Veradigm Inc. (MDRX) Earnings Call Transcript & Summary

Greetings, and welcome to the Veradigm Investor Update Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jenny Gelinas, Vice President, Investor Relations. Jenny, please go ahead.

Thank you very much. Good morning, and welcome to the Veradigm Update conference call. Our speakers today are Tom Langan, Veradigm's Interim Chief Executive Officer; and Lee Westerfield, our Interim Chief Financial Officer. We'll be making a number of forward-looking statements during the presentation and the Q&A part of the call. These statements are based on current expectations and involve a number of risks and uncertainties that could cause our actual results to vary materially from those reflected in the forward-looking statements. We undertake no obligation to revise these forward-looking statements in light of new information or future events. Please refer to our releases and the SEC filings for more information regarding the risk factors that may affect our results. In addition, we will be referring to certain non-GAAP financial measures. Please refer to the information regarding these non-GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures in our press releases that are available on our Investor Relations website. Today's meeting will start with an introduction from Tom, followed by a financial update from Lee. And then lastly, Tom will provide closing remarks. And with that, I'm going to hand the call over to Tom.

Thank you, Jenny, and welcome to everyone joining the call today. The focus of the call today is to review our audited financial results from 2022 and unaudited revenue, adjusted EBITDA and cash positions from 2023 and 2024, provide a current view of Veradigm's business, summarize key business highlights and characterize our path forward to leverage our strong market position, including our outlook on revenue and cash for 2025. Update you on the progress of the audit, accounting remediation and becoming current with our filing obligations. We remain confident in the Veradigm business model and our value proposition. The fundamentals of our core business are sound. We've completed our 2022 restatement and are on the path to becoming current in our filing obligations. We have a refreshed Board to provide oversight as we execute our go-forward strategy. Starting with Board refreshment. Since the beginning of this year, we added 4 new independent directors. Our new Chairman of the Board, Lou Silverman, is a seasoned health care executive with over 30 years of leadership experience in health care, information technology and technology-enabled health care services, including 8 years as CEO of Quality Systems, now known as NextGen Healthcare. Our new Audit Committee Chair, Bruce Felt, has served as Chief Financial Officer at several public companies in the technology space, including most recently at a cloud software company, and he has served as Audit Committee Chair of both Cambium Networks and Evolent Health. Our new Nominating and Governance Committee Chair, Vinit Asar, brings to the Board 30 years of diversified global health care leadership experience in medical devices and non-acute health care services as well as experience as a public company CEO at a company that went through a restatement and relisting of its common stock. Additionally, Jonathan Sacks, a partner at Stonehill Capital Management, which is Veradigm's largest shareholder, brings over 20 years of investment management experience across many industries, including health care as well as experience with companies undergoing complex accounting challenges, delistings and capital structure changes. Yesterday, we reached an important milestone by filing our Form 10-K, which includes restatements of certain 2020, 2021 and 2022 financials and details the findings of our Audit Committee's investigations and our other reviews as well as our remediation plan to address identified control deficiencies and enhance our overall internal control environment. This marks a crucial step in becoming current in our financial reporting. Last night, we released updated preliminary unaudited 2023 estimated revenue and adjusted EBITDA in ranges that are both at the higher end of the previously disclosed estimates from January of 2024 and reaffirmed in March of 2024. We also released updated preliminary unaudited 2024 estimated revenue and adjusted EBITDA ranges that are below prior guidance issued in March of 2024 and reaffirmed in May of 2024. There are a number of market and execution factors that impacted the 2024 estimated revenue and adjusted EBITDA results, which we will detail later in this call. As you will see, we incurred significant external audit fees, accounting, advisory fees and legal fees in 2023 and 2024. These fees related to the preparation of the financial statements contained in the 2022 Form 10-K, the Audit Committee investigation as well as the restatement and internal reviews described in the 2022 10-K. We also incurred additional expenses to supplement our internal accounting operations. There were many reasons that it took so much time and expense to prepare the 2022 10-K. For example, there were several material weaknesses described in the 2022 10-K. These internal controlled deficiencies resulted in more extensive audit procedures. This extended our time lines and significantly increased our external professional services spend. In addition, the materiality threshold for the 2022 audit was significantly lower than it had been prior to the sale of our HLPP business in May 2022 due to the reduced size of the company. This also resulted in a lower materiality threshold being applied to 2020 and 2021 during the restatement. It is worth noting that the external professional services fees we have already incurred have benefited our remediation efforts and should continue to do so as we move forward with our remediation plan. We have described that remediation plan in the 2022 10-K. It should also help us with the preparation of our 2023, 2024 and 2025 financial statement filings. Given the work already completed, we expect that external professional services fee relating to audit procedures will decline from 2024 levels for the remainder of 2025. Despite the shortfall in revenue and adjusted EBITDA for 2024, we remain confident in Veradigm's business model and market positioning. Veradigm is a leading health care data and intelligence organization uniquely positioned at the intersection of the 3 pillars of health care, payer, provider and life sciences with a broad-based national footprint. Veradigm's data assets encompassing both proprietary and external sources serve each of our 3 pillars. We believe that the application of our in-house generative AI capabilities will drive deeper insights and greater value for our clients. Key business highlights across our provider business center on signing new customers to our Veradigm suite of solutions with a focus on high-growth specialty EHR markets. Just in 2025, we signed the largest wound care organization in the United States to a Veradigm Practice Management and Veradigm Revenue Cycle Analytics deal. We continued our growth in specialty markets, for example, signing another multimillion dollar 5-year contract with a large urology practice, one of the largest provider deals we have signed in recent years. We have seen recent successes in our payer business as well, signing 7 new clients over the past 3 months within our care gap alerting solution. Veradigm Payer Insights continues to grow rapidly with nearly 400 new sites onboarded so far in 2025. The product currently provides gaps in care alerts to over 3,500 health care practices across the United States. We recently signed a number of contracts in our Life Sciences business, signing a multimillion dollar Veradigm Digital Health Media deal and a top 10 biopharma company committing to a multiyear, multimillion dollar enterprise data deal for both Veradigm Network EHR and remit data. Veradigm has a strong foundation for sustained growth, anchored by high recurring revenue and the distinctive value we provide our customers. At the same time, we recognize the need for operational improvements. The Veradigm leadership team with the review of an independent strategic advisory firm conducted a thorough operational assessment and developed a comprehensive go-forward plan to rationalize our cost structure to ensure profitable growth. This plan supports our priorities, which include remediating our material weaknesses and other internal control efficiencies, becoming current in financial reporting, executing against our growth strategy to deliver end-to-end solutions that empower our clients and relisting our common stock. Looking forward, Veradigm's growth strategy focuses on expanding our core provider base while enhancing the value of our offerings, including advancing AI-enabled clinical and financial workflows. By integrating high-value specialty practices into our EHR network and broadening our reach and revenue cycle management solutions, Veradigm is strengthening its foundation in the health care ecosystem, which is the anchor for expanding our payer and life sciences solutions. We believe the continued expansion of the Veradigm network through increased provider participation, enhanced data access and improved connectivity will drive growth across all of our market segments. Let me provide you with some details on these initiatives across our 3 pillars. In our provider business, we have implemented streamlined provider workflows utilizing AI to reduce administrative burden and improve data capture while enhancing the customer experience. In the payer business, we are working to expand the Veradigm network through payer provider collaborations and deliver solutions that empower multiple health care stakeholders to work together more effectively. And in Life Sciences, we have scaled our data products and analytics that utilize natural language processing to unlock new market opportunities and new revenue streams. In parallel with our investments for growth and innovation, we are transforming our internal technology infrastructure and processes. This initiative will create a modern 360-degree view of the customer by upgrading and consolidating our CRM and ERP systems. Before we get to the financial results, I want to express my sincere gratitude to all of our employees. Our customers trust us to help them solve their challenges, and that trust is earned through the hard work and dedication of our incredible Veradigm team. It is their commitment to customers and their resilience through 2024 that have been a true highlight for me and our leadership team. Let me turn it over to Lee, who will walk you through the Form 10-K, 2023 and 2024 unaudited revenue, adjusted EBITDA and cash positions and 2025 outlook as well as our cash position and progress on remediation. Then I'll come back to provide some final comments.

Thank you, Tom. Today, my comments will focus on 3 areas: first, our historical financials; second, our forward outlook; finally, I'll address our accounting remediation plans. Now turning to our historical financials. There are 5 years to review with you. First, I'll briefly touch on the restated audited periods 2020 to 2022. Then I will address more fully the recent unaudited years '23 to 2024. As Tom mentioned, the company filed its 2022 Form 10-K yesterday. For the years 2020 to 2022, I'll focus on the restated revenue and assets, revenue from continuing operations and total assets from both continuing operations plus divested businesses. Restated revenue from Veradigm's continuing operations changed minimally in the years 2020 and 2021 from prior filings by less than 1% in each year. In 2022, for the first 9 months of that year, restated revenue from continuing operations was reduced by approximately 4%. Restated assets in total, combining both Veradigm's continued operations and divested businesses, were reduced through impairments and write-offs in the restated balance sheet. The impact of the internal control failures on the company's assets was a reduction of $63 million for the year ended 2020 and a reduction of $119 million for the year ended 2021. For the 9 months ended September 2022, restated assets were reduced by $57 million. Deferred revenue and contract assets, goodwill and accounts receivable were the primary accounts affected on the restatement balance sheet. You will find a description of identified material weaknesses in the 2022 Form 10-K filing in Item 9A, which also summarizes the company's remediation plans. Regarding 2020 to 2022 historicals, I'll now comment on growth and profitability. Revenue increased modestly from 2020 to 2022, up by 4% in 2021, lifted by both transaction-related revenue and recurring revenue. Then up by 2% in 2022 when our emerging payer and life sciences operations gained market traction. And regarding adjusted EBITDA in those historical periods, Veradigm's EBITDA margin for 2020 was 22%, for 2021 was 29%, and for 2022 was 24%. That's what -- that was EBITDA margins. Now let me address more recent years. In 2023 and 2024, both years are unaudited periods. I will share preliminary estimated financials in ranges based on information currently available. In 2023, our updated preliminary estimated revenue and adjusted EBITDA ranges show that we performed at the higher end of prior guidance ranges that we issued last year in January and reaffirmed in March. The 2024 preliminary estimated revenue and adjusted EBITDA ranges show that we fell short of the prior guidance ranges that we issued last year in March and reaffirmed in May. I'll speak first about 2023. GAAP revenue is estimated to be in a range between $620 million and $625 million. That range includes favorable customer settlements of approximately $19 million. Revenue, excluding customer settlements, grew modestly by approximately 3% at the midpoint year-over-year from 2022. Recurring revenue in 2023 was approximately 80% of total revenue, consistent with prior years. In 2023, business unit performance showed top line increases in both businesses, up 1% in Provider and up 7% in Payer and Life Sciences, each at midpoint. Our adjusted EBITDA in 2023 is estimated to be between $139 million and $144 million higher than our previously estimated range. About cash and debt, net cash was $239 million at year-end 2023. Cash and equivalents were $447 million and debt, which at year-end 2023 consisted of convertible notes and an undrawn credit facility was $208 million of funded debt. Change in cash in 2023 was approximately net 0. In other words, cash remained flat year-on-year during 2023. I'll walk you through the major sources and uses of cash in 2023. First, outflows for transaction and other expenses totaled approximately $46 million, the bulk of which went towards audit, accounting and legal professional fees for the restatement of 2022 as well as legal fees for certain other matters. Two, net outflows for equity investing activity was $59 million, mainly towards the strategic investment in Holmusk. Three, there were no acquisitions or divestitures in 2023. Four, CapEx outflows totaled approximately $30 million, mainly for software development and also for hardware. Five, and finally, approximately negative $5 million impact on cash from the sum of net interest income, working capital changes and taxes. Now turning to 2024 unaudited results. Revenue fell short of the prior range first issued in March of 2024 and reaffirmed in May of 2024. Unexpected revenue shortfalls took shape late in the third quarter and more significantly in the fourth quarter of 2024. Revenue shortfalls occurred across all business units, especially in Payer and Life Science. Full year 2024 GAAP revenue is estimated to have been between $583 million and $588 million. That range includes favorable customer settlements of approximately $1 million. Recurring revenue in 2024 was approximately 80% of total revenue, again, consistent with prior years. As compared to our prior guidance ranges, today's updated estimated revenue fell short by approximately $42 million at the midpoint. I'll break down the components of the revenue shortfall, drilling into each business unit. Provider revenue dipped 1% year-over-year from the midpoint of the range in 2023. We had anticipated roughly 2% growth in our prior guidance. Payer and Life Science revenue declined by 10% from the midpoint of the range in 2023. We had anticipated growth of roughly 10% in our prior guidance. Of the total shortfall in revenue, provider accounted for roughly 1/3, while Payer and Life Science accounted for roughly 2/3 of the $42 million estimated shortfall. Several factors contributed to the top line shortfall. In provider, the shortfall stemmed from higher-than-expected customer net attrition across multiple solutions, especially affecting revenue cycle management. While in Payer and Life Sciences, top line declined rather than grew. At the root of it, multiple internal and external factors affected that performance. In payer, we experienced implementation delays in clinical data exchange and rollout delays in gap care closure services. And in Life Science, biopharma sector-wide softness led to lower real-world data sales closings and media bookings versus 2023. Full year adjusted EBITDA for 2024 is estimated to have been between $85 million and $90 million. This estimated range is below the previously disclosed guidance range. The adjusted EBITDA decline year-on-year was primarily driven by the shortfall in revenue. About cash in 2024. Our net cash was $87 million at year-end 2024, consisting of cash and equivalents of $295 million less funded debt of $208 million. During 2024, cash declined by $152 million versus 2023. I will walk through the major sources and uses of cash in 2024. First, approximately $103 million of outflows for transaction and other expenses, the bulk of which went towards audit and accounting professional fees for the restatement of 2022 and the remainder for the strategic review process and for legal fees for certain other matters. Two, net inflow of $13 million from our equity investing activities, including inflows from distributions less outflows for contractually committed equity investments. Three, approximately $110 million of outflow for the acquisitions of ScienceIO and Koha Health. Four, approximately $35 million of outflow for CapEx, mainly for software development and hardware and also for the implementation of our new ERP system. Five, and finally, approximately $5 million net negative impact on cash from net interest income, working capital changes and taxes. Now turning to our outlook for 2025. The framework for our financial outlook is revenue is expected to be approximately flat versus the 2024 range. We're expecting top line growth from new customers and contracts and price increases, offset by customer attrition, if consistent with historical levels. Regarding our cash outlook, we are currently net cash positive and anticipating remaining net cash positive throughout 2025, and we are pursuing additional debt financing. Now the next steps towards remediation. To regain current SEC filing status, the necessary steps are to complete the annual audits for 2023 and 2024 and, thereafter, the audit of 2025 and all quarterly filings up to the current period. We do not anticipate becoming current in our financial reporting until sometime in 2026. For remediation, we have several -- 7 material weaknesses cited in the 2022 Form 10-K. The majority of our remediation plans are expected to be completed during 2026 in conjunction with the implementation of our new ERP designed to enhance controls. The ERP system implementations and accounting remediations will affect the timing of our audits and filings. To wrap up, what can you expect going forward? Tom and I plan to provide periodic business updates until we're current with our financial reporting obligations. I will now pass the call back to Tom.

Thanks, Lee. Now I will make a few closing remarks. Looking forward, we believe Veradigm is well positioned to capitalize on today's and tomorrow's health care market trends. I remain confident in our business model and value proposition. Our revitalization plan is straightforward. We will focus on remediating our material weaknesses and other internal control deficiencies, becoming current in financial reporting, executing against our growth strategy to deliver end-to-end solutions that empower our clients and relisting our common stock. I am proud of our Veradigm employees who work each and every day to earn our customers' business, and I'm grateful for their dedication. Thank you for your patience over the past 24 months. We still have much work to do, but we are resilient, determined and motivated, and we believe Veradigm is on a path that positions us for success. Operator, we will take questions now.

[Operator Instructions] Our first question is coming from Charles Rhyee from TD Cowen.

I guess, Lee, just to clarify, did I hear you correctly that the remediation efforts need to be completed first before you can become current on the filings?

No, that's not quite right, Charles. In fact, we can regain currency on filings while continuing to work on the remediations.

Okay. So then I guess the question is your statement about '26, that's related to remediation. But in terms of getting current, what was the time line to expect for getting current on filings? Is that also still in '26? And if so, why is that expected to be so long, I guess?

Each is expected to occur during 2026, the remediations and the current filings based upon what we currently foresee in our pathways along both of those tracks. Why so long or so short, the elements are to perform a 2023 and 2024 annual audit with 10-K filing. And then, of course, 2025 ensues and the quarterlies that would also need to be filed ensuing the 2025 annual filing.

Okay. I guess just a follow-up there. I was under impression, I think when we spoke a while back, maybe last year, it sounded -- or maybe it was with Jenny. It sounded that -- it seemed like that -- I was under impression that the process for the 2022 restatement was kind of running separately from the 2023 and 2024, and the impression being that, that process was ongoing separately. But it sounds like now that -- was there any work done on '23 or '24 up until now? Or has that -- will that just get started now, I guess?

Preparation work for 2023 and for 2024 for some testing work has been performed. Logically, to really commence on 2023 and 2024 from trial balances, the completion of 2022 to be able to roll forward into those ensuing years, '23 and '24. And when we do arrive at this point, 2025 annual audit occur in sequence. So the bulk of the work for each of the annual audits that remain on our plate, '23, '24 and '25 will occur in the sequence.

Okay. And maybe one last question for me. The net attrition that you talked about, particularly in provider, which you're also assuming in 2025 as well. Can you give us a little bit more color, maybe, Tom, what's occurring here? And what's kind of driving that attrition? Is it through consolidation or share loss to competitors? If you can give us a sense of what the competitive environment is currently looking like? And where -- how are you looking to remediate that yourself?

Charles, thanks for the question. I appreciate it. Yes, we're not seeing -- it's not market consolidation driven. So we're seeing, obviously, as we stated, higher net attrition within our core provider business, both our EHR, primarily revenue cycle. We had higher attrition in our revenue cycle business. We're still seeing market opportunities in the small to mid-segments of the market, but we had lower net new sales in 2024 in addition to the higher net attrition impacting the business.

Any kind of details on what might be driving that? Is that a situation of functionality in the products that you need to enhance or just maybe decisions to move -- why are people moving away, I guess, is the main question.

We're seeing higher attrition in the large physician practice segment, where there tends to be a little bit more consolidation, affiliations with hospitals, but more stability in the kind of mid- to small market segment.

Next question is coming from Jeff Garro from Stephens.

Maybe a follow-up on some of Charles' questions on the timing of the path forward. And first, I guess, you talked about the different years and moving through sequence. So I wanted to ask if you could kind of break that time line into more discrete pieces so we can think about when to expect updates and would appreciate if you could kind of affirm the commitment to updating us on where the '25 outlook is trending as you progress through all the audit work.

The audits and the remediation is our top priority for Tom and for our company. With regard to timing and the amount of work ahead, I can lay out the sequence and an end state, which is regaining current filing status. I'd not want to lay out the specific date for expectations for the specifics of '23 or '24 or '25 filings, except to say over the next several quarters and rolling into 2026. With regard to the amount of work involved in those, significant preparation because of the amount of work that got done for 2022 is already laid before us for the work for the other outstanding years. With regard to -- sorry, what was the other portion of the question?

The other question you asked was with Jeff, was around the timing of frequent periodic updates on the business and the status of the business. So you have our commitment to provide periodic updates as needed. Obviously, there hasn't been a lot of communication recently, but we're going to continue as we go forward to be as transparent and open with periodic updates.

Great. I appreciate that. And then maybe turning to the fundamentals. Over the last few years, even before the accounting restatement was needed, there was lots of work being done creating this network business, building up the data assets, building up data partnerships. So I would love if you could give us an update on the size and scale of the network in terms of relevant data points like number of providers, number of patients being accessed by the network? And any way you can frame up the size and scale of claims and related data flowing through the network?

Sure. Let me comment on that, Jeff. So you're absolutely right. We spent the last couple of years building out the Veradigm network, which is our proprietary data assets that we have as well as access to other data sources. So as we stated in the 10-K, we have over 400,000 providers, both from our proprietary sources as well as other sources that we're monetizing different use cases across both our payer and life sciences business. In addition, we have over 200 million patients that we're gaining access to that we're using for various use cases across both payer and life sciences. Building out the network and continuing to find additional data sources through partnerships and growth in our business is a key priority for us. And as I stated, the specialty markets are a key area of focus for us. I'm excited with the new wins we had recently in urology and other specialty markets that continues to add to the data platform that we have. In addition to our structured data, there's significant unstructured data in the platform, and we're accessing using NLP and our AI capabilities to build out premium datasets across different specialties to then monetize with our life sciences clients. We continue to build out on the payer side of our business, our clinical data exchange platform. And in addition to the data that we have, we're also -- we've launched our gap closure solution that's gaining traction in the market, as I stated in my opening comments.

Great. I appreciate that update. And then I want to turn to the outlook for 2025. And I appreciate the update on the top line and the expectations around the cash balance, but notice there's no profitability outlook for 2025. So I was hoping maybe you could frame up where you see the exit margin rate leaving the fourth quarter of '24. And yes, there might be some seasonality impact we should consider there? And then also comment on expenses that occurred in '24 and fall off as you get more current on the financials or just kind of work through that? The backlog of work, I noticed the $103 million in transaction and other expenses called out in '24. Presumably, those are excluded from adjusted EBITDA. But how does that trend in '25? And what's the spend that's not going to fall off that's related to some of this accounting work?

Jeff, I'm really glad you've asked these questions because they'll help clarify for all of the audience and yourself as well what is coming up in 2025. There's a lot there. So if I miss any of the items, please tell me at the end of this. First, our outlook for -- framing our outlook for 2025, we have said here an outlook on revenue for approximately flat with the midpoint to the range of 2024's estimations. And at the cash bottom line, we would remain -- we are and will remain -- anticipate remaining net cash positive during 2025. In between those numbers, there's a lot, and that's what you're really asking. With regard to our EBITDA margin and with regard to other elements below EBITDA for cash expense, I'm going to give a qualitative framework here for you, but not a specific kind of guidance to be sure. We are in the midst of a cost realignment and have executed, as you heard Tom mention in his remarks, and that is underway with an impact that will be occurring -- favorable impact on our margins during 2025 and a more significant impact on EBITDA margins when we get a full year of benefit from cost actions in 2026. With regard to below EBITDA, the intensely high level of auditor accounting-related legal expenses and also the strategic review process in 2024 was a significant use of cash, as you pointed out. We do anticipate there being continued but at a significantly diminished level. That cash expense below the EBITDA line, while we continue to pursue the finality of our -- or the completion towards completion of our 2023, '24 and '25 audit set. And so that below EBITDA expense line should be not 0, but significantly lower in 2025.

Got it. That helps. And last one for me before I hop back in the queue. I want to ask about revenue visibility for FY '25. The expectation that is flat, but certainly, there are some moving pieces there, and you mentioned kind of attrition offsetting growth. I would love for you to unpack that more and particularly in light of the shortfall in revenue that manifested in the second half of 2024. Presumably, with that occurring, you kind of need some rebound from the exit rate from '24 and on the shortfall kind of -- which is reoccurring, which was nonrecurring revenue that might be a little easier to bounce back from. But I would appreciate some more comments on forward visibility of revenue.

I'm going to try to translate the question to be sure we're saying the same thing and hand it to Tom. I think you're asking we had shortfall in revenue clearly in 2024. What portions were recurring, what portions were transactional and, therefore, what the bounce back rate might be? Yes?

Correct.

Yes, Jeff, I'd comment, as we stated, we have high recurring revenue, about 80%. There is a percentage of our business that's obviously nonrecurring. As we stated, obviously, our Payer and Life Science business had a pretty significant shortfall in 2024, anticipated shortfall. As I stated on my comments of some of the new business coming in across the business, I feel good with our first quarter activity and where we are from an overall pipeline conversion with both net new business coming across both payer, provider and life sciences. So, so far, the start of the year so far in '25 is looking promising, but we still have some work to do, particularly on the nonrecurring type revenue that comes within our Payer and Life Science business.

Next question is coming from George Hill from Deutsche Bank.

And I think I'm just going to wind up hitting a couple of the themes that Charles and Jeff have already hit. So if we think about the revenue fall off in Q3 and Q4 of '24, it seemed to happen across all the company segments. I guess, is there anything you can talk about like what happened to the timing? Like what was special about Q3 and Q4? What was special about the back half of 2024 that kind of drove the revenue decline across all the segments?

Yes, sure. Thanks, George. I'll address that. So let me focus on each of the segments, Payer and Life Science first. The timing of implementation and go-live, as Lee had referenced, particularly in our clinical data exchange as well as our gap closure rollout and go-live definitely had an impact in Q4. So these are -- when I say implementation go-live, they're clearly contracts that are signed with contracts in hand, but the actual timing of them did not happen in the fourth quarter. And we had anticipated them happening in the fourth quarter, so that had a pretty dramatic impact. That's in the Payer segment. In the Life Science segment, we've seen softness in '24 across the Pharma Services and Data segment across the industry. That also had an impact on the Life Sciences business and particularly a shortfall in the media revenue in the real-world data business. We did see good momentum within our real-world evidence business, but that also had an impact in the fourth quarter. And then in the provider business...

Okay. And maybe...

Yes, go ahead. Go ahead.

No, you keep going. I couldn't tell if you had finished that part of the answer or complete. I'm sorry, I didn't mean to interrupt you.

No, that's okay. In the provider business, it's highly recurring. But when you have a softness in your net new business, that has an impact on the second half of the year. So performance earlier in the year or in the prior year can have an impact on revenue that's recognized in the third or fourth quarter. So the lower net new sales and our kind of net new business is having -- had an impact in the second half of the year. We're seeing good momentum. That, as I stated, we're signing much larger deals, multiyear deals across both our EHR as well as our clearinghouse solutions, so that's encouraging as well as we close out Q1.

Okay. That's helpful. And then just given that you guys haven't been a regular reporter in a while, I thought would you take an opportunity to update us kind of on the lay of the land from the provider business, kind of what's the RCM exposure, what's the EHR exposure? Can you talk about exposure by practice size. But just kind of -- would love kind of a corporate overview update of where you guys are these days as it relates to the positioning of the business.

Yes. I mean, sure, from a market segment size perspective, we have a really strong presence in the, I would call it, the small market and the mid-market. Clearly, our Practice Fusion platform, which is in the smaller independent physician practices, we have now a full suite of solutions there, both our core clinical EHR, our billing solution rev cycle as well as our PM solution to be able to go to the market. So we're seeing good opportunities within that segment of the market. The segment that is kind of, I would say, the mid-market, which is our Veradigm Suite and Veradigm EHR, we're seeing a lot of market opportunities where clients are asking for support around rev cycle and the end-to-end financial management of their practices. So that's where we're seeing from a market opportunity. The suite of solutions that we have that includes our clearinghouse, our revenue cycle capabilities as well as our PM solution is where a lot of the net new business is coming from and particularly in specialties: orthopedics, urology and other multi-specialties is where we're seeing a lot of the opportunity.

Okay. And I guess 2 quick ones for Lee. I guess, Lee, I know we're expecting to be fully current on the filings in 2026. Can you comment on whether the expectation is front half or back half of '26? Just trying to get like a slightly narrower sense of timing?

It'd be premature at this point to offer that kind of precision.

Okay. And then you talked about the debt refinance. And I guess, is that -- I apologize I'm on -- are the convertibles coming due that you guys need to refinance? Or is there any reason, like is there an operating reason where you guys like need to tap the debt market considering you're going to stay in a positive net cash position?

Sure. First, let me offer on the debt financing that I commented on, what our situation is and what we're doing. The situation is simple enough. It is that our convertible note investors hold a put right and their next put opportunity is July 1, 2025. We have ample cash should they choose to exercise the put to repay the principal and accreted amounts and then have, I would call it, a significant amount of cash remaining. That said, we -- a year ago, approximately 9 months ago, I let go of our credit facility with our commercial banks. So our cash and liquidity are equal, meaning as a public company, it's our judgment to be prudent to make sure that we have additional liquidity. And for that reason, we're looking for alternative lending at this point to assure that we are sufficiently cash supported and liquidity supported in the months and a couple of years ahead.

Got it. I didn't have the put data in front of me, but I appreciate that color.

Next question is going to be a follow-up from Charles Rhyee from TD Cowen.

Tom, you mentioned earlier some weakness in rev cycle management in particular. If I recall, you guys acquired Koha Health in early '24. Can you give us any kind of sense on the size of that business, kind of what that brought in for you guys in terms of a customer base or revenue contribution? And with some of the losses there, was that attrition from maybe the Koha customer base? Just trying to understand if you kind of enhance sort of that product capabilities, what's going on?

Sure. I'll comment. Thanks, Charles. Yes, so the Koha acquisition was obviously additional capabilities within our rev cycle capability. So we did see more attrition in the Koha business after the acquisition. It did also bring us capabilities that we didn't have within the business credentialing and others. It gave us a presence in the orthopedic market, which has really helped our pipeline and our new business opportunities. So we're excited about the addition of the Koha business, but some of the attrition in a few of their clients did have a negative impact on 2024.

Got it. And then to George's question earlier, you mentioned that in the Pharma segment, there was sort of weakness in real-world evidence. And -- sorry, I forgot the other part. But can you kind of comment on the trends that you're seeing? Because when you look at some of the peers in the space, particularly serving the commercial end of the pharma spend, it does seem like there's been a rebound sort of in the back half of last year. The outlooks appear to be a little bit better going into this year. Any comments on the trends you're seeing in '25? And then my last question would be the favorable customer settlements that you mentioned for '23, what portion came in provider versus maybe payer, life science?

Sure. I'll talk about the Life Science business first. We didn't have softness in the real-world evidence business. That segment of Life Science business was strong in the fourth quarter. We did have softness in our media business and in our data business; however, we are seeing good momentum, as I commented on some of the larger deals that our life science commercial team is focused on. So we are starting to see in Q1 more spend flowing into the market, particularly around the data assets and some of the differentiation that we're selling in the market. We are starting to see some acceleration in the programmatic buying in our core digital health media business in the first quarter, but we did see softness in the fourth quarter of last year. So your comment about the trends and you're hearing across the industry, we're starting to hear that a little bit in Q1 that there's a pickup in spend and more dollars coming into the market.

Got it. And the breakout in the customer settlements?

Lee, I'll let you comment on that. The breakout in customer settlements in 2024.

The customer settlements in 2023 and 2024 are in the provider business, if that's the question.

Okay. So it was all in provider then?

It's all provider, correct. All provider, not payer life sciences.

Next question is a follow-up from Jeff Garro from Stephens.

Similar to Charles, I want to ask on one of the acquisitions that we haven't had much of a chance to discuss. So I want to hit on ScienceIO and have a few questions there. Would like if you could explain the impact on the financials. And more pointedly, is there any revenue coming directly from that business? And what's the magnitude of the likely drag on profitability? And then more broadly, what's the strategic vision for that technology? And to what extent has that changed since the CEO change?

Sure. Thanks, Jeff. It's Tom. I'll address the question. So there's no revenue in '24 for ScienceIO. However, let me comment on just in general on our AI strategy and our Gen AI strategy. We see significant opportunities across all segments of our business. The ScienceIO team, which is our center of excellence around AI is working collaboratively across our payer, provider and life sciences business. As I commented in my opening statements, we're seeing really strong opportunities around clinical workflows within the Provider segment, where AI is improving the administrative burden for physicians, and we're seeing significant operational improvement there. Also in the provider segment, we're seeing opportunities to leverage AI to make us more operationally efficient, particularly in our rep cycle business. In the Payer segment of our business, getting access to discrete data by leveraging our AI capabilities is going to continue to help us differentiate in the payer market. And then finally, in the Life Sciences business, which historically we've talked a lot about the use of AI around our data assets. We still have a very strong investment thesis as well as strategic view that generative AI and that technology will help us unlock value around the data assets that we have and create unique datasets for our life sciences companies, not just data, but also the insights that we can provide back to the life sciences organizations. So overall, we're still very, very positive about the acquisition as well as the opportunities that we're seeing in the market. The market is moving fast. We'll continue to look for ways to both improve our revenue, increase our revenue as well as our operational efficiency. And AI is a clear key strategic priority for us across the entire organization.

Great. I appreciate that. And maybe the one thing that you didn't touch on is the drag on profitability cash burn related to that business. So I think it's a helpful piece knowing that, that wasn't there in '23 that now we have a little more clarity on '23 versus seeing where the margins are likely to land for '24.

Sure. I'll let Lee bridge it what the costs are for the ScienceIO acquisition.

Sure. ScienceIO and Koha impacted EBITDA margins in 2024 because each brought new costs that were not in 2023's operating expense base. Measurably, I guess, I would say, combining the 2, we are in the mid-teens in overall expenses, COGS and OpEx hitting EBITDA in 2024 for those 2 combined. In regard to future outlays, we've published previously that there are 2 future installment payments to complete the acquisition purchase price for ScienceIO. One in January 2026, one in January 2027, each approximately $15 million. That would be acquisition cash.

And the mid-teens expense, that's accrual basis and that's millions of dollars, not percentage of revenue?

Yes, sorry. Thank you for that. Mid-teens millions in 2024.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

I'd like to thank everyone for the call today. I appreciate your patience over the last 24 months. We're excited about the opportunities going into 2025. Just to also make the final comment that the management team has done a thorough business review and operational review. We stated that we've worked with a third party to look at both our product rationalization, our costs and our go-to-market and how we're going to look for ways to be more efficient as well as to drive top line revenue growth. So we're very focused on kind of the go forward for the business as we move into 2025. And we look forward to having follow-up calls, periodic calls to inform you of our progress through the rest of the year.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.