-vis the competition.

And in that regard vis vis the competition, meaning with the pending acquisition of cloud that.

Speaker 4: Meaning with the pending acquisition of cloud med, we have a world class modular channel and a comprehensive set of solutions.

We have a world class modular channel and a comprehensive set of solutions.

Speaker 4: Um, but that partner when they engage or that provider when they engage on that dimension also has the additional benefit that at any point in time they can engage us in a discussion on a broader strategic partnership. And I think that'll play well and that should.

But that partner when they engage with that provider when they engage on that dimension also has the additional benefit at any point in time, they can engage us in a discussion on our broader strategic partnership I think that will play well.

Don that should.

Speaker 4: end up in conversions over time based on us being a good partner and serving them.

<unk>.

And often in conversions over time based on based on us being a good partner in serving them.

Speaker 4: against what they need in terms of an engagement model in the near term.

Against what they need in terms of an engagement model in the near term.

Okay. Thanks for your thoughts I appreciate it.

Thanks, Doug.

We have no further questions at this time I will turn the call over to Joe Flanagan for any closing remarks.

Speaker 2: We have no further questions at this time. I'll turn the call over to Joe Flanagan for any closing remarks.

Speaker 4: First, Chris, thanks for all your help moderating the call, and thank you, everybody, for joining us today. I'd like to close just by thanking the entire R01 team for their continued focus on delivering for our customers and strong financial performance. We look forward to executing on the growth opportunity ahead and updating all of you accordingly on future calls. So thank you very much.

First Chris Thanks for all your help moderating the call and thank you everybody for joining us today I'd like to close by thanking the entire <unk> team for their continued focus on delivering for our customers and strong financial performance.

We look forward to executing on the growth opportunity ahead, and updating all of you accordingly on future calls so thank you very much.

Speaker 2: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

Sure.

Okay.

Yes.

Q4 2021 R1 RCM Inc Earnings Call

Request a DemoDemo

RCM

R1 RCM

Earnings