And think about that apply tens of thousands of times across our business. Over time, it will reduce the need of – it will reduce the need to have people doing that same task. Reduce the numbers of people. So, the Microsoft partnership is an example of, first of all, a great partnership. They are a partner for our cloud services, but also a symbol of the attention and the focus we are going to put on gen AI is applied to our business.
Craig Hettenbach: Thanks.
Operator: Your next question comes from Jeff Garro.
Jeff Garro: Good morning. Thanks for taking the question. With the reiteration of the FY ‘23 guidance and I am thinking about the implied Q4 range, I want to ask, what are the key points of variance that could drive results to the high or low end of that range in Q4? And any specific comments on incentive fees and cash flow in Q4 would be helpful, too. Thanks.
Jennifer Williams: Sure. We feel good about the volume, cash collections going into Q4 results and our expectations for the quarter. We feel good about our synergy realization. Some of the factors just based on the way that our revenue works is incentive fees could always be a guide up or down, although we are comfortable with the expectations that we have for incentive fees for the quarter. And then we are going to continue to think about resources as far as new business onboarding and what’s to come and the timing of those as well as some of our modular business and the timing of some of those transactions and work that customers are asking us to do on their behalf. So, those are kind of some of the factors that could drive it towards the higher end of the range, although we are very confident in the – reiterating the guidance for the full year of EBITDA that we gave to be in that – still be in that $600 million to $615 million range.
Jeff Garro: Great. That helps. And then a follow-up around the gross margin line, some nice outperformance there relative to our model in the quarter, likely some of that coming from incentive fees, but the expense levels also looked relatively favorable versus our expectations. So, any further color on the impact of expense synergies or the deployment of technology that you have mentioned kind of already moving live and whether that’s having an impact already. Thanks.
Jennifer Williams: Yes. It’s both. I mean we are continuing – this is one area we are continuing to monitor very closely, and we are continuing to drive hard. I mean first – our first priority is making sure that we are delivering for our clients and the performance metrics and generating the cash collections for them. But we are always looking for opportunities, especially with the deployment of technology and opportunities there to streamline and make our operations more efficient, whether that’s utilizing global resources, utilizing automation opportunities and also continuing to drive high-margin modular business.
Jeff Garro: Great. Thanks for taking the questions.
Operator: Your final question comes from Richard Close.
Richard Close: Great. Thanks for squeezing me in. Jennifer, I was wondering if you could go over the third quarter incentive fees and the puts and takes there. You said something about a reclassification of $4 million. And so would that $4 million of hit modular rather than incentive fees. If you could just go into that, that would be helpful.
Jennifer Williams: Sure. So, incentive fees did come in higher than what we expected for the quarter, but there were a couple of one-offs. As I have mentioned in the prepared remarks, the first one was some incentive fees that we would have expected to realize in Q4 that we had said realized in Q3 based on the timing of the customer contract. So, think about that as recognizing it one quarter earlier, it would have hit in Q4. The second was a contract change and based on the nature of how revenue gets classified across the different revenue line items. The contract change was to change the nature of how we calculate the fees. And because it’s more of a – not necessarily fixed fee in nature, but because it’s not tied to specific metrics and performance for those, for this particular customer because they wanted more predictable outcomes and their revenue and their expense going into the second half of the year, we made a change that will take it from the net operating fees into base fees.
So, instead of hitting incentive fees, it will hit net operating fees and therefore, it would bring incentive fees down based on the previous guide that we gave. So, I thought it was important that we gave that color commentary because we will continue to see that. Obviously, the revenue that got pulled forward into Q3 would have been in Q4 as well as we will no longer see roughly that $2 million of revenue a quarter in Q4. And incentive fees, it’s going to be up in the other line item.
Richard Close: Okay. Thank you.
Operator: There are no further questions. I will now turn it over to Lee for closing remarks.
Lee Rivas: Thanks Sydney. A couple of closing points. Well, first of all, we appreciate your interest and support of R1. And as we have discussed today, the first point is customers need us now more than ever as they face challenging macro dynamics, and we are distinctly positioned to serve any of the revenue cycle needs. Second point is we believe we have a right to win with a unique combination of services and technology and access to the structured and unstructured data of $900 billion worth of NPR to drive insights for customers, drive costs down and drive revenue yield. The next point I would make is we have a growing pipeline with diverse opportunities when deed by size, type and solution interest. The next point I make is we have a large set of modular customers and capabilities, 500 customers in total.
This is a high-growth, high-margin business, an increasingly significant part of our business that allows us to meet customers where they are on the revenue cycle journey. And last, we have a strong financial profile and have delivered on our 2023 guidance remaining on track for continued growth and performance. Thank you.
Operator: This concludes today’s conference call. You may now disconnect.
