MultiPlan Corporation

Hello everyone and welcome to the Multiplan Corporation first quarter 2022 earnings conference call. My name is Charlie and I'll be coordinating the call today. You'll have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. I'll now hand over the call to Shauna Gassick, AVP of Investor Relations at Multiplan Corporation to begin. Shauna, please go ahead.

Thank you, Charlie. Good morning and welcome to Multiplan's first quarter 2022 earnings call. Joining me today is Dale White, Chief Executive Officer and Jim Head, Chief Financial Officer. The call is being webcast and can be accessed through the investor relations section of our website at www.multisign.com. During our call, we will refer to the supplemental slide deck that is available on the investor relations portion of our website along with the first quarter 2022 earnings press release issued earlier this morning. Before we begin, I'd like to remind you that our remarks and responses to questions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those stated or implied by forward-looking statements due to risk coincidences associated with our business, which are discussed in the risk factors included in our annual report on Form 10-K for the fiscal year ended December 31st, 2021 and other documents filed or to be filed with the SEC. Any such forward-looking statements represent management's expectations, beliefs, and forecasts based on assumptions and information available as of the date of this call. While we may elect to update such forward-looking statements at some point in the future, please note that we assume no obligation to do so. Certain financial measures we will discuss on this call are non-GAAP financial measures. We believe that providing these measures help investors gain a better and more complete understanding of our financial results and is consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure to the extent available without unreasonable effort is available in the earnings press release and in the slides included in the investigations portion of our company's website. I would now like to turn the call over to our Chief Executive Officer, Dale White. Dale?

Thank you, Shauna. Good morning, everyone, and welcome to the Multi-Plan First Quarter 2022 Earnings Call. As Shauna said, joining me today is Multiplan CFO Jim Head. As I look back on my first 100 days as CEO of Multiplan, I stand encouraged by the trajectory of our company and confident that we are tracking to our full year expectations. We have now produced seven consecutive quarters of growth and a sustained record of strong performance. The operating environment continues to normalize as the tragedy of COVID becomes less disruptive to our everyday life. We now have many NSA implementations in progress and are increasingly assured that we will have a handle on how to help our customers and what it means for Multiplan. We remain focused on investing in new markets and new initiatives to drive growth, encouraged by our growing set of M&A opportunities and confident in our financial flexibility to pursue these opportunities while continuing to de-risk the balance sheet. Our first quarter results yet again demonstrated the considerable earnings power of our business and our ongoing fundamental momentum. First quarter revenues were $298 million, up nearly 17% from the prior year quarter, and basically in line with fourth quarter 2021. Our robust year-over-year growth reflected both the dissipation of the Q1 2021 COVID impact and strong organic growth. Adjusted EBITDA was $225.4 million, up nearly 18% from the prior year quarter and up just under 1% from the fourth quarter of 2021. Both revenues and adjusted EBITDA exceeded the first quarter expectations we communicated in February. In the first quarter, we generated $194.9 million in cash flow from operations and free cash flow of $170.5 million. Our performance is the direct result of the value we provide to our payer customers, the employers, and other health plan sponsors and the members they serve. In the first quarter, we generated $5.6 billion in potential identified savings, a growth rate of over 9 percent from the prior year on billed charges of $31.7 billion as shown on page seven or on page eight of our supplemental deck. Demand for our services have never been stronger. Last quarter, we discussed how multi-plan solutions delivered value to over 100,000 employers and other health plan sponsors in 2021. We have positioned our broad set of medical management and payment accuracy solutions to accommodate a wide range of health benefit plan designs to help our healthcare payer customers serve this vast footprint of employers. This service breadth meets not only the considerable range of preferences across these employers, but also the cyclicality of their preferences as the overall labor environment causes employer priorities to shift between cost efficiency and benefit attractiveness. Multi-plan solution breadth is particularly relevant today because by all accounts, employers are in the midst of a war for talent. Employers are more challenged than they have been in years to retain and attract employees, and benefits matter to employees. Research by Health Equity suggests more than half of employees name healthcare benefits as the greatest driver of job satisfaction. Another 78 percent report that these benefits impact their productivity. At the same time, employers consistently rate the cost of providing these benefits among their top concerns. A 2022 Willis, Towers, and Watson survey indicated that 94 percent of responding employers cite managing health care benefit costs as their number one priority. This should not be surprising since the cost of health care benefits is second only to and was estimated at well over $800 billion in 2021. In a tight labor market, employers must walk an even finer line to balance benefit cost against benefit richness. Multiplan has been helping payers and employers navigate these tradeoffs between cost efficiency and benefit attractiveness for over 40 years. It's why we offer both network solutions and reference-based pricing solutions and combinations of the two that help payers and plan sponsors customize an approach to medical cost management that meets their particular needs. It's why we introduced value-driven health plans that pair reference-based pricing with member and provider engagement tools to minimize balance billing. And it's why we involve a staff of physicians in both algorithm development and the operations of our payment integrity services to achieve higher levels of provider acceptance. We know from experience that no single approach fits all and that a swinging pendulum from cost effectiveness to benefit attractiveness makes adaptability imperative. Multiplan's broad set of cost management and payment accuracy services provides flexibility in how they are accessed and in what combinations allowing payers and health plan sponsors to tailor their cost management strategy to their specific goals and to adjust those strategies as the labor market conditions evolve. Today, with employers laser-focused on retaining and attracting talent, and in the context of rising healthcare costs and accelerating health services utilization as COVID dissipates, our customers are taking full advantage of the flexibility we provide. We are seeing it in our pipeline and in our new business wins. Our larger customer initiatives currently underway or completed include an estimated $40 million in potential new annual revenues encompassing all of our service categories, network-based services, analytic-based services, including No Surprises Act services, and payment and revenue integrity services spanning both pre- and post-pay modalities. About 66% of those estimated revenues are for services not previously in place with our customer. The remaining 34% relate to expansion of services with existing customers or the reconfiguration of these existing services. Our broader pipeline is robust and increasing with velocity. Altogether across the enterprise, we are working on 650 active opportunities representing over $200 million in annual revenues. In Q1, we added over 390 opportunities with current estimated annual revenue of $36 million. The growth in our Q1 pipeline spanned across all service categories and all market segments. During the quarter, We closed on 192 opportunities expected to generate over $27 million in annual revenues once fully ramped. As with our pipeline, our new wins were across all service categories and all market segments. We are particularly pleased with the momentum building in our health plan segment for multi-solution sales, which again underscores the demand for the customization our solutions provide. For example, With one regional health plan, we sold an expansion of reference-based pricing, the end-to-end surprise billing service, and prepayment integrity services for both commercial and Medicare Advantage lines of business. With another plan, we sold both payment integrity and Medicare Advantage network access. And to another, we sold network access, reference-based pricing, and value-driven health plan services. With regard to NSA services, customer implementations and our pipeline continue to progress nicely. In our prior earnings call, we noted that we had good visibility into the NSA compliance approaches of our larger customers and were engaged in active implementations with the majority of them. That visibility continues to improve as we secure more of our customer base. We now have 98 completed NSA implementations ranging from managing the end-to-end process to performing the back-end negotiation and arbitration to adjusting existing cost management hierarchies. Another 26 NSA implementation projects are in process, most of them for the end-to-end service. Additionally, we have NC NSA-related opportunities with 41 customers in the sales pipelines. While still early, NSA-related claim volume is tracking to our expectations. Given the typical lag we experience in our business, about two-thirds of the total claims received in Q1 were for dates of service before the law took effect for groups with renewal dates of January 1, 2022. So we really didn't see material NSA-related activity from our implemented customers until March. Based on trends in April, which was the first full month of substantial NSA activity, we expect to be closer to a full run rate of NSA-related activity and volume by the end of Q2. The negotiating strategies that both payers and providers seem likely to continue to evolve, particularly given recent legal challenges to the NSA regulations, that introduced uncertainty around the treatment of the qualified payment amount, or QPA, in arbitration. In February, a federal judge in Texas vacated the portions of the NSA's interim final rule that had given primacy to the QPA in the independent dispute resolution, or IDR process, except for air ambulance claims. The judge's decision, which was effective immediately and nationwide, places the QPA on equal footing with other factors that may be considered in the IDR process. In April, HHS announced that it would appeal the ruling, and we expect the Fifth Circuit Court to review and rule on the case in the next few months. In addition to the Texas ruling, there are several other cases challenging the interim final rules or the interim rules prioritization on the QPA in the IDR process. and one arguing that some of the broader provisions of the NSA are in fact unconstitutional. Assuming the Texas ruling stands, we believe payers and providers could have a greater desire to avoid post-payment negotiation and arbitration, the outcomes of which seem more uncertain without the primacy of the QPA. On the margin, this could imply greater utilization of our prepayment negotiation network or other pricing services, which is in our legacy wheelhouse. In any case, given our unique end-to-end NSA solution, we are well positioned to provide services along the entire NSA continuum, and a shift in emphasis between prepay and postpay activities in either direction would not change our view that we have a critical role to play administering NSA services for our customers or our projection that NSA will be a net headwind of less than 2 percent of revenues in 2022. In summary, our Q1 2022 results continued our string of strong performance. We are seeing robust demand for our services and our business activity, as well as the pipeline and new business wins. We are on track to achieve our 2022 performance expectations, And our unparalleled breadth and flexibility of our solutions position us well to help payers and employers navigate through this economic environment. I remain encouraged by Multiplan's trajectory and confident about the future. Before I hand the call off to Jim, I would like to take a moment to thank our 2,400 Multiplan colleagues, their devotion to our mission to deliver affordability efficiency, and fairness to the U.S. healthcare system, their dedication to operational excellence, and their commitment to outstanding customer service are the heart of this great company. With that, I'd like to turn the call over to Jim to discuss our results in more detail. Jim?