MultiPlan Corporation

Good morning, and thank you for attending today's Multi-Plan Corporation Second Quarter 2022 Earnings Conference Call. My name is Austin, and I will be your moderator for today. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star 1 on your telephone keypad. I would now like to hand the conference over to your speaker today, Shawna Gaskett, AVP of Investor Relations. Thank you, and please go ahead.

Thank you, Austin. Good morning, and welcome to Multiplan's second 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.multiplan.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 second 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 risks and uncertainties associated with our business which are discussed in the risk sectors included in our annual report on Form 10-K for the fiscal year ended December 31st, 2021, and our quarterly report on Form 10-Q for the quarter ended March 31st, 2022, 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 investor relations portion of our company's website. With that, 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 Second Quarter 2022 earnings call. On the call with me today is our CFO, Jim Head. The second quarter was an important one in which Multiplan achieved several new milestones. Among these, we continue to help our payer customers navigate the complexity of the No Surprises Act, with these customers increasing their use of our NSA compliance services, and we expanded our pipeline of completed or in-process NSA-related implementations. We continue to make investments in our platform and in new markets to drive long-term growth including an investment in a new and promising partnership with Abacus Insights, a leading data management and interoperability platform that offers a number of opportunities to enhance our technology and customer reach. And importantly, we are pleased to announce that we have completed a multi-year contract renewal with one of our larger customers, further underpinning our confidence in our base business, In light of these milestones, we remain confident in our ability to achieve our long-term strategic goals. Once again, Multiplan delivered strong results with revenues and adjusted EBITDA squarely in the range of the guidance we set for the quarter. Second quarter revenues were $290.1 million, growing 5 percent from the prior year quarter. driven by an 8 percent increase in savings identified for healthcare system stakeholders to $5.5 billion. Excluding the impact of COVID, revenues in the quarter grew 3.1 percent from the prior year quarter. Second quarter revenues declined 2.7 percent sequentially. As we communicated previously, the first quarter benefited from a variety of factors, including claim volumes related to Q4 2021 dates of service, heightened COVID testing and treatment-related revenues, which normalized in Q2, and little impact from the NSA in the quarter. Adjusted EBITDA was $209.6 million, up 2.1 percent from the prior year quarter and down 7 percent from the first quarter. The sequential decline was driven by the aforementioned revenue dynamics and by anticipated investments in our platform and structural cost increases consistent with guidance and the adjusted EBITDA margin bridge outlined in February. In the second quarter, we generated $40.7 million in cash flow from operations and cash flow of $21.8 million. Underpinning our results is the value provide to our payer customers, the more than 100,000 employers, and other health plan sponsors that use our services either through these payers or directly, and the more than 60 million health plan members those payers and plan sponsors serve. In the second quarter, we generated $5.5 billion in potential identified savings, up 3.5% from the prior year on bill charges of $32 billion as shown on page eight of our supplemental deck. Customer demand for our services remains very strong and notably is distinct from the ebb and flow of healthcare utilization trends. Last quarter, we discussed how the breadth of Multiplan's medical cost management and payment accuracy solutions meets the wide range of plan design preferences across the broad base of employers that use our services, and in the context of an extremely tight labor market, how our service breadth provides flexibility as employers' plan design preferences shift between benefit cost efficiency and benefit attractiveness. Since at least mid-April, there have been rising expectations that the U.S. economy could be headed towards recession this year or next. The signals remain mixed. as the labor market remains tight despite other recessionary warnings. Only time will tell whether the U.S. will slip into recession or avert it and how strongly this might be expressed in labor market conditions. But it remains the case that the breadth of our solutions will continue to provide flexibility in how our services are accessed and in what configurations Helping employers adjust their health plan strategies as they navigate economic and labor cyclicality. Simply put, we are an all-weather service provider to all types of health plans. And that position continued to be demonstrated during the second quarter. We added 143 opportunities to our pipeline for a current estimated $39 million in annual contract value, bringing the total active pipeline to 582 opportunities and $242 million in estimated annual revenues. The 10 largest of these comprise about 37 percent of the total and average just under $8 million in annual revenues each. We closed 157 deals during the quarter for an estimated $16 million in annual revenues. Five of these have estimated annual revenues over $1 million. New wins span all market segments and include 87 new customer relationships. Notably, about two-thirds of the new revenues are attributed to our regional health plan segment reflecting continued momentum in this very important market segment, which is a key target of our extend growth strategy component and furthers our goal of diversifying our customer base. Other business highlights during the quarter include a large blue plan expanding use of data eyesight for its ASO customers. Just five months in, this plan has more than a third of its ASO lives accessing the program. Continued momentum in building our post-payment and revenue integrity services pipeline. At the quarter's end, we had 192 active opportunities that together are estimated to deliver $110 million in annual contract value. The successful launch of a campaign promoting our prepayment itemized bill review service with nine customers already requesting contracts. Our product team also has an exciting roadmap for this service that used advanced analytics to significantly expand the solution's impact. We have strong growth in our property and casualty segment after months of COVID-driven volume lags, aided by the deployment of one of three new customers in this segment. We continued to roll out our No Surprises Act to more payers, and in the second quarter, we saw a meaningful ramp in claims process through our NSA services. At the end of the second quarter, we had 126 implementations completed and 29 implementations for a total of 155, up from a total of 124 as of the end of the first quarter. Notably, one of our key customers that adopted our end-to-end NSA compliance service is expected to double revenues with us by year end. NSA-related activity continues to track to our expectations with NSA-related claims volumes approaching what appears to be a full run rate by the end of the quarter. we are seeing meaningful medical cost reductions when claims are priced using our QPA-based pricing service, signifying this objective of the NSA is being achieved. Meanwhile, the federal surprise bill regulatory backdrop remains in flux. On June 15th, the Office of Management and Budget began reviewing the anxiously anticipated final rule from CMS. which is expected to clarify requirements for the independent dispute resolution process. At issue is the status of earlier language directing IDR entities to treat the qualifying payment amount, or QPA, as the presumed appropriate reimbursement. Ensuing lawsuits challenging this interpretation of the role of the QPA caused CMS to retrench it until it publishes the final rule. And the plot continues to thicken. In late July, in a new ruling pertaining specifically to air ambulance services, a federal judge in Texas once again vacated the portions of the NSA's interim final rule that had given primacy to the QPA in the IDR process. In addition, other parts of the administration of the IDR process all remain vaguely prescribed or challenging to fulfill. Compounding the problem, CMS was late in releasing functionality needed for providers and payers to initiate the IDR process. As a consequence, and not unexpected, as payers and providers operationalize the IDR process, we are seeing process missteps early in the early stages of the rollout. In fact, multi-plan offers submitted on behalf of our payers have been accepted 80 percent of the time since the IDR process began early in the quarter, and provider missteps, process missteps, have contributed significantly to that outcome. It is still early, and we expect providers and payers to gain more familiarity with the process. So we are reluctant to extrapolate our experience thus far. But I'm encouraged that the significant data and data science resources we've invested in this part of the service positions us well in supporting our customers. In June 2022, we acquired a minority interest of Abacus Insights for a $15 million cash consideration. Abacus is a leading data management and interoperability platform that enables health plans and their providers to standardize data across the healthcare ecosystem. This is a terrific company with unique capabilities, and we see interesting commercial opportunities to pursue jointly. Our strengths are very complementary. Their enterprise data capabilities will help us accelerate our time to market for data offerings, and they find our analytic expertise and strong distribution channel very attractive. As I mentioned at the beginning of the call, we have concluded a multi-year contract renewal with one of our larger customers. As a policy, and in accordance with the terms of our customer agreements, we do not disclose specific terms of our customer contracts. we are not providing 2023 guidance at this time. However, with the increased visibility this extension provides, we anticipate our 2023 revenue growth will be muted, subject to market conditions and the implementation of our other growth initiatives. Despite the near-term financial impact, we believe this renewal demonstrates the strength of Multiplan's value proposition the importance of the services we provide to customers, and the depth of our long-standing customer relationships. Additionally, this customer commitment further underpins our confidence in our base business and enhances our ability to execute on our long-term growth strategy. I would like to take a moment to speak to the operating environment and how that is shaping our outlook for the remainder of 2022. As reported by a number of hospital and health services groups, and as evidenced in the lower medical loss ratios of some major health insurers, utilization of healthcare in the second quarter was sluggish and below expectations, as a significant decline in COVID-related patient volume was not offset by higher non-COVID-related patient volumes. Our recent claim volume, while still strong, reflects some of these sequential designs, albeit with our typical lack. Additionally, non-COVID healthcare utilization and non-COVID claim volume remain below 2019 levels, and from where we sit today, it is difficult to foresee whether those will recover in Q3 or come back more slowly. Despite this uncertainty, We continue to track against our 2022 plan, and at this time we are maintaining our full year 2022 guidance ranges for revenue of $1.16 to $1.20 billion, and for adjusted EBITDA of $850 to $875 million. That said, if the current utilization trends persist into Q3 and Q4, and accounting for some customer adjustments, full year 2022 results could fall in the lower half of our guidance ranges. In summary, our second quarter results were once again strong. We are making meaningful progress on multiple fronts of our business with the pace of new business wins and the strength of our pipeline indicating robust demand for our services. We remain on track to achieve our 2022 plan despite the recent subdued rebound in non-COVID volumes. We continue to expand our No Surprises Act services footprint and activity and help our customers navigate the significant complexities of achieving compliance with the new regulations. We are investing in our business to drive growth and maintain our high levels of customer service. We now have even more visibility into our base business with the renewal of our contract with one of our larger customers. And we continue to work to bring the external perception of our risks in line with the realities of the business, an objective that Jim and I have made a priority since assuming leadership of the company. As I look forward, I remain confident that our unique value proposition to the US healthcare system together with the investments we are making in the platform, will drive our long-term growth and deepen our industry-leading position with our payer customers. Before I turn the call over to Jim, I want to extend my gratitude to our more than 2,500 Multiplan colleagues. The past few years have presented all manner of disruptions and potential distractions, and yet you have soldiered on with tireless dedication to our mission to deliver affordability, efficiency, and a fairness to the U.S. healthcare system and an unyielding focus on operational excellence and outstanding customer service. Thank you. With that, I'll turn the call over to Jim to discuss our financial results in more detail.