Q1 2024 R1 RCM Inc Earnings Call
Please wait the conference will begin shortly.
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Operator: Thank you for standing by, and welcome to the R1 RCM first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: Thank you for standing by and welcome to the all one off in first quarter 2020 full earnings conference calls.
Speaker Change: Lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. A reminder that this conference is also being recorded. I would now like to turn the conference over to Evan Smith, Senior Vice President, Investor Relations. Please go ahead.
Speaker Change: After the Speakers' remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press the star one again.
Speaker Change: A reminder, that this conference is also being recorded.
Speaker Change: I would now like to turn the conference over to Evan Smith Senior Vice President Investor Relations. Please go ahead.
Evan Smith: Thank you, Operator, and thank you, everyone, for joining us today. Certain statements made during this call may be considered forward-looking statements pursuant to the safe harbor provisions of the Private Securities Relegation Reform Act of 1995. In particular, any statements about our future growth plans and performance, including statements about our review of strategic alternatives, our strategic and cost-savings initiatives, our liquidity position, our growth opportunities, our future financial performance, and the impacts of the changed healthcare cyberattack and a customer bankruptcy on our business are forward-looking statements. These statements are often identified by the use of words such as anticipate, believe, estimate, intend, design, may, plan, project, would, and similar expressions or variations.
Evan Smith: Thank you operator, and thank you everyone for joining us today certain statements made during this call maybe considered forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 in particular any statements about our future growth plans and performance, including statements about our review of strategic alternatives.
Evan Smith: Investors are cautioned not to place undue reliance on these forward-looking statements. All forward-looking statements made on today's call involve risk and certain... While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so, except to the extent required by applicable law. Our actual results and outcomes may differ materially from those included in these forward-looking statements as a result of various factors including, but not limited to, the impact that the review of strategic alternatives could have on our business or our stock price, the outcome and timing of the review of strategic alternatives, economic downturns and market conditions beyond our control, including high inflation, the quality of global financial markets, our ability to timely and successfully achieve the anticipated benefits and potential synergies of the acquisitions of CloudMed and Aclara, our ability to retain existing customers or acquire new customers, the development of markets for a revenue cycle management offering, variability in the lead time of prospective customers, the later unsuccessful implementation of our technologies, including AI, competition within the market, and factors discussed under the heading risk factors in our most recent annual report on foreign-pranked, Certain results that will be referenced on this call may be rounded to the nearest whole number. We will also be referencing non-GAP metrics on this call. For reconciliation of non-GAP metrics to the most closely comparable GAP metrics, please refer to our press release. Now let me turn the call over to Lee.
Lee Rivas: Thank you, Evan, and good morning, everyone. Our first quarter 2024 revenue results reflect positive trends in the underlying business, as we continue to demonstrate our ability to drive value for our customers. The quarter includes a CLARA contribution from the closing date in January.
Lee Rivas: Investments in Onboard Providence and continued investments in our multi-year technology transformation. We believe these technology investments will enhance our platform and drive innovation with new AI and advanced automation tools and solutions in development. We delivered approximately $604 million in revenue and $152 million in adjusted EBITDA for the first quarter.
Lee Rivas: Before I provide more detail on our progress in the corner, I want to reinforce my commitment and belief in R1's vision and strategy to deliver long-term sustainable growth and performance for our shareholders. Our vision is to be the automation platform of choice for the provider industry. We are distinctly positioned to solve a highly complex problem across the provider ecosystem, with our combination of technology, global scale, and industry expertise to deliver revenue yields and cost reductions to the largest health systems and physician groups in the country. Today, we operate at the largest scale of any technology and services provider in our state, with over 90 of the top 100 health systems as our customers.
Evan Smith: Our strategic and cost savings initiatives, our liquidity position our growth opportunities, our future financial performance and the impacts of the change healthcare cyber attack and a customer bankruptcy on your business are forward looking statements. These statements are often identified by the use of words, such as anticipate believe estimate.
Lee Rivas: Our addressable market is large, and over 100 billion and growing, and we are well positioned to win more than our share of this growing market over time. Technology is the foundation of our strategy. To deliver our value proposition to customers and our place in the industry, we apply automation, AI, and large-scale analytics to the revenue cycle. We have visibility into large sets of structured and unstructured data across over 500 provider customers. This is where the scale of our platform matters most. For example, we apply machine learning models to automate clinical appeals and reduce payment timelines.
Lee Rivas: We see clinical care episodes across all payers, all care settings, and all reimbursement model types, enabling us to apply models to validate certain charges and reimbursement levels for underpaid claims. These examples scratch the surface on the potential for the application of automation and AI when we are embedded in our customer's workflow. Global service capabilities are also a core to our strategy. We are unique in that we operate our own facilities with our own people.
Lee Rivas: Our own processes and IP. The combination of technology plus global scale is what allows us to deliver best-in-class unit economics and increased revenue yield to our customers. Now, let me shift to execution on our priorities and our near-term outlook. We will enter 2024 in a strong position to support long-term growth and improve performance. We have executed for our end-to-end clients and achieved solid bookings for our modular solution. We closed the ECLERA acquisition and started our 10-year strategic relationship with our largest new enterprise customer.
Lee Rivas: We believe the continued strength of our commercial engine, Delivering Results for Existing Clients and Ongoing Investments in AI-Driven Technology and Solutions, will further support our group throughout 2024 and the coming year. Now let me turn to the Change Healthcare cyber attack, which had an impact across the healthcare industry. Given the central role R1 plays in the revenue cycle for our large, diversified customer base, it has impacted our near-term operating performance as well.
Evan Smith: And design May plan project would and similar expressions or variations investors are cautioned not to place undue reliance on these forward looking statements. All forward looking statements made on today's call involve risks.
Evan Smith: Uncertainties, while we may elect to update these forward looking statements at some point in the future. We have no current intention of doing so except to the extent required by applicable law.
Evan Smith: Actual results and outcomes may differ materially from those included in these forward looking statements as a result of various factors, including but not limited to the impact that the review of strategic alternatives could have on our business or our stock price the outcome and timing of the review of strategic alternatives economic downturns and market conditions beyond our control.
Evan Smith: <unk> high inflation, the quality of global financial markets, our ability to timely and successfully achieve the anticipated benefits and potential synergies of the acquisitions of cloud minimum Clara our ability to retain existing customers or acquire new customers. The development of markets for our revenue cycle management offering variability in the lead time of perspective.
Customers. The later on successful implementation of our technologies, including AI competition within the market and factors discussed under the heading risk factors in our most recent annual report on Form 10-K.
Lee: So as a result that will be referenced on this call may be rounded to the nearest whole number we will also be referencing non-GAAP metrics on this call a reconciliation of non-GAAP metrics to the most closely comparable GAAP metrics. Please refer to our press release now let me turn the call over to Lee Lee.
Lee Rivas: Thank you Ed and good morning, everyone.
Lee: Our first quarter 2024 revenue results reflect positive trends in the underlying business as.
Lee: As we continue to demonstrate our ability to drive value for our customers.
Lee: The quarter includes a clearer contributions from the closing date in January.
Lee: Investments to onboard Providence.
Lee: And continued investment in our multiyear technology transformation.
Lee: We believe these technology investments will enhance our platform and.
Lee: And drive innovation with new AI, and advanced automation tools and solutions and development.
Lee: We delivered approximately $604 million in revenue and $152 million and adjusted EBITDA for the first quarter.
Lee: Before I provide more detail on our progress in the quarter I want to reinforce my commitment and belief in <unk> vision and strategy to deliver long term sustainable growth and performance to our shareholders.
Lee: Our vision is to be the automation platform of choice for the provider industry.
Lee: We are distinctly positioned installed a highly complex problem across the provider ecosystem.
Lee: With our combination of technology.
Lee: <unk> scale and industry expertise to deliver revenue yield and cost reductions to the largest health systems and physician groups in the country.
Lee: Today, we operate with the most scale of any technology and services provider in our states with over 90 of the top 100 health systems as our customers.
Lee: Our addressable market is large at over 100 billion and growing.
Lee: And we are well positioned to win more than our share of this growing market over time.
Lee: Technology is the foundation of our strategy.
Lee: Our value proposition to customers and our place in the industry.
We apply automation AI and large scale analytics to the revenue cycle.
Lee: We have visibility to large sets of structured and unstructured data.
Lee: Crossover 500 provider customers.
Lee: This is where the scale of our platform matters most.
Lee: For example, we apply machine learning models to automate clinical appeal and reduced payment timelines.
Lee: We see critical care episodes across all payers, all care settings, and all reimbursement model types.
Lee: Enabling us to apply models to validate certain charges and reimbursement levels for underpaid claims.
Lee: These examples scratched the surface on the potential for the application of automation and AI when.
When we are embedded in our customers' workflows.
Lee: Global service capabilities are also core to our strategy.
Lee: We are unique in that we operate our own facilities with our own people.
Lee: Our own processes and IP.
Lee: The combination of technology plus global scale is what allows us to deliver best in class unit economics and increased revenue yield to our customers.
Speaker Change: Now, let me shift to execution on our priorities and our near term outlook.
Speaker Change: We entered 2024 and a strong position to support long term growth and improved performance.
Speaker Change: We have executed for our end to end clients.
Speaker Change: Achieved solid bookings for our module solutions.
Speaker Change: Flows via Clara acquisition.
Speaker Change: And started our tenure our strategic relationship with our largest new enterprise customer.
Speaker Change: We believe the continued strength of our commercial engine sales.
Speaker Change: Delivering results drove 15 clients and ongoing investments in AI, driven technology and solutions will further support our growth throughout 2024.
Speaker Change: Over the coming years.
Speaker Change: Now, let me turn to the change healthcare cyber attack, which had an impact across the healthcare industry.
Speaker Change: Given the central role <unk> plays in the revenue cycle for our large diversified customer base.
Speaker Change: It has impacted our near term operating performance as well.
Lee Rivas: Our operating team mobilized quickly and worked closely with those affected. In a matter of weeks, the team was able to successfully migrate 100% of affected customers to Alternative Claims Clearinghouse. We also implemented technology and automation solutions to help mitigate both near-term and longer-term impacts surrounding claim submissions, processing, and ultimately cash collection.
Speaker Change: Our operating team mobilized quickly and work closely with those affected.
Speaker Change: In a matter of weeks the team was able to successfully migrate 100% of affected customers to alternative claimed clearinghouses.
Speaker Change: We also implemented technology and automation solutions to help mitigate both near term and longer term impacts surrounding claim submissions.
Speaker Change: Processing and ultimately cash collections.
Lee Rivas: Our unified data exchange, which is designed to integrate with every major EMR, Hayer, Clearinghouse, Bank, and other data sources, enabled R1 to support the implementation of alternative solutions and uphold data integrity and facilitate connections. We believe the challenges faced by providers.
Speaker Change: Our unified data exchange, which is designed to integrate with every major EMR.
Speaker Change: Payer clearinghouse.
Speaker Change: <unk> and other data sources.
Speaker Change: Enabled our one to support the implementation of alternative solutions and uphold data integrity and facilitate connections.
Speaker Change: We believe the challenges faced by providers as a result of the cyber attacks have the potential to enhance demands are partners like our one over time.
Lee Rivas: As a result of the cyber attack, it has the potential to enhance demand for partners like R1. Over the past several months, we have made progress against each of our focus areas for the year. As a reminder, these are one, ensuring our growth strategy aligns with customer needs to meet them where they are on their revenue cycle journey, to continue to deliver excellent operational results to our customers to maximize revenues and cash yield in these challenging times. And last, executing our technology roadmap to deliver innovation on behalf of our customers and drive measurable results above and beyond what they would otherwise be able to do on their own. First, our growth strategy.
Speaker Change: Over the past several months, we have made progress against each of our focus areas for the year.
Speaker Change: As a reminder, these are one ensuring our growth strategy aligns with customer needs to meet them, where they are on their revenue cycle journey.
Speaker Change: Two continuing to deliver excellent operational results to our customers to maximize revenues and cash yield in these challenging times.
Speaker Change: And black executing our technology roadmap.
Speaker Change: To deliver innovation on behalf of our customers and drive measurable results.
Speaker Change: Above and beyond what they would otherwise be able to do on their own.
Speaker Change: First our growth strategy.
Lee Rivas: During the quarter, we saw traction with our flexible engagement model, enabling R1 to quickly align with new customers wherever they are in their revenue cycle journey. We demonstrated continued strength in our modular bookings and expanded our end-to-end pipeline, enhancing its breadth with additional opportunities for medium-sized health. We are also gaining traction in our sales activities for our functional model, adding new opportunities to our pipeline, which will support additional embedded growth opportunities over time. Second, operational execution.
Speaker Change: During the quarter, we saw traction with our flexible engagement model.
Speaker Change: Enabling <unk> to quickly align with new customers wherever they are in their revenue cycle journey.
Speaker Change: We demonstrated continued strength in our modular bookings and expanded our <unk> pipeline.
Speaker Change: Enhancing its breath with additional opportunities for medium sized health systems.
Speaker Change: We are also gaining traction in our sales activities for our functional model.
Speaker Change: Adding new opportunities to our pipeline.
Speaker Change: Which will support additional embedded growth opportunities over time.
Speaker Change: Second operational execution.
Lee Rivas: Our modular business remains central to our business model, driving diversification, delivering further cross-sell opportunities for both modular and end-to-end solutions and providing the core advantage of data visibility across a wide spectrum of provider customers. We are succeeding in cross-selling and have grown to an average of more than three modular solutions per customer, with a long runway to drive additional growth. During the quarter, there was considerable interest in our physician advisory solutions. DRG validation, charge capture, and underpayment
Speaker Change: Our modular business remains central to our business model driving diversification <unk>.
Speaker Change: Levering further cross sell opportunities for both modular and end to end solutions.
Speaker Change: And providing the core advantage of data visibility across a wide spectrum to provide our customers.
Speaker Change: We are succeeding in cross selling and have grown to an average of more than three modular solutions per customer.
Speaker Change: With a long runway to drive additional growth.
During the quarter there was considerable interest in our physician advisory solutions.
Speaker Change: <unk> validation.
Speaker Change: Charge capture and under payments and we expect to see an increase in demand or denials and a recovery going forward as a result of the change healthcare Internet.
Lee Rivas: And we expect to see an increase in demand for denials in AR recovery going forward as a result of the changing healthcare institution. Let me provide a couple of examples of our commercial success. We are already expanding the managed services or functional partnership we discussed in our year-end 2023 earnings call, having signed two new modular solution offerings in the recent quarter for both underpayments and retrospective Medicare bad debt. Another example is a longstanding multibillion-dollar NPR modular customer who uses most of our solutions, which further expands the business for AR recovery solutions.
Speaker Change: Let me provide a couple of examples of our commercial success.
Speaker Change: We are already expanding the managed services or functional partnership we discussed in our year end 2023 earnings call.
Speaker Change: <unk> signed two new module solution offerings in the recent quarter for both underpayments and retrospective Medicare bad debt.
Speaker Change: Another example is a long standing multibillion dollars NPR modular customer.
Speaker Change: As most of our solutions, which further expanded the business for a recovery solutions.
Lee Rivas: Over the last three fiscal years, we have delivered over $60 million in value to this customer in AR recovery and denial solutions alone. We are also seeing success with regional hospitals. In 2023, we contracted with a $400 million NPR regional hospital to provide DRG and charge capture solutions, and we were named vendor of choice for our CDI total performance. In the first quarter, we added a larger deal for inpatient clinical denial.
Speaker Change: Over the last three fiscal years, we have delivered over $60 million in value to the customer and a recovery in denial solutions alone.
Speaker Change: We are also seeing success with regional hospitals in 2023, we contracted with a $400 million NPR regional hospital to provide DRG and charge capture solutions and were named vendor of choice for our CDI total performance solutions and.
Speaker Change: In the first quarter, we added a larger deal for inpatient clinical denials.
Lee Rivas: And we are in discussions to expand our relationship across multiple solutions. Finally, we are also executing on our technology roadmap. With access to large-scale clinical, financial, and patient data powering our technology platform and advanced analytics, R1 remains at the forefront of helping leading providers transform their approach to financial performance and patient engagement.
Speaker Change: And we are in discussions to expand our relationship across multiple solutions.
Speaker Change: Finally, we are also executing on our technology roadmap.
Speaker Change: With access to large scale clinical financial and patient data powering our technology platform and advanced analytics are one remains at the forefront of helping leading providers transform their approach to financial performance and patient engagement.
Lee Rivas: We have continued to apply technology to the revenue cycle to help our customers drive cost and revenue. We have increased our technology investment in key areas of the revenue cycle to develop new Gen-AI solutions to further enhance or eliminate processes, and leverage our global scale to address critical issues for our customers. In 2023, you heard me discuss several large language models that were launched. These included Denials Automation, Next Action Prediction for AR Management, and Physician Evaluation and Management Coding. As a result of these automations,
Speaker Change: We have continued to apply technology to the revenue cycle.
Speaker Change: Help our customers drive cost and revenue improvement.
Speaker Change: We have increased our technology investment in key areas of the revenue cycle to develop new Gen AD solutions to further enhance or eliminate processes.
Speaker Change: And leverage our global scale to address critical issues for our customers.
Speaker Change: In 2023, you heard me discuss several large language models that were launched.
Speaker Change: This included denials automation next action prediction for our management.
Speaker Change: And physician evaluation and management coding.
Speaker Change: As a result of these automation.
Lee Rivas: We have identified additional value for our customers, improved the efficiency of our operators, and expanded our quality assurance capabilities, enabling continuous technological advancement and improvement. We anticipate launching several new solutions throughout 2024, which will put us at the forefront of innovating on behalf of our customers. An example of a particularly high-impact use case delivered this quarter was our Clinical Appeals Summarization Large Language Model. This model is designed to reduce the time spent on denial appeal generation by 75% from an hour on average to 15 minutes. Instead of taking time to read through hundreds of pages of medical records, Crafting the Appropriate Clinical Argument and Drafting an Appeal.
Speaker Change: We have identified additional value for our customers improve the efficiency of our operators.
Speaker Change: And expanded our quality assurance capabilities, enabling continuous technological advancement and improvement.
Speaker Change: We anticipate launching several new solutions throughout 2024.
Speaker Change: Which will put us at the forefront of innovating on behalf of our customers.
Speaker Change: An example of a particularly high impact use case deliver this quarter was our clinical appeal summarization large languished model.
Speaker Change: This model is designed to reduce the time spent on denial appeal generation by 75% from an hour on average to 15 minutes.
Speaker Change: Instead of taking time to read through hundreds of pages of the medical records.
Speaker Change: Crafting the appropriate clinical argument and drafting and appeal.
Lee Rivas: This model is designed to complete this process and generate a draft letter. Our auditors then complete quality control to validate and edit the content as needed. We expect this use case will expand over time as we continue to review additional areas of our business that could utilize this automated drafting capability. In summary, we believe our vision to be the automation platform of choice for the provider industry is clear and achievable. Our strategy to meet providers where they are in their needs today matches a large and growing $100 billion addressable market.
Speaker Change: This model is designed to complete this process and generate a draft letter.
Speaker Change: Our auditors, then complete quality control to validate and edit the content as needed.
Speaker Change: We expect this use case will expand over time as we continue to review additional areas of our business that can utilize this automated trusting capability.
Speaker Change: In summary, we believe our vision to be the automation platform of choice for the provider industry is clear and achievable.
Speaker Change: Our strategy to meet providers, where they are and their needs today matches, a large and growing 100 billion addressable market and.
Lee Rivas: And we expect it will help us continue to grow and further diversify our business. Lastly, our value proposition to the provider industry is strong, combining technology, global scale, and the best people in the industry. Thank you. And with that, I'll turn the call over to Jennifer to discuss our quarterly financials and updated outlook.
Speaker Change: And we expect will help us continue to grow and further diversify our business.
Speaker Change: Lastly, our value proposition to the provider industry are strong.
Speaker Change: Mining technology global scale and the best people in the industry.
Speaker Change: Thank you and with that I'll turn the call over to Jennifer to discuss our quarterly financials and updated outlook.
Jennifer Williams: Thank you, Lee, and good morning, everyone. Our first quarter financial results demonstrate the progress we are making on some of our financial objectives, despite some disruption in the industry, as Lee just discussed. We delivered solid results in the first quarter with revenue of $603.9 million and adjusted EBITDA of $152.2 million. These results demonstrate continued strength across the business. As Lee mentioned, we are pleased with our ability to respond quickly on behalf of our customers to mitigate disruption across the industry caused by the change healthcare cyber attack.
Jennifer: Thank you Lee and good morning, everyone.
Jennifer: Our first quarter financial results demonstrate the progress we're making on some of our financial objectives. Despite some disruption in the industry as we just discussed.
Jennifer: We delivered solid results in the first quarter with revenue of $603 9 million and adjusted EBITDA of $152 2 million.
Jennifer: These results demonstrate continued strength across the business.
Jennifer: As Lee mentioned, we are pleased with our ability to respond quickly on behalf of our customers to mitigate disruption across the industry by the change healthcare cyber attacks.
Jennifer Williams: Overall, approximately 50% of our customers' volumes flowed through the impacted vendor systems, with some impacted more significantly than others. We estimate that the disruption impacted the company's results by $9.5 million for both revenue and adjusted EBITDA in the first quarter. As Lee mentioned, we also had a large customer of our modular services file for bankruptcy protection earlier this week. We did not record revenue for any unpaid work completed in the quarter, and we are fully reserved for all outstanding AR balances. This is the same customer that we reserved for in late 2023 as they were experiencing financial challenges. I'll provide some details on these impacts in just a moment.
Jennifer: Overall, approximately 50% of our customers' volumes flow through the impacted vendor systems with some impacted more significantly than other.
Jennifer: We estimate that the disruption impacted the companys results by $9 $5 million for both revenue and adjusted EBITDA in the first quarter.
Jennifer: As Lee mentioned, we also had a large customer of our modular services file for bankruptcy protection earlier this week.
Jennifer: We did not record revenues for any unpaid work completed in the quarter and we are fully reserved for all outstanding AR balances.
This is the same customer that we reserved for in late 2023, as they were experiencing financial challenges.
Jennifer Williams: But first, I want to give you an update on the financial results for the quarter. Total revenue grew by 11% year-over-year, which included growth in our base business as well as a contribution from Eclera since we closed the acquisition on January 17th. This growth was partially offset by client attrition and facility divestitures we discussed last quarter, as well as the changed health care outage and the bankruptcy of one of our modular customers that was filed earlier this week.
Speaker Change: I'll provide some details on these impact in just a moment, but first I wanted to give you an update on the financial results for the quarter.
Speaker Change: Total revenue grew by 11% year over year, which included growth in our base business as well as the contribution from a clearer since we closed the acquisition on January 17.
Speaker Change: This growth was partially offset by client attrition and facility divestitures, we discussed last quarter as well as the change healthcare outage and the bankruptcy of one of our modular customers that was filed earlier this week.
Jennifer Williams: Net operating fees of $381.5 million grew approximately 6% or $20.5 million year-over-year. This was mostly driven by the $19.2 million contribution from Aclara. Low single-digit growth in cash collections across our end-to-end customer base was offset by no nutrition in the physician business and expected facility divestiture. The healthcare cyber attack had no impact on our net operating fees in the quarter due to the lag of collections used in our base fee revenue calculation.
Speaker Change: Net operating fees at 381, 5 million grew approximately 6% or $25 million year over year. This was mostly driven by the $19 2 million contribution from Clara.
Speaker Change: Low single digit growth in cash collections across our end to end customer base was offset by known attrition in the physician business and expected facility divestitures.
Speaker Change: Change healthcare cyber attack had no impact on our net operating days in the quarter due to the lack of collections used in our base fee revenue calculations.
Jennifer Williams: Incentive fees were $15.6 million, which was below our expectations, primarily due to the change healthcare outage. This incident negatively impacted balance sheet metrics related to cash and AR, which gets measured at the end of each quarter. We also expect the outage to impact our full-year revenue as some of these metrics will remain elevated for the next few quarters. Our modular and other revenue of $206.8 million grew by 28%, or approximately $46 million year over year, driven by the addition of Eclair revenues, as well as the expansion of services to existing customers and new customer contracts. This was partially offset by the impact of both changing health care and customer bankruptcy.
Speaker Change: Incentive fees were $15 6 million, which was below our expectations, primarily due to the change healthcare outage.
Speaker Change: And so that negatively impacted balance sheet metrics related to cash and that.
Speaker Change: That gets measured at the end of each quarter.
Speaker Change: We also expect the outage to impact our full year revenue as some of these metrics will remain elevated for the next few quarters.
Speaker Change: Our modular and other revenue of $206 8 million grew about 28% or approximately $46 million year over year, driven by the addition of a clear revenue as well as the expansion of services to existing customers and new customer contracts.
Speaker Change: This was partially offset by the impact of that change healthcare and the customer bankruptcy.
Jennifer Williams: Turning to expenses for the quarter, the non-GAAP cost of services in Q1 was approximately $401 million, up roughly $39 million year-over-year. This includes approximately 46 million related to Eclaira.
Speaker Change: Turning to expenses for the quarter.
Speaker Change: non-GAAP cost of services in Q1 was approximately $401 million.
Speaker Change: Roughly $39 million year over year.
This includes approximately $46 million related to a player.
Jennifer Williams: Excluding Aclara, our underlying business expenses decreased due to the margin maturity on end-to-end customers, Realization of Synergies and Benefits from Technology, offset by investments we continue to make in our tech platform. Non-GAAP SG&A expenses were $50.6 million, up approximately $9 million from the prior year.
Speaker Change: Excluding a clear our underlying business expenses decreased due to the margin maturity on the end to end customers realization of synergies and benefits from technology.
Speaker Change: Sat Fi investments, we continue to make in our tech platform.
Speaker Change: non-GAAP SG&A expenses were $50 6 million.
Speaker Change: Ultimately $9 million from the prior year.
Jennifer Williams: This increase is driven by $6.7 million in expenses related to ECLARA, as well as timing of expenses and corporate functions. Our adjusted EBITDA for the quarter was $152.2 million, which was in line with our internal expectations, even after the impact of the incidents we faced this quarter. Continued cost discipline and the timing related to some Providence-related investments, which are now expected to occur over the next few quarters, reduced the impact of the lower incentive fees in the quarter. Lastly, we incurred $33.9 million in other expenses.
Speaker Change: This increase is driven by a $6 $7 million of expenses related to <unk> as well as timing of expenses and corporate functions.
Speaker Change: Our adjusted EBITDA for the quarter was $152 2 million, which is in line with our internal expectations, even after the impact from the Internet we faced this quarter.
Speaker Change: Cost discipline and the timing related to some Providence related investments, which are now expected to occur over the next few quarters reduce the impact of the lower incentive fees in the quarter.
Speaker Change: Lastly, we incurred $33 9 million and other expenses.
Jennifer Williams: This included roughly $16 million of transaction costs related to the Eclair acquisition. Now, let me provide a couple of comments on cash flow and the balance. As I previously discussed, cast generation remains a focus for the company. Cash and cash equivalents at the end of March were $178 million, compared to $173.6 million at the end of December. For the quarter, we generated $46.7 million in cash from operations. Net debt at the end of the quarter was $2.1 billion, up approximately $651 million from the end of December. This increase reflects the additional debt in term loans and revolver borrowings for Eclera.
Speaker Change: This included roughly $16 million of transaction costs related to the player acquisition.
Speaker Change: Now, let me provide a couple of comments on cash flow and the balance sheet.
Speaker Change: As I previously discussed cash generation remains a focus for the company.
Speaker Change: Cash and cash equivalents at the end of March were $178 million compared to $173 6 million at the end of December.
Speaker Change: For the quarter, we generated $46 7 million in cash from operations.
Speaker Change: Net debt at the end of the quarter with $2 1 billion up approximately $651 million from the end of December.
Speaker Change: This increase reflects the additional debt and term loans and revolver borrowings for our player.
Jennifer Williams: Our liquidity also remains strong, with approximately $697 million at the end of March. This is both from cash on our balance sheet and borrowing capacity on our revolvers. Now, let me move to our 2024 outlook.
Speaker Change: Our liquidity also remained strong with approximately $697 million at the end of March. This is both from cash on our balance sheet and borrowing capacity on our revolver.
Speaker Change: Now, let me move to our 2020 for outlook.
Jennifer Williams: As a result of the Change Healthcare cyberattack, we're updating our outlook to reflect the expected impact on revenue and adjusted EBITDA for the full year. We now expect revenue of $2.6 to $2.64 billion, growing 15 to 17% year-over-year; gap operating income of $85 million to $105 million, and adjusted EBITDA of $625 to $650 million.
Speaker Change: As a result of the change healthcare cyber attack, we're updating our outlook to reflect the expected impact on revenue and adjusted EBITDA for the full year.
Speaker Change: We now expect revenue of two six to $2 64 billion growing 15% to 17% year over year.
Speaker Change: GAAP operating income of $85 million to $105 million.
Speaker Change: And adjusted EBITDA of $625 million to $615 million.
Jennifer Williams: These expectations reflect the full year 2024 impact of the Change Healthcare Cyber Attack and the contribution of ECLARA, as well as the new contract with Providence. As a reminder, R1's revenue is tied to cash collections, which were impacted by the Change Healthcare Cyber Attack. As Lee indicated, while we've successfully transitioned our clients to alternative clearinghouses, the disruption will impact the timing of net operating fee revenue as we move through the year. Specifically, we expect a large shift in timing between our Q3 and Q4 net operating fee revenues based on the backlog of claims and cash during March, April, and May.
Speaker Change: These expectations reflect the full year 2024 impact of the change healthcare cyber attack.
Speaker Change: And the contribution of our Clara as well as the new contract with Providence.
Speaker Change: As a reminder, our <unk> revenue is tied to cash collections, which was impacted by the change healthcare cyber attacks as Lee indicated while we successfully transitioned our clients to alternative clearing houses the disruption will impact the timing of net operating fee revenue as we move through the year.
Speaker Change: Specifically, we expect a large shift in timing between our Q3 and Q4 net operating fee revenues based on the backlog of claims and cash during March April and May.
Jennifer Williams: We expect most of the cash from these claims will be settled by August, which is the last month of collections that will drive our Q4 net operating fee. At this point, given our utilization outlook has not changed, we believe the impact of net operating fee revenues is just a shift in timing between the quarters. As we experienced in the first quarter, we do expect a reduction in incentive fees for the full year, as we will not be able to earn back lost revenues from missed balance sheet metrics for AR and cash until the recovery is complete. In total, for the full year, we expect the impact from the outage will be approximately $20 million in revenue and approximately $25 million in adjusted EBITDA.
Speaker Change: We expect most of the cash from these claims will be settled by August which is the last month of collections that will drive our Q4 net operating fees.
Speaker Change: At this point given our utilization outlook has not changed we believe the impact of net operating fee revenues, it's just a shift in timing between the quarters.
Speaker Change: As we experienced in the first quarter, we do expect a reduction in incentive fees and the full year as we will not be able to earn back lost revenues from missed balance sheet metrics for AAR and cash until the recovery is complete.
Speaker Change: In total for the full year, we expect the impact from the outage will be approximately $20 million in revenue and approximately $25 million and adjusted EBITDA.
Jennifer Williams: This is driven by the revenue impact I just mentioned and additional costs of approximately $2 million per quarter for the rest of 2024, primarily related to the backlog of claims and manual efforts that will be required to support our clients. Our outlook also assumes the following low single-digit year-over-year growth for our net operating fees from existing customers. Customer attrition and facility divestitures are consistent with our original outlook. We also remain confident in the onboarding of Providence and expect that contract to be materially in line with our previous guidance.
Speaker Change: This is driven by the revenue impact I, just mentioned and additional cost of approximately $2 million per quarter for the rest of 2024, primarily related to the backlog of claims and manual efforts that will be required to support our clients.
Speaker Change: Our outlook also assumes the following low single digit year over year growth for our net operating fees from existing customers customer.
Speaker Change: Customer attrition and facility divestitures are consistent with our original outlook.
Speaker Change: We also remain confident in the Onboarding of Providence.
Speaker Change: Expect that contract to be materially in line with our previous guidance.
Jennifer Williams: With respect to ECLARA, we are revising our outlook to reflect that we plan to harmonize certain lines of business and customer contracts. We anticipate this will support our adjusted EBITDA outlook as we move into 2025. As a result, we now expect ECCLR to contribute approximately $275 to $280 million of revenue in 2024. $25 million of adjusted EBITDA is consistent with our original guidance. We expect modular and other revenue, excluding the impact of ECLARA, to grow in low double digits.
Speaker Change: With respect to our player we are revising our outlook to reflect that we plan to harmonize certain lines of business and customer contracts.
Speaker Change: We anticipate this will support our adjusted EBITDA outlook as we move into 2025.
Speaker Change: As a result, we now expect declarer to contribute approximately $275 million to $280 million of revenue in 2024.
Speaker Change: $25 million of adjusted EBITDA is consistent with our original guidance.
Speaker Change: We expect modular and other revenue excluding the impact of a clear to grow low double digits.
Jennifer Williams: Regarding the client bankruptcy, we have not removed the revenue from our outlook, given RCM service providers were designated as critical vendors in the filing early this week. We estimate $45 million in modular revenue for this customer in our full year outlook. Based on the above factors, we now expect adjusted EBITDA to be in the range of $625 to $650 million. This outlook also assumes capital expenditures of approximately 5% of revenue. Other expenses of approximately $105 million to $120 million, including ECLAIR transaction costs and related expenses.
Speaker Change: Regarding the client bankruptcy, we have not removed the revenue from our outlook given RCM service providers were designated as critical vendors and filing early this week we.
Speaker Change: We estimate $45 million in modular revenue for this customer in our full year outlook.
Speaker Change: Based on the above factors, we now expect adjusted EBITDA to be in the range of $625 million to $650 million.
Speaker Change: This outlook also assumes capital expenditures of approximately 5% of revenue.
Speaker Change: <unk> expenses of approximately $105 million to $120 million, including a clear transaction cost and integrated related expenses.
Jennifer Williams: Interest expense in the range of $175 to $180 million, including the increased debt to Fundaclara, and depreciation and amortization expense of $330 to $350 million. In closing, we had a good quarter, and we are pleased with the great work from our 30,000 global colleagues. We came together as a team this quarter, and I'm incredibly proud and grateful to work with some of the best healthcare experts in the industry to deliver for our customers. With that, I'll turn it back over to the operator.
Speaker Change: Interest expense in the range of $175 million to $180 million, including the increased debt to fund declarer.
Speaker Change: And depreciation and amortization expense of $330 million to $350 million.
Speaker Change: In closing we had a good quarter and we are pleased with the great work from our 30000 global colleagues.
Speaker Change: We came together as a team this quarter and I'm incredibly proud and grateful to work with some of the best health care experts in the industry to deliver for our customers.
Speaker Change: With that I'll turn it back over to the operator.
Operator: Thank you, and as mentioned, we are now open to questions. To ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. In the interest of time and to ensure we cover as many participants as possible, we do request a limit of one question per person. Your first question comes from the line of Charles Rhyee from TD Cowan. Please go ahead.
Speaker Change: Thank you and as mentioned we are now open for questions to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
Speaker Change: If you would like to withdraw your question simply press Star one again.
Speaker Change: The interest of time and to ensure we cover as many participants as possible. We do request a limit of one question per person.
Speaker Change: Your first question comes from the line of Charles Ray from TD Cowen. Please go ahead.
Lee Rivas: Yeah, thanks for taking the questions. I wanted to just dive into this impact on the change outage. You know, with the guidance change, is it fair to think that the full impact of change is really just captured So, I guess the question is, when a company is going to be in a crisis, is there a chance that it's going to fall completely into 24, or is there a chance that some of that impact could fall into next year?
Charles Rhyee: Yes, thanks for taking the questions.
Charles Rhyee: Wanted to just dive into this impact on the change outage.
Charles Rhyee: With what the guidance is it fair to think that the.
Charles Rhyee: The full impact of changes really just captured.
Speaker Change: <unk> to 'twenty four or is there a chance that.
Speaker Change: Some of that impact could fall into.
Speaker Change: Next year, and then Jennifer I think you said.
Lee Rivas: And then, you know, Jennifer, I think you said, obviously, some of the incentive fees that you can't capture, which are sort of balance sheet items at the end of the period, but did I hear correctly that some of that could be recaptured at a later date on the balance sheet? And then, sorry, lastly, any kind of sense for if we have this shift between Q3, Q4, could you give us a sense of how Q2 should look in terms of REVs and adjusted EBITDA? Thanks.
Jennifer: Obviously some of the incentive fees that you can capture.
Jennifer: Which are sort of balance sheet items at the end of the period, but did I hear correctly that some of that could be recaptured at a later date on the balance sheet items, and then lastly, any kind of sense for if we have the shift of Q3 Q4 could you give us a sense of whats.
Jennifer: Q2 should look.
Jennifer: <unk> adjusted EBITDA.
Lee Rivas: Hi Charles, this is Lee. Why don't I start with just, you know, the big picture of how we've addressed this challenge, and then I'll hand it over to Jennifer to answer the specific question on timing. So let me just talk about the long-term impact, what the team did to address the situation, and just maybe a few lessons learned, because I know this would be a common question if I didn't hit this up front, and then we'll talk about the specifics.
Jennifer: Hi, Charles This is Lee why don't I start with just.
Lee: Big picture, how we've addressed this challenge. So then I'll hand, it over to Jennifer to answer the specific question.
Lee: On timing.
Jennifer: So let me just talk about long term impact what the team did to address the situation and just maybe a few less in Florence I know this would be a common question. If I don't hit this upfront and then we'll talk about the specifics.
Lee Rivas: Long-term strategically, no impact; the core business is strong. If anything, just emphasize the need for technology and automation with all of our host systems. We'll address the near-term impact, but clearly, there's a near-term impact for our customers and for our business. But long-term, you know, we feel very solid about our business and what we've done through this challenge. The second thing is that the team mobilized very quickly on behalf of our customers, assessed three main alternatives, technology vendors that you would know, alternative clearinghouses, and within a matter of weeks, got them up and running on those clearinghouses.
Jennifer: Long term strategically no impact the core business is strong if anything thats emphasize the need for technology and automation with all of our host systems.
Jennifer: We will address the near term impact, but clearly there is a near term impact for our customers and for our business, but long term, we feel very solid about our business and what we've done.
Jennifer: Through this challenge the second thing is the team mobilized very quickly on behalf of our customers.
Jennifer: Three.
Jennifer: Three main alternatives technology vendors that you would know alternative clearinghouses and within a matter of weeks Scott them up and running on those clearinghouses now we do expect some residual impact on kpis with regard to denials because we.
Lee Rivas: Now, we do expect some residual impact on KPIs with regard to denials because we have built in automations with many of our vendors and many of our host systems. So, you know, we do expect some KPI impact back after this year.
Jennifer: We have built in automation with many of our vendors many of our health system. So we do expect some kpis impact back after this year.
Jennifer: But we feel very good about the work we did on behalf of our customers to get them up and running over the last couple of weeks in terms of lessons learned clearly the number one by far is the importance of information security relative to what's happening in our industry.
Jennifer Williams: But we feel very good about the work we did on behalf of our customers to get them up and running over the last couple weeks. You know, in terms of lessons learned, clearly, the number one by far is the importance of information security relative to what's happening in our industry. This is an attack on one company but could happen to any company in our industry. The second lesson learned is around vendor dependency.
Jennifer: As an attack on one company, but could happen at any company in our industry. The second lesson learned is around vendor dependency.
Jennifer Williams: We've, you know, clearly looked across our customer base and across our own internal systems to identify any other dependencies. This happens to be a pretty unique situation with change. And third, the importance of technological scale. So, us being able to invest on behalf of our customers, fix the issues, get ahead of them, and resolve the issues. Jennifer, do you want to answer the specifics on some of the timing questions? Sure. Let me just...
Jennifer: Clearly looked across our customer base across our own internal systems to identify any other dependencies. This happens to be a pretty unique situation with change.
Jennifer: And third the importance of technology scale, so us being able to invest on behalf of our customers fix the issues get ahead of it and resolve the issues. Jennifer do you want answer the specifics on some of the timing questions sure. Let me just give me a little bit of clarity on the way, we're thinking about change in total and it's really in three areas.
Jennifer Williams: Sure. Let me just give you a little bit of clarity on the way we're thinking about change in total, and it's really in three areas. The first is related to revenue on KPIs, and Charles, you asked about some of the metrics. There are three areas of KPIs, three metrics that we're monitoring, and we think that there will be impacts. It's cash, AR, and then, as Lee just mentioned on denials, cash and AR, the balance sheet metrics.
Jennifer: Yes.
Jennifer: First is related to revenue on Kpis and Charles you asked about some of the metrics. There are three areas of Kpis three metrics that we're monitoring and we think that there will be impacts on cash.
Jennifer: And then as Lee just mentioned on denials cash in the balance sheet metrics.
Jennifer Williams: And there was obviously a large impact in Q1, and we think that the AR will remain elevated for the next couple of quarters, so there will be some impact on KPIs related to that. CASH, we will have the opportunity to recoup some of the Q1 impact because CASH will come back in Q2 and Q3, which will help a little bit, and then KPIs will be impacted in Q4, we believe, by the denials that Lee just mentioned.
Jennifer: And there was obviously a large impact in Q1, and we think that the.
Jennifer: The AAR will remain elevated for the next couple of quarters. So there will be some impact on kpis related to those cash.
Jennifer: We'll have the opportunity to bring some of the Q1 impact because cash will come back in Q2, and Q3, which will help a little bit and then kpis will be impacted in Q4, we believe that the denials that Lee just mentioned so really net net the big impacts on Aps will be first quarter.
Jennifer Williams: So really, net-net, the big impacts on KPIs will be first quarter and fourth quarter, with kind of some noise between metrics in Q2 and Q3. The second one is timing, and think about it in two different buckets.
Jennifer: And fourth quarter with kind of some noise in between metrics in Q2 and Q3.
Jennifer: The second one is timing.
Jennifer Williams: On modular, there was an impact in Q1. And we expect a little bit of an impact in Q2. And that's really just timing.
Jennifer: And think about it in two different buckets.
Jennifer: Modular there was an impact in Q1.
Jennifer: And we expect a little bit of impact in Q2, and Thats really just timing so when the cash and the backlog comes through we expect that that will come back in the second half of the year. The larger impact is on our base fees and remember we have a format flat. So the way to think about that as cash collections in March April and May.
Jennifer Williams: So when the cash and the backlog come through, we expect that that will come back in the second half of the year. The larger impact is on our base fees. And remember, we have a four month lag. So the way to think about that is cash collections in March, April, and May, which will be the biggest timeframe of an impact on cash for our customers. That is our Q3 base fee revenue.
Jennifer: Which will be the biggest.
Jennifer Williams: And then June, July, and August are Q4. So we expect a big fluctuation between our Q3 and our Q4 base fees. But we're considering that timing between quarters, large fluctuation, but really no net impact for the year. And then the third bucket of change impact is cost. And as you heard in the prepared remarks about $2 million of costs, incremental costs expected for the balance of the year per quarter. And that's really driven by incremental labor, either in the form of incremental people and or contractors and overtime associated with manual efforts.
Jennifer: <unk> frame.
Jennifer: Impact to cash for our customers that is our Q3 base fee revenue and then June July and August is Q4, So we expect a big fluctuation between our Q3 and our Q4 base fees, but we're considering that timing between quarters large fluctuation, but really no.
Jennifer: The net impact for the year and then the third bucket is.
Jennifer: Change impact as costs and as you heard in the prepared remarks about $2 million of cost incremental cost expected in the balance of the year per quarter.
Jennifer: That's really driven by incremental labor either in the form of incremental people and Andrew contractors and overtime associated with manual efforts. So as Lee just mentioned, we have a lot of automation and.
Jennifer Williams: So, as Lee just mentioned, we have a lot of automations and, Rules built into some of that front-end change healthcare software, and as we transition to other vendors, we've got to rebuild those automations, and we've been building those rules in over years and years, so it will take some time to get back up to the efficiency level that we expect, and in the short term, we've got a backlog of claims that we've got to work through.
Jennifer: <unk>.
Jennifer: Rules built into some of that front end change saw change health care software and as we transition to other vendors, we've got to rebuild those automation and we've been building. Those rules then over years and years. So it will take some time to get back up to the efficiency level that we expect in the short term we've got a backlog of claims that we got to work through.
Jennifer: Okay.
Charles Rhyee: Got it. I appreciate the call. Thank you. And before we continue on to the next question, a reminder to please limit to one question per person. And your next question comes from the line of:
Speaker Change: Got it appreciate the color. Thank you.
Operator: And before we continue on to the next question, a reminder to please limit to one question per person. And your next question comes from the line of Craig Hettenbach from Morgan Stanley. Please go ahead.
Speaker Change: And before we continue on to the next question a reminder to please limit to one question per person.
Speaker Change: Next question comes from the line of Craig heading back from Morgan Stanley. Please go ahead.
Craig: Great. Thank you Lee question on Providence.
Craig: Really around visibility into the ramp of that contract and just the investments youre, making the first half of this year. How you feel it's going so far and then again visibility into second half and the ramp into 2025.
Lee Rivas: Thanks, Craig. You know, I'll start, and if Jennifer, if you have any other colors, please feel free to add them.
Craig: Thanks, Craig I'll start and it's Jennifer.
Speaker Change: Any other color please feel free to add.
Lee Rivas: You know, stepping back, this is obviously an important customer, a flagship win for our business. We're very proud of having been selected as their partner, both on the Eclera and on the Providence side. All is positive, Craig.
Jennifer: Stepping back this is obviously an important customer a flagship win for our business, we're very proud of being having been selected as their partner both on the Clara and on the Providence side.
Lee Rivas: There's a very supportive, very strong executive team on their side, a very aligned set of goals and incentives. And regarding execution of onboarding, we're following a playbook that has worked for other large acute and physician customers. We have a very experienced R1 onboarding team. There are lots of moving parts, bringing on that many people, getting on to their technologies, and transitioning to our teams. But all is on track. We feel very good about the timing of onboarding and integration. Jennifer, anything to add?
Speaker Change: All of those positive Craig.
Jennifer: Very supportive very strong executive team on their side.
Jennifer: Very aligned set of goals and incentives.
Jennifer: And on regarding execution of Onboarding. We're following a playbook that has worked for other large acute physician and physician customers. We have a very experienced are one onboarding team, there's lots of moving parts, bringing on that many people.
Jennifer: Getting onto their technologies transitioning to our teams, but all is on track we feel very good about timing of on boarding and integration Jennifer anything to add.
Jennifer Williams: So, just as we mentioned in our prepared remarks, our guidance from a guidance perspective was materially in line with the guidance that we gave for the Providence contract, and we're confident in our ability to achieve those results. Your next question comes from the line of Elizabeth Anderson from Evercall. Please go ahead. Hi guys, thanks so much for the question. I appreciate the sensitivity around this.
Jennifer: So just as we mentioned in our.
Jennifer: Prepared remarks from a guidance perspective were materially in line with the guidance that we gave for the private its contract in which we're confident in our ability to achieve this.
Jennifer: Salt.
Operator: Your next question comes from the line of Elizabeth Anderson from Evercall. Please go ahead.
Jennifer: Your next question comes from the line of Elizabeth Anderson from Evercore. Please go ahead.
Elizabeth Hammell Anderson: Hi, guys. Thanks, so much for the question.
Elizabeth Hammell Anderson: I appreciate the sensitivity around this I was wondering if there's anything that you guys can comment on publicly about the update.
Elizabeth Hammell Anderson: May six waiver and if not.
Elizabeth Hammell Anderson: Wondering if you could comment a little bit more on sort of the increased harmonization with a clearer I was interested in understanding what that is and then how does that sort of set you up better for 2025 that you mentioned.
Lee Rivas: Yeah, thanks, Elizabeth. Look, no update other than what's publicly available on your first question. You know, we're very focused on operating on behalf of our customers and not letting this distract our team. With regard to Eklera, look, I'm very positive about what we've seen a few months in. A very solid set of customers, including several reasonably sized academic medical centers, and these are sophisticated buyers, so we've gone deep, had a good set of meetings with those customers, and they are very pleased with the work that Eklera has done on their behalf over the last several years.
Speaker Change: Yes, Thanks, Elizabeth look no update other than what's public is publicly available on on your first question. We're very focused on operating on behalf of our customers and not letting this distract our team.
Speaker Change: With regard to a clear up.
Speaker Change: I'm very positive on what we've seen a few months and.
Speaker Change: A very solid set of customers, including several reasonably sized academic medical centers and these are sophisticated buyers. So we've got an D pad.
Speaker Change: Good set of meetings with those customers and they are very pleased with the work that <unk> done on their behalf over the last several years. The second thing I'd point out is that team has very deep revenue cycle expertise I've got to know the.
Lee Rivas: The second thing I'd point out is that the team has very deep revenue cycle expertise. I've gotten to know the leaders on that team, and there's a healthy amount of respect between the R1 and Eklera teams on the level of expertise, ability to deploy technology, customer focus, and the just relationships they have with their customers. We are taking a very similar approach to integration that we took with CloudMed, a very structured approach commercially, operationally, with regard to people, and all the kinds of back-end processes.
Speaker Change: The leaders on that team and there's a healthy amount of respect between the <unk> and Clara teams on level of expertise ability to deploy technology customer focus and just relationships relationships they have with their customers we.
Lee Rivas: All of that is on track, so we feel very good about the process we followed with integration and, you know, no concerns; I'm just very positive about the business so far in terms of how complementary they are to what we've seen over the last several years. We've already deployed them with customers. The only thing I would
Speaker Change: We are taking a very similar approach to integration that we took with cloud med a very structured approach commercially operationally.
Speaker Change: With regard to people and all the kind of backend processes.
Speaker Change: All of that is on track. So we feel very good about the process, we followed with integration.
Speaker Change: No no no concerns I'm, just very positive on the business so far.
Speaker Change: In terms of how complementary they are to what we've already deployed with customers.
Jennifer Williams: The only thing I would add on the harmonization, Elizabeth, is two things. One, at the time we announced the transaction with Aclara, as you may recall, the margins were obviously below what our margins are in the business. And so as we're starting to think about integration and looking at those businesses, we're taking a hard look at businesses and certain solutions that aren't profitable and taking the opportunity to think about harmonization. And that will really set us up well as we move into 2025.
Speaker Change: The only thing I would add on the harmonization Elizabeth is.
Speaker Change: Two things one at the time, we announced the transaction with a Clara.
Speaker Change: As you May recall the margins are obviously below what our margins are in the business and so as we're starting to think about integration I'm looking at those businesses were taking a hard look at.
Speaker Change: Businesses in certain solutions that aren't profitable and taking the opportunity to think about harmonization and that will really set us up well as we move into 2025, but it will have a revenue impact, but really no impact on EBITDA is there. They were areas are contracts, where we didn't have any.
Jennifer Williams: But it will have a revenue impact, but really no impact on EBITDA, as there were areas or contracts where we didn't have any profitability, in some cases, negative margins. So that's one area. The second is particularly around some of the opportunities that Aclara had with Providence as we're sorting out the end-to-end contract and where the revenue will end up. There will be some revenue impacts on Eclair on the top line, but they were already contemplated in the Base D for Providence, and so there's no margin impact because it's already part of the baseline spend with Providence that they're spending either with other vendors or Eclair had contemplat So just sorting out how the revenue aligns across the different businesses, but really no impact on margin.
Speaker Change: Profitability in some cases negative margin. So that's one area. The second is particularly around some of the opportunities that a player a hat with Providence as we're sorting out the end to end contract.
Speaker Change: And where the revenue will.
Speaker Change: Up.
Speaker Change: There will be some revenue impacts on a clear on the topline, but they were already contemplated in the base fee for for Providence.
Speaker Change: And so there is no margin impact because it's already part of the baseline spend.
Speaker Change: With Providence.
Speaker Change: They are spending either with other vendors or clear had contemplated taking on some of that business. So just sorting out how the revenue aligned across the different businesses, but really no impact to margin.
Operator: Your next question comes from the line of Jailendra Singh. On tourist security, please go ahead.
Speaker Change: Your next question comes from the line of Chilean drifting from tour Securities. Please go ahead.
Jennifer Williams: Thank you and good morning, and thanks for taking my question. First, a quick clarification on Charles' question. So, you are saying that there is no change to your core 2024 EBDA, which is what you kind of assumed two and a half months ago. Basically, we're trying to understand like it looks like all the items you're calling out are kind of one-time in nature or a shift of dollars within like intra year. So, basically, what we think about the growth from 2024 to 2025, there's no change compared to two and a half months ago.
Chilean: Thank you and good morning, and thanks for taking my question first a quick clarification on Charles question. So you are saying that there is no change to your core 22004, EBITDA. What do you kind of assumed two five months back basically we're trying to understand it looks like all the items, you're calling out are kind.
Chilean: Kind of onetime in nature or shift of dollars within intra year. So basically how we think about the growth from 2425, there is no change compared to two and a half months back I would confirm that my main question is Mike with respect to change healthcare disruption.
Jennifer Williams: I want to confirm that. My main question is, with respect to healthcare disruption, has it impacted your pipeline, RFP flow, or conversations in general? And also, all these developments around strategic options, have you seen that impacting any ongoing contract rollouts or any client conversations?
Chilean: Has that impacted your pipeline RFP fluid conversations in general and also like all of this.
Chilean: Elements around strategic options have you seen that impact in Europe, any ongoing contracts rollout or any client conversations.
Lee Rivas: Jailendra, I'll start on the change impact, and then Lee, if you want to take the pipeline piece and the impact on that. As far as the KPIs are concerned, we do expect that some of the KPI impact will bleed into 2025, into the first half of 2025, and that's really driven by denials, as we expect that denials will be elevated for a period of time as we continue to build in the automations on the front end where we've built rules over a period of time that have to be rebuilt, if you will, in the Clearing Howell, process.
Speaker Change: So lender I'll start on the change impact and then Lee if you want to take the pipeline piece and the impact on that as far as the Kpis. We do expect that we will have some of the kpis impact bleed into 2025 and to the first half of 'twenty five and that's really.
Speaker Change: Driven by denials I said, we expect the denials will be elevated for a period of time as we continue to build in the automation on the front end of where are we.
Lee: We've built rules over a period of time that has to be rebuilt if you will in the new providers.
Speaker Change: <unk>.
Speaker Change: Its clearinghouse process. So we do expect that there will be an impact to kpis in the first half of 2025 with that said if you look at the change to the guidance. It really is net net the change impact both cost and then the net kpis impact there is no fundamental.
Jennifer Williams: So we do expect that there will be an impact on KPIs in the first half of 2025. With that said, if you look at the change to the guidance, it really is net-net the change impact, both cost and then the net KPI impact. There's no fundamental issue in the business outside of that net impact.
Speaker Change: Issue in the business on the core business outside of that net impact.
Speaker Change: Yeah.
Lee Rivas: Jailendra, I was referring to your... Just let me get to the second part of that. No long-term impact on the pipeline. We did see a three or four week delay, but the team is very much on track both in a quarter and for a full year on bookings. And I'm speaking specifically about modular bookings, Jailendra. If anything, there's an opportunity here, as any customer who deals with the outage will have an increase in denials when we think back after the year. So we are seeing an increase in the pipeline around AR and denials.
Speaker Change: Regarding your yes.
Speaker Change: Let me, let me get to the second part of that no long term impact on the pipeline, we did see a three or four week delay, but the team is very much on track both in the quarter and for full year on bookings and I'm speaking specifically to modular bookings solyndra.
Speaker Change: If anything there is an opportunity here.
Speaker Change: The customer who deals with the outage will have an increase in denials, we think back half of the year. So we are seeing an increase in the pipeline around and denials.
Speaker Change: Okay.
Operator: Apologies for that interruption. And your next question comes from the line of Sean Dodge from RBC Capital Markets. Please go ahead.
Speaker Change: I apologize for that interruption and your next question comes from the line of Sean Dodge from RBC capital markets. Please go ahead.
Sean Wilfred Dodge: Yeah, thanks. Jennifer, just staying on the change outage for a moment, I'm just trying to understand the cadence of the impact, the incentive fees for this year. So you said $25 million of total impact for the year, $10 million in Q1, and then $2 million of extra costs each quarter for the rest of the year. So I think that means there should be about another $9 million impact on incentive fees.
Sean Wilfred Dodge: Yes, Thanks John.
Sean Wilfred Dodge: Jennifer just just staying on the change items for a moment I'm just trying to understand the cadence of the impact of the incentive fees for this year. So you said.
Sean Wilfred Dodge: $25 million, the total impact to the year $10 million in Q1, and then $2 million of extra cost each quarter for the rest of it. So I think that means there should be about another $9 million impact to incentive fees is that right and then cadence wise.
Jennifer: It sounds like there might be a little bit of a step up in Q2 incentive fees relative to Q1 kind of flattish in Q3, and then a step down in Q4.
Sean Wilfred Dodge: My kind of aggregating all of that right.
Jennifer Williams: Yeah, that's right. There will be the other large negative impact expected on incentive fees in Q4. And there's just a little bit of noise, but a step up in the incentive fees, but still a little bit of noise in Q2 and Q3, but then another impact in Q4 that's really driven by that denial. So, yes, that's correct.
Sean Wilfred Dodge: And then, cadence-wise, it sounds like there might be a little bit of a step up in Q2 incentive fees relative to Q1, kind of, flattish in Q3, and then a step down in Q4. Am I kind of aggregating all that right? Yeah, that's right.
Speaker Change: Yes, that's right there will be other large negative impact expected on incentive fees in Q4, and there is just a little bit of noise, but a step up in incentive fees, but still a little bit of noise in Q2, and Q3, but then another impact in Q4, and Thats really driven by that denials. So yes, that's correct.
Operator: Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead.
Speaker Change: Your next question comes from the line of George Hill from Deutsche Bank. Please go ahead.
Lee Rivas: Yeah, good morning, guys. I kind of have a follow-up on Jailendra's line of questioning, which is on the market macro backdrop. And with the onboarding of Providence and the acquisition of Eclera, has this kind of increased or decreased the size of the sales funnel looking forward? And how are you guys feeling about capacity as it relates to whether or not this is attracting more business interest or potential clients seeing this as, like, is this a safe place to go now, or are people worried that you guys have a lot on your plate? Just kind of be interested in the sales pipeline and the sales funnel. Thanks.
George Robert Hill: Yes, good morning, guys I kind of have a follow up on <unk> line of questioning which is on the market macro backdrop and with the Onboarding of Providence and the acquisition of a clearer has this kind of increased or decreased the size of the sales funnel looking forward and how are you guys feeling about capacity.
George Robert Hill: As it relates to whether or not this is attracting more business interest or our potential clients, saying this is like.
Speaker Change: As you guys are safe place to go down or are people worried that you guys have a lot on your plate.
Speaker Change: Could it be interested in the sales pipeline in so Paulo.
Lee Rivas: George, the short answer is no impact. You know, short-term in nature on the pipeline, the modular pipeline, we're still seeing plenty of opportunities and increases in some areas like AR and denials, and same on the end-to-end pipeline. We're feeling very good about what's happening there, seeing many or several medium, small, and medium-sized systems. We're very active in discussions across the board there, so no changes across the board. If anything, that just heightens the awareness of needing good partners that can deploy technology and services. And I'd also add, George, on your Providence question: look, these are separate teams, very focused teams, with no impact on onboarding Providence or integrating Clara.
Speaker Change: George short answer is no impact.
Speaker Change: Short term in nature on the pipeline modular pipeline, we're still seeing plenty of opportunities and increases in some areas like they are in denials and same on the <unk> pipeline.
Speaker Change: We're feeling very good about what's happening there.
Speaker Change: Many or several medium small and medium sized systems, we're very active in discussions across the board there so no changes.
Speaker Change: <unk>.
Speaker Change: If anything Thats, just heightened heightens the awareness of needing good partners that can deploy technology and services.
Speaker Change: Yeah.
Speaker Change: And I'd also add George on the prior year Providence question, but these are separate teams.
Speaker Change: Very focused teams no impact to onboarding, providence, or integrating et cetera.
Operator: Your next question comes from the line of Jack Wallace from Guggenheim Securities. Please go ahead.
Speaker Change: Your next question comes from the line of Jack Wallace from Guggenheim Securities. Please go ahead.
Jack Dawson Wallace: Thanks for taking my questions. Jennifer, I just want to make sure that I've got the net impact of first quarter EBITDA correct, and then give me an opportunity to tell us just how much outperformance there looked like under the surface. If I recall correctly, first quarter EBITDA was expected to be down about $20 million quarter over quarter related to some of the transactions we discussed. However, we were only down about $16 million, and that also included $9 or $10 million of change. So are we right to say that under the surface, there was about $13 or $14 million of EBITDA beat in the quarter?
Jack Dawson Wallace: Hey, Thanks for taking my questions.
Jack Dawson Wallace: Jennifer I just want to make sure that I've got the net impact first quarter EBIT correct.
Jack Dawson Wallace: And then give me an opportunity to tell us just how much.
Jack Dawson Wallace: Outperformance there looked like under the surface. So if I recall correctly first quarter EBITDA was expected to be down about $20 million quarter over quarter related to some of the transactions. We discussed if you are only down about 16 million that also included what nine or $10 million change. So are we right to say that under the surface. There is about 13%.
Speaker Change: 14 million of EBITDA beat in the quarter.
Jennifer Williams: We did have a good quarter with our core business. We also, and I alluded to it in the prepared remarks, some of our first quarter favorability was driven by the timing of the investments in the Providence onboarding. So there are some one-time costs that we incur onboarding related to things like technology licenses and some other technology costs that we expect will come in Q2 and Q3. So some of that is timing, but we did have a great quarter. Your next question comes from the line of Michael Cherny from Lee Rink Partners. Please go ahead.
Speaker Change: We did have a good quarter with our core business, we also and I alluded to it in the prepared remarks, some of our first quarter.
Jennifer Williams: Favorability was driven by timing of investments on the Providence Onboarding. So there are some onetime costs that we incur on onboarding related to things like technology licenses and some other technology cost that we expect will come in Q2 and Q3. So some of that is timing.
Speaker Change: We did have a great quarter.
Jennifer Williams: Your next question comes from the line of Michael Cherny from Leerink Partners. Please go ahead.
Michael Cherny: Good morning, Thanks for taking the question and I apologize if I missed this but did you give any update on sutter either in the current ongoing onboarding process or how you think about the changes in management there what it means for phase III.
Michael Cherny: Thanks, Michael. I'll take that. You know, I'd say this is a very important customer, another West Coast customer that we won several years ago, broadly performing well. Like any customer, there are always opportunities for improvement as we manage an important part of their business. I would think of what we have called phase two, as like with many of our end-end customers, and an opportunity going forward.
Michael Cherny: Thanks, Michael I'll take that I'd.
Michael Cherny: I'd say look this is a very important customer and other west coast customer that we won several years ago broadly performing well like any customer there's always opportunities for improvement as we manage an important part of their business I would think of what we have called phase two as like with many of our end to end customers.
Michael Cherny: An opportunity going forward.
Lee Rivas: Your next question comes from the line of Sarah James from Canter Fitzgerald. Your line is open. Tara, your line is open.
Michael Cherny: Your next question comes from the line of Sarah James from Cantor Fitzgerald. Your line is open.
Sarah Elizabeth James: Sara Your line is open.
Sarah Elizabeth James: Yes, sorry about that.
Sarah Elizabeth James: Is there an opportunity to cover some of the switching costs, which related to change to other vendors through business interruption insurance.
Sarah Elizabeth James: And are those changes of vendors permanent and then if you could give us any color on the seasonality of impact of change to net operating revenue.
Lee Rivas: <unk>.
Sarah Elizabeth James: So, Sarah, the first part of your question: I don't want to give you any specifics, but clearly, we, like many other companies, are pursuing different options regarding insurance. The second part of your question is an important one.
Sarah Elizabeth James: So the first part of your question I don't want to get into specifics, but clearly we like many other companies are pursuing different options regarding insurance.
Sarah Elizabeth James: The second part of your question is an important one.
Lee Rivas: You know, we going forward will never be single threaded through any one technology on a large use case, whether it's, you know, clearinghouse or otherwise. I would think of this as us diversifying our base of options regarding this area. Some of those will be more permanent than others, but for the most part, any of our customers will have multiple options and deploy not just one for this use case.
Sarah Elizabeth James: We going forward will never be single threaded through any one technology on a large use case, whether its clearinghouse or otherwise.
Lee Rivas: I would think of this as us.
Lee Rivas: Diversifying our base of options regarding this area some of those will be more permanent than others, but for the most part any any of our customers will have multiple options and deployed not just one for this use case.
Lee Rivas: Yes.
Lee Rivas: And then on your last question related to the timing of base fees, we really think there will be a large impact fluctuation and shift in timing between Q3 and Q4 base fee revenue, probably in the range of, you know, somewhere between, you know, 25-30 million.
Lee Rivas: And then on your last question related to the timing of base fees, we really think it will be a large impact fluctuation and shift in timing between Q3, and Q4 base fee revenue.
Lee Rivas: Probably in the range of somewhere between 25 $30 million.
Lee Rivas: Okay.
Operator: Your next question comes from the line of Daniel Grosslight from Citi. Please go ahead.
Lee Rivas: Your next question comes from the line of Daniel growth Slide from Citi. Please go ahead.
Daniel R. Grosslight: Hey guys, thanks for taking the question. It's more of a macro question on my end and really about the managed care environment, particularly given some difficulties in Medicare Advantage. I'm wondering if, you know, some of those headwinds that Medicare Advantage faces in 2025 and possibly beyond, if that's going to cause, do you think, an increase in utilization management tools, and how may that impact collections on your end and incentives fees on your end? And then, I guess, longer term, how may that drive demand for some of your more modular solutions? Yeah, so it's a great question.
Daniel R. Grosslight: Hey, guys. Thanks for taking the question more of a macro question on my end and really about the managed care environment, particularly given.
Daniel R. Grosslight: Some difficulties.
Daniel R. Grosslight: <unk>.
Daniel R. Grosslight: And Medicare advantage I'm wondering if.
Daniel R. Grosslight: <unk>.
Daniel R. Grosslight: If some of those headwinds that that Medicare advantage faces in 2025, and possibly beyond if that's going to cause do you think an increase in utilization management tools.
Daniel R. Grosslight: And how may that impact collections on your end and incentive fees on your end and then I guess longer term, how how may that drive demand for some of your more modular solutions.
Lee Rivas: Yeah, so it's a great question. I'd say pretty balanced across the board on the macro outlook. So I love the last part of your question. It does drive demand, as some of our customers deal with the nature of payment timelines with MA and some of the technologies they'll deploy on the reimbursement side. Some of our customers do have reasonably reasonable sizes of their population in MA. And, if anything, this emphasizes the importance of having a technology partner that can be as proactive in driving revenue yield and reducing costs. So pretty balanced across the board.
Speaker Change: Yes, so it's a great question, I'd say pretty balanced across the board on the macro outlook. So.
Lee Rivas: The last part of your question it does drive demand as some of our customers deal with.
Lee Rivas: The nature of of payment timelines with MAA.
Lee Rivas: And some of the technologies Dell deploy on the reimbursement side.
Lee Rivas: Some of our customers do have reasonably reasonable size is up there are their population and look if anything thats emphasize the importance of having a technology partner that can be.
Lee Rivas: As proactive on driving revenue yield and reducing costs, so pretty balanced across the board no major changes over the last year, plus Jennifer and I've seen but we're definitely watching that that trend going forward.
Speaker Change: Maybe I'd add Jennifer.
Operator: Your next question comes from the line of Jeff Garro from Stevens. Your line is open.
Jennifer Williams: No major changes over the last year plus Jennifer and I have seen, but we're definitely watching that trend going forward. Leave me an ad, Jennifer. Your next question comes from the line of Jeff Garro from Stevens. Yes, good morning. Thanks for taking the question. I want to ask more about demand and
Lee Rivas: Your next question comes from the line of Jeff Garro from Stephens. Your line is open.
Jennifer Williams: Yeah. Good morning, Thanks for taking the question I wanted to ask more on the demand environment and so on.
Jeffrey Robert Garro: Recognize that the business model is evolving and you guys don't want to tie yourself to an end to end NPR targets.
Jeffrey Robert Garro: And also I appreciate all the discrete examples of booking success, but wanted to ask if there is any way you could quantify your bookings success or the progression of opportunities through the pipeline or just otherwise support your confidence in the medium term revenue growth outlook.
Lee Rivas: Just, you know, I'll just touch on the demand environment at a high level. So I'll go a bit deeper on what we've said, meeting providers where they are on the revenue cycle journey. We believe we have the most comprehensive set of capabilities for solutions, whether you want a fully managed deal or, on the other spectrum, have us help you drive revenue that you would not otherwise be able to find based on miscoding errors, you know, lack of availability of resources to deal with denials or analyze claims that may have been underpaid. And in the middle is what we're calling managed services or functional partnerships.
Jennifer Williams: Jeff.
Jennifer Williams: Yes ill just touch at a high level.
Lee Rivas: On the demand environment. So I'll go a bit deeper on what we've said meeting providers, where they are in their revenue cycle journey.
Lee Rivas: We believe we have the most comprehensive set of capabilities of solutions, whether you want a fully managed deal or on the other spectrum.
Lee Rivas: <unk> help you drive revenue that you would not otherwise be able to define based on myths coding errors lack of availability of resources deal with denials or analyze claims that may have been underpaid and in the middle is what we're calling our managed services our functional partnerships and we are seeing.
Lee Rivas: And we are seeing plenty of situations where it is better for us and better for the potential customer to go down the path of using our people, our technology, and our IP offshore to accomplish a task while having the customer still manage the revenue cycle. So we see good demand across the board. On the end-user side, as I said, a strong pipeline of medium-sized systems that would look to do a fully managed deal.
Lee Rivas: Plenty of situations, where it is better for us and better for the potential customer to go down the path of using our people our technology, our IP offshore to accomplish a task while having the customer manage still manage the revenue cycle. So we see good demand across the board on the <unk> side as I said.
Lee Rivas: Our strong pipeline.
Lee Rivas: <unk> of media.
Lee Rivas: <unk> systems that would look to do a fully managed deal and on the other spectrum on the on the on the modular side still still see very strong demand, where I'm seeing where we're seeing it. The most is still on the underpayments optimization area, we see plenty on the denials and they are satisfied we're still.
Lee Rivas: And on the other spectrum, on the modular side, we still see very strong demand. Where we're seeing it the most is still in the underpayments optimization area. We see plenty on the denials and coding side. We're seeing demand for physician advisory solutions and continued demand on the coding accuracy side. So we see strong demand across the industry in a time when we believe providers need it the most.
Lee Rivas: Demand for physician advisory solutions and continued demand on the coding accuracy side. So we see strong demand across the industry in a time, where we believe providers need us the most.
Lee Rivas: Yes.
Operator: Your next question comes from the line of Richard Close from Canaccord Genuity. Please go ahead.
Richard: Your next question comes from the line of Richard close from Canaccord Genuity. Please go ahead.
Richard Collamer Close: Thanks for the questions.
Richard Collamer Close: Good job, helping out all your clients in a hard time here.
Jennifer Williams: Jennifer, you mentioned the bankruptcy in your comments on the modular revenue in the quarter. I was wondering if you could provide a little bit more details there and appreciate the $45 million for the full year that you referenced. But I'm curious how you're thinking about the bankruptcy and the impact on your business going forward, longer term.
Richard Collamer Close: Jennifer you mentioned the bankruptcy and your comments on the modular revenue in the quarter I was wondering if you could provide a little bit more details there and I appreciate the 45 million.
Jennifer Williams: For the full year that you referenced but im curious how youre thinking about the bankruptcy.
Jennifer Williams: The impact on your business going forward longer term.
Speaker Change: Richard If you don't mind I'm going to start just kind of give a little context and hand it over to Jennifer.
Lee Rivas: Richard, if you don't mind, I'm going to start, just give a little context and hand it over to Jennifer. This is an important customer for both Aclara and CloudMed. Long-standing customers on both sides, I'm personally familiar with, and our Aclara teams are very familiar with. Multiple solutions sold on both sides. This is a customer that highly valued the combination of technology, global scale, and the solutions we have. However, they have filed for bankruptcy. As you know, we are committed to helping them through this as we have helped others in similar situations. We feel very good about the work we will do for them going forward. Jennifer. Sure, so I'm
Jennifer Williams: This is an important customer for both Clara and cloud met.
Jennifer Williams: Long standing customer on both sides I'm personally familiar with at our Clara teams are very familiar with multiple solutions sold on both sides. This is a customer that has highly valued the combination of technology global scale and the solutions we have.
Lee Rivas: They have filed for bankruptcy as you know we are committed to helping them through this as we have helped others in similar situations. So we feel very good about the work we will do for them going forward Jennifer.
Jennifer Williams: Sure. As I mentioned in the remarks, about $45 million is what the annual revenue is across both pieces of the business, Eclair Solutions and CloudMed Solutions for this customer. With that said, in the first quarter, we did not recognize any revenue that was not collected, so we received cash payments for all the revenue that we recognized in the first quarter, and any outstanding accounts receivable that we had on the books was fully reserved at the point that they filed for bankruptcy this week. So there's no exposure from a balance sheet perspective based on the outstanding receivables.
Lee Rivas: Sure.
Jennifer Williams: I mentioned.
Jennifer Williams: In the remarks about $45 million is what the annual revenue is across both pieces of the business of Claris solutions and cloud managed solutions for this customer.
Jennifer Williams: With that said and the first quarter, we did not recognize any revenue that was not collected so we've received cash payments for all of the revenue that we recognized in the first quarter and any of the outstanding AR that we had on the books is fully reserved at the <unk>.
Jennifer Williams: <unk> that they filed for bankruptcy. This week. So there's no exposure from a balance sheet perspective based on the outstanding receivables. This is the same customer as you may recall from prior earnings calls, where we took a reserve and.
Jennifer Williams: This is the same customer, as you may recall from prior earnings calls, where we took a reserve in the latter part of 2023 based on financial challenges we knew this customer had, and so we had taken a reserve to account for that. So this is the same customer, which removed the revenue from our guidance for the year. As I mentioned, they just filed earlier this week, but in the initial filings, they have designated revenue cycle vendors as being critical to the operations of the business.
Jennifer Williams: Latter part of 2023 based on financial challenges, we knew this customer had and so we had taken a reserve to account for that so this is the same customer as far as looking forward we have not.
Jennifer Williams: Renewed the revenue.
Jennifer Williams: From our guidance for the year, they as I mentioned, they just filed earlier this week, but in the initial filings they have designated revenue cycle vendors as being critical to the operations of the business. So we're working through the bankruptcy process, but we have not remedies that revenue from our <unk>.
Jennifer Williams: So we're working through the bankruptcy process, but we have not removed revenue from our forecast, as we do believe we'll still be doing work for them going forward. Your next question comes from Allen Lutz from Bank of America. Please go ahead. Good morning.
Jennifer Williams: Forecast is we do believe we will still be doing work for them going forward.
Operator: Your next question comes from the line of Allen Lutz from Bank of America. Please go ahead.
Allen Charles Lutz: Your next question comes from the line of Alan <unk> from Bank of America. Please go ahead.
Allen Charles Lutz: Good morning, and thanks for taking the questions Lee you talked a little bit about some of the benefits youre seeing in modular solutions from change. Thank you highlighted are in denial recovery is there any way to quantify how material those are as modular solutions or what percent of your customers have adopted those to date. Thanks.
Lee Rivas: The way I think about this at the highest level is that we have more than 90 of the top 100 that we've previously said have at least one solution sold. A big part of the former CloudMed, now modular strategy has been to cross sell into that customer base. So one metric is the number of solutions sold.
Allen Charles Lutz: The way I'd think about this.
Lee Rivas: At the highest level is.
Lee Rivas: We have more than 90 of the top 100 that we've previously said to have at least one solution sold.
Lee Rivas: A big part of the former cloud Med now modular strategy has been to cross sell into that customer base. So one one metric is the number of solutions sold and I mentioned in my previous remarks, we're increasing the number of solutions sold into that base and that is historically and can.
Lee Rivas: As I mentioned in my previous remarks, we're increasing the number of solutions sold into that base. And that has historically and continues to be a big part of our growth strategy. Really think about that as 75% of more of our growth is coming from current customers, not just the top 100, but also when you go past the top 100. The next part of our strategy is attacking new markets. We haven't kind of gone after them before.
Lee Rivas: <unk> to be a big part of our growth strategy really think about that is 75% of more of our growth is coming from current customers not just the top 100, but also when you go past the top 100.
Lee Rivas: The next part of our strategy is.
Lee Rivas: Is attacking new markets, we haven't kind of gone after before.
Lee Rivas: And that is for us to go down market with bundled solutions. We're also seeing success there. The third part that we think about is cross-selling some of the, what we would know as, historic kinds of R1 modular solutions like physician advisory, and our coding solutions, we call CBO, into the base. So we very much track the rate of penetration of those new solutions into the base. And we're seeing really good success there with our commercial teams that already have relationships with every head of revenue cycle at these top 100 by NPR.
Lee Rivas: And that is for us going down market with bundled solutions. We're also seeing success there.
Lee Rivas: Third part that we think about is cross selling some of the what we would know it is historic.
Lee Rivas: Our one modular solutions like physician advisory.
Lee Rivas: Our coating solutions, we call CBO into the base. So we very much track the rate of penetration of those new solutions into the base and we're seeing.
Lee Rivas: Good success, there with our commercial teams that already have relationships with every head of revenue cycle at these top 100 by NPR.
Lee Rivas: Without giving you numbers where we have a bookings target, we articulate internally that this translates to revenue over time and delivers the double-digit growth rates we've conveyed to you. And we're very much on track in the quarter and expect to be on track in the year.
Lee Rivas: Without giving you numbers, where we had a bookings target we articulated internally that translates to revenue over time and delivers the double digit growth rates. We have we've conveyed to you and we're very much on track in the quarter and expect to be on track in the year.
Jennifer Williams: The only thing I would add is that denials is one of our larger solution lines within our modular business. But with that, as Lee mentioned, there's still a lot of opportunity for further penetration across our customer base.
Lee Rivas: The only thing I would add is the denials as one of our larger solution lines within our modular business.
Jennifer Williams: With that as Lee mentioned, there's still a lot of opportunity for further penetration across our customer base.
Operator: And a reminder, if you would like to join the queue and ask a question, please press star 1 on your keypad now to raise your hand, and we'll pause for a moment for any final questions. And there are no final questions at this time. I would like to turn the call back over to Lee for closing remarks.
Jennifer Williams: And a reminder, if you would like to join the queue and ask a question. Please press star one on your keypad now to raise your hand.
Lee Rivas: We will pause for a moment for any final questions.
Operator: And there are no final questions at this time I would like to turn the call back over to Lee for closing remarks.
Lee Rivas: Thanks, Polly. There are a couple of things I'd say just to close this out. First and foremost, we remain focused on delivering operationally and innovating for our customers. That's by far our top priority. Second, a point that I've emphasized a few times, is that market demand for our solutions is very strong across the board. And third, and last, we're very excited about the opportunity to transform the industry through technology and what we believe are the best people in the industry. Thank you for your time today, everyone.
Polly: Thanks, Paul.
Lee Rivas: Couple of things I'd say just to close this out first and foremost we remain focused on delivering operationally and innovating for our customers that's by far our top priority.
Lee Rivas: As a point that I've emphasized a few times is that market demand for our solutions is very strong across the board and.
Lee Rivas: And third and last we are very excited about the opportunity to transform the industry through technology and what we believe are the best people in the industry. Thank you for your time today everyone.
Operator: This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.
Speaker Change: This concludes today's conference call enjoy the rest of your day you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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