R1 RCM Inc. (NASDAQ:RCM) Q1 2024 Earnings Call Transcript

R1 RCM Inc. (NASDAQ:RCM) Q1 2024 Earnings Call Transcript May 8, 2024

R1 RCM Inc. misses on earnings expectations. Reported EPS is $-0.08349 EPS, expectations were $-0.05. R1 RCM Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by and welcome to the R1 RCM First Quarter 2024 Earnings Conference Call. [Operator Instructions] 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.

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 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 Change Healthcare cyber attack 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.

Investors are cautioned not to place undue reliance on these forward-looking statements. All forward-looking statements made on today’s call involve risks and uncertainties. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of 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 Acclara, 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 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 Form 10-K.

Certain results that will be referenced on this call maybe rounded to the nearest whole number. We will also be referencing non-GAAP metrics on this call. For 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, 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 Acclara’s contributions from the closing date in January, investments to onboard Providence, and continued investments in our multiyear technology transformation. We believe these technology investments will enhance our platform and drive innovation with new AI and advanced automation tools and solutions and development. We delivered approximately $604 million in revenue and $152 million in adjusted EBITDA for the first quarter. Before I provide more detail on our progress in the quarter, I want to reinforce my commitment and belief in R1’s vision and strategy to deliver long-term sustainable growth and performance to 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 with the most scale of any technology and services provider in our space with over 90 of the top 100 health systems as their customers. Our addressable market is large at 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, 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 to 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. 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 customers’ workflow. Global service capabilities are also core to our strategy. We are unique and that we operate our own facilities with our own people, 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 enter 2024 in a strong position to support long-term growth and improve performance. We have executed for our end-to-end clients, achieved solid bookings for our modular solutions, closed the Acclara acquisition, and started our 10-year strategic relationship with our largest new enterprise customer. We believe the continued strength of our commercial engine, delivering results to our existing clients and ongoing investments in AI-driven technology and solutions will further support our growth throughout 2024 and over the coming years.

Now, let me turn to the Change Healthcare cyberattack, 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. 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 clearinghouses. We also implemented technology and automation solutions to help mitigate both near-term and longer term impacts surrounding claim submissions, processing and ultimately, cash collections. Our unified data exchange, which is designed to integrate with every major EMR, payer, 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 as a result of the cyberattack have the potential to enhance demand for partners like R1 over time. 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; two, continuing to deliver excellent operational results to our customers to maximize revenues and cash yield in these challenging times; and last, executing our technology road map 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. 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 systems. 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. 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 underpayments and we expect to see an increase in demand for denials and AR recovery going forward as a result of the Change Healthcare incident. Let me provide a couple of examples of our commercial success. We are already expanding the managed services, our 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 long-standing multibillion-dollar NPR modular customer who uses most of our solutions, which further expanded the business for AR recovery solutions.

Over the last 3 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 NTR regional hospital to provide DRG and charge capture solutions and were named vendor of choice for our CDI total Performance Solutions. In the first quarter, we added a larger deal for inpatient clinical denials and we are in discussion to expand our relationship across multiple solutions. Finally, we are also executing on our technology road map. 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.

We have continued to apply technology to the revenue cycle to help our customers drive cost and revenue improvement. 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. This included denials automation, next action prediction for AR management and physician evaluation and management coding. As a result of these automations, we have identified additional value for our customers, improve 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 appeal 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, 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 if 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, and we expect 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.

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 by the Change Healthcare cyberattack. 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 filed 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 will provide some details on these impacts in just a moment. 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 the contribution from Acclara since we closed the acquisition on January 17.

This growth was partially offset by client attrition and facility divestitures we discussed last quarter, as well as the changed healthcare outage and the bankruptcy of one of our modular customers that was filed earlier this week. Net operating fees of $381.5 million grew approximately 6% and or $20.5 million year-over-year. This was mostly driven by the $19.2 million contribution from Acclara. 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. The Change Healthcare cyberattack had no impact on our net operating fees in the quarter, due to the lag of collections used in our base fee revenue calculations. 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 that 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 Acclara revenues as well as the expansion of services to existing customers and new customer contracts. This was partially offset by the impact of both Change Healthcare and the customer bankruptcy. Turning to expenses for the quarter. 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 Acclara.

Excluding Acclara, 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. This increase is driven by a $6.7 million of expenses related to Acclara 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 from 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, reduce the impact of the lower incentive fees in the quarter.

Lastly, we incurred $39 million in other expenses. This included roughly $16 million of transaction costs related to the Acclara acquisition. Now let me provide a couple of comments on cash flow and the balance sheet. As I previously discussed, cash 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 for the end of December. This increase reflects the additional debt and term loans and revolver borrowings for Acclara. 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. Now let me move to our 2024 outlook. 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 billion to $2.64 billion growing 15% to 17% year-over-year, GAAP operating income of $85 million to $105 million and adjusted EBITDA of $625 million to $650 million. These expectations reflect the full year 2024 impact of the Change Healthcare cyberattack and the contribution of Acclara as well as the new contract with Providence. As a reminder, R1’s revenue is tied to cash collections, which was impacted by the Change Healthcare cyberattack.

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 and net operating fee revenues based on the backlog of claims and cash during March, April and May. 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. At this point, given our utilization outlook has not changed, we believe the impact to 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 in 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. 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.

With respect to Acclara, 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 Acclara to contribute approximately $275 million 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 Acclara to grow low double-digits. 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 million to $650 million. This outlook also assumes capital expenditures of approximately 5% of revenue; other expenses of approximately $105 million to $120 million, including Acclara transaction costs and integrated related expenses; interest expense in the range of $175 million to $180 million, including the increased debt to fund Acclara; and depreciation and amortization expense of $330 million 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 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.

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Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Charles Rhyee from TD Cowen. Please go ahead.

Charles Rhyee: Yes. Thanks for taking the questions. I wanted to just dive into this impact on the Change outage. With the guidance change, is it fair to think that the full impact of Change is really just captured completely into ‘24? Or is there a chance that some of that impact could fall into next year? And then, 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 items? And then sorry, lastly, any kind of sense for if you have the shift of Q3, Q4, could you give us a sense what – how Q2 should look in terms of revs and adjusted EBITDA. Thanks.

Lee Rivas: Hi, Charles, this is Lee. Why don’t I start with just big picture, 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 long-term impact, what the team did to address the situation and just maybe a few lessons learned. I know this would be a common question, if I don’t hit this upfront, and then we’ll talk about the specifics. Long-term strategically, no impact. The core business is strong. If anything, that’s emphasized 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, we feel very solid about our business and what we’ve done through this challenge.

The second thing is 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. Now we do expect some residual impact on KPIs with regard to denials because we have built-in automations with many of our vendors, many of our host systems. So we do expect some KPI impact back half of this year. 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.

This is an attack on one company but could happen to any company in our industry. The second lesson learned is around vendor dependency. We’ve 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. 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 to answer the specifics on some of the timing questions?

Jennifer Williams: Sure. Let me just give you a little bit of clarity in 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 on. It’s cash, AR, and then as Lee just mentioned, on denials. Cash and AR, the balance sheet metrics 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 this 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. So really, net-net, the big impact on KPIs will be first quarter and fourth quarter with kind of some noise in between metrics in Q2 and Q3. The second one is timing and think about it in two different buckets. On modular, there was an impact in Q1 and we expect a little bit of impact in Q2 and that’s 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 4-month lag. So the way to think about that is cash collections in March, April and May, which will be the biggest time frame of an 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 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 cost – incremental costs expected in the balance of the year per quarter. And that’s really driven by incremental labor either in the form of incremental people and contractors and overtime associated with manual efforts. So as Lee just mentioned, we have a lot of automation 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.

Charles Rhyee: Got it. Appreciate the color. Thank you.

Operator: [Operator Instructions] And your next question comes from the line of Craig Hettenbach from Morgan Stanley. Please go ahead.

Craig Hettenbach: Great. Thank you. Lee, question on Providence, really around visibility into the ramp of that contract and just the investments you’re making in 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. I’ll start and Jennifer, if you have any other color, please feel free to add. 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 Acclara and on the Providence side. All is positive, Craig. There’s a very supportive, very strong executive team on their side, very aligned set of goals and incentives. And on – 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’s lots of moving parts, bringing on that many people getting onto their technologies, transitioning to our teams, but all is on track. We feel very good about timing of onboarding and integration. Jennifer, anything to add?

Jennifer Williams: Just as we mentioned in our prepared remarks from a guidance perspective, we’re materially in-line with the guidance that we gave for the Providence contract, and we’re confident in our ability to achieve those results.

Operator: Your next question comes from the line of Elizabeth Anderson from Evercore. Please go ahead.

Elizabeth Anderson: Hi, guys. Thanks so much for the question. I appreciate the sensitivity around this. I was wondering if there’s anything that you guys can comment on publicly about the update in the May 6 waiver. And if not, I was wondering if you could comment a little bit more on sort of the increased harmonization with Acclara. I was interested in understanding like what more that is, is that? And then how does that sort of set you up better for 2025, as you mentioned?

Lee Rivas: Yes. Thanks, Elizabeth. Look, no update other than what’s publicly available on your first question, we’re very focused on operating on behalf of our customers and not letting this distract our team. With regard to Acclara, look, I’m very positive on 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 gotten deep had a good set of meetings with those customers, and they are very pleased with the work that Acclara has 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 leaders on that team, and there’s a healthy amount of respect between the R1 and Acclara teams on level of expertise, ability to deploy technology, customer focus and just relationships they have with our 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 kind of back-end processes. All of that is on track. So we feel very good about the process we followed with integration and no concerns just very positive on the business so far 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 Acclara, 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 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 well as we move into 2025. 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 Acclara 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 impact on Acclara on the top line, but they’re already contemplated in the base fee 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 a player had contemplated taking on some of that business. So just sorting out how the revenue aligns across the different business, but really no impact to margin.

Operator: Your next question comes from the line of Jailendra Singh from Truist Securities. Please go ahead.

Jailendra Singh: Thank you. And good morning. Thanks for taking my questions. First, a quick clarification on Charles’ question. So you’re saying that there is no change to your core 2024 EBITDA, what you kind of assumed 2.5 months back. 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 shift of dollars within like intra-year. So basically, how we think about the growth from ‘24 to ‘25, there’s no change compared to 2.5 months back. I’m going to come from that. My main question is like with respect to Change Healthcare disruption, has that impacted your pipeline, RFP flow conversations in general? And also like all these developments around strategic options, have you seen that impacting your – any ongoing contract rollout or any client converse?

Jennifer Williams: 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, we do expect that we will have some of the KPI impact bleed into 2025 and to the first half of ‘25. 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 into automation on the front end of where we have built rules over a period of time that has to be rebuilt, if you will, in the new providers clearing house 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 KPI impact. There is no fundamental issue in the business on the core business outside of that net impact.

Lee Rivas: Just let me get to the second part of that. No long-term impact on the pipeline. We did see a three-week or four-week delay, but the team is very much on track, both in the quarter and for full year on bookings. And I am speaking specifically to modular bookings, Jailendra. If anything, there is an opportunity here as any customer who deals with the outage will have an increase in denials, we think, back half of the year. So, we are seeing increase in the pipeline around AR and denials.

Operator: Apologies for that interruption. And your next question comes from the line of Sean Dodge from RBC Capital Markets. Please go ahead.

Sean Dodge: Yes. Thanks. Just Jennifer, just staying on the change outage for a moment, I am just trying to understand the cadence of the impact of the incentive fees for this year. So, you said $25 million of total impact to the year, $10 million in Q1 and then $2 million of extra cost each quarter for the rest of the year. So, I think that means there should be about another $9 million impact to incentive fees, is that right? 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?

Jennifer Williams: Yes, that’s right. There will be the 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 that’s 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.