Good afternoon. At this time, I would like to welcome everyone to the MultiPlan Second Quarter 2020 Financial Update Call. [Operator Instructions] I would now like to turn the call over to [ Erica Bartsch ]. Please go ahead.

Good afternoon, ladies and gentlemen. Welcome to MultiPlan's Second Quarter 2020 Financial Update Conference Call. Please note that our discussion today may include certain forward-looking statements including, without limitation, statements with respect to anticipated future operating performance, growth, acquisition opportunities and of similar forecasts and statements of expectations. Words such as expects, anticipates, intends, budget, believes, seeks, estimates, could and should and variations of these words and similar expressions are intended to identify these forward-looking statements. Forward-looking statements made by the company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance. We undertake no obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. Actual performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the company and its management as a result of risks, uncertainties and assumptions. Representative examples of these factors include, without limitations, general industry and economic conditions; interest rate trends; cost of capital and capital requirements competition; customer cancellations; the ability to expand certain areas of the company's business; shifting customer demand; changes in operating expenses, including employee wages, benefits and medical inflation; governmental and public policy changes; and the continued availability of financing in the amount and on the terms to support the company's business; the impact of the COVID-19 pandemic on the company's business; the completion of the transaction with Churchill; and the ability to recognize the anticipated benefits and achieve the goals of the proposed business combination. I would now like to turn the conference over to MultiPlan's CEO, Mr. Mark Tabak.

Thank you. Good afternoon, everyone, and welcome. We are pleased to host today's call and provide you with an update on the business. Before I discuss our second quarter performance, I want to address the recent news regarding MultiPlan and Churchill Capital III. As many of you have known, MultiPlan entered into an agreement and plan of merger with Churchill Capital III on July 12. In terms of the transaction, Churchill will contribute $1.1 billion of cash raised during its initial public offering in February. Other additional investors have committed to participate in the transaction with pipe commitments to a $2.6 billion new private capital raise consisting of $1.3 billion of common stock at $10 per share and $1.3 billion of 6% cash interest convertible debt with a conversion price of $13 per share. Churchill will acquire an equity interest in MultiPlan for a total consideration of $5.7 billion paid in cash and shares of Churchill common stock. The business combination will be accounted for as a reverse capitalization with no goodwill or other intangible assets recorded in accordance with GAAP. We firmly believe this is an excellent opportunity for MultiPlan and represents an appropriate next step in the company's evolution. Churchill's cash infusion and intellectual resources will enable MultiPlan to focus on growth through M&A and internal initiatives which will enable us to better execute our growth strategy. The transaction will allow us the opportunity to create payer value beyond the tech-enabled cost management and payment integrity services we offer today. As a public company, we will also have greater strategic and financial flexibility, making us better equipped to expand organically with adjacent acquisitions and by investing in new technologies. We are excited to join forces with the Churchill team to expand our offerings while continuing to deliver value…

Thank you, Mark. Let me review first the results from Q2 2020, and then we will share our thoughts on the remainder of 2020. Let's take a look at our Q2 results. Revenues for the second quarter 2020 were $206.9 million as compared to $245.7 million in the second quarter last year, a decrease of $38.8 million or 15.8%. This decline of 15.8% was primarily due to reduced claims from customers as a result of restrictions of elective medical procedures and nonessential medical services related to the COVID-19 pandemic. Revenues for the 6 months ended June 30, 2020, were $458.9 million as compared to $490.7 million in the comparable period in 2019, a decrease of $31.8 million or 6.5%. As discussed in our May 2020 earnings call, revenues in Q1 2020 increased approximately $7 million when compared to the comparable period in '19, and we did not see any meaningful impact from COVID-19 in our Q1 2020 results. While we did not experience a material impact from COVID-19 during the 3 months ended March 31, as previously stated, we did experience a 15.8% decline in revenues for the 3 months ended June 30, 2020, as compared to the 3 months ended June 30, '19, due to the restrictions and the reduced volume of claims from customers. For the 6 months ended June 30,of 2020, we incurred only about $300,000 of expenses related directly to COVID, primarily for office, cleaning and computer and office place to now -- to enable our employees to work remotely. We have temporarily closed all of our offices and restricted travel due to concern for our employees' health and safety and also in compliance with state shelter-in-place orders. Most of our approximately 2,000 employees are working remotely. Other than these modifications and the claims and revenue…

Thanks, Dave. Before we open the call to your questions, I'd like to introduce Michael Klein, Chairman and CEO of Churchill Capital III, for some remarks. Michael?

Thank you very much. Thank you, Mark, and thank you very much, Dave. And thank you all for dialing into this. As you know, this is the first quarter for the bondholders after the announcement of the transaction, so we've migrated this bondholder update call into an update call also for equity shareholders. And as we migrate towards being a public company and move to a regularized format, you'll see the company move towards a regular issuance of quarterly earnings. For all of you that are interested, and I'm sure you will be, as Mark indicated, we had a MultiPlan Research Analyst Day today that obviously fit the format of the going forward public company. There was 18 analysts there, and it was an extraordinarily detailed presentation provided by Mark and Dale and Dave and Michael Kim and Paul Galant. That presentation, both in its written form as well as the full video of a couple of hours, will be posted, so you will all see that. And as you've heard today, and you'll hear from that presentation, management both explained the business, provided the appropriate information for analysts to model as well as reconfirm their forecasts and reconfirmed the strategic plan on a go-forward basis. And we all at Churchill remain as excited, if not more excited today than the day we announced the transaction. As you heard from Dave, the filing of the proxy on July 31 means that we expect to get comments, as we've been told by the SEC, by the end of this month, which will allow us to distribute a final proxy to shareholders mid-September and close as quickly thereafter as possible, plus or minus the end of the month. I will remind all of you that because -- as Dave very finely stated,…

Thank you, Michael. We're very excited with the merger with Churchill Capital. It gives us additional strategic and financial flexibility to pursue an aggressive growth, both organically as well as inorganically. We're going to open the program now to your questions. [Operator Instructions]

[Operator Instructions] We'll take our first question from Franklin Jarman with Goldman Sachs.

This is actually Andrew Kugler on for Frank. Maybe just a real quick clarification and then a real question after that. So first, pro forma for the deal. You have all this excess cash on the balance sheet. I believe you guys have talked about taking down some of the opco debt with that. Can you maybe talk about your priorities there? And then just on the acquisition side, you've talked about expanding some in in-network opportunities and opportunities in automotive insurance. Are you essentially just trying to expand your payment integrity business? Or can you maybe elaborate on what the actual opportunity set is there? And then is that being driven by expanding to the white space of the market or are you going to try and take share from competitors?

Dave, why don't you answer the first part of the question, and I'll answer the second part?

You did a really good job of getting 3 questions in one, right? We have committed, and as I said publicly a few minutes ago and we've said publicly for the last month, that we would take out the 8.5% PIK toggle notes in closing. We are optimistic, hopeful that there will be very few redemptions. And if there are very few redemptions, we could have as much as $800 million to $900 million of cash on our balance sheet. We have made no commitment to pay debt -- to redeem or pay down the [ 7% and an 8% ] opco debentures. That's something we may do in the future, depending on circumstances, but I think in the initial planning, we want to have as much available cash to capitalize on potential M&A opportunities and investments that we want to make in the extend-and-expand strategy. And so we make no commitment at this point to pay down any opco debt. And I would think we'd be highly unlikely to do that in 2020.

Relative to the second part of the question, the financial and strategic flexibility afforded us by the -- as you know, the merger with Churchill, gives us the opportunity to aggressively pursue growth opportunities, which will include, as you noted, in-network; government business; Medicare/Medicaid, where we have a presence already in early innings; also to adjacent lines of business in property casualty, mainly workers' comp and other medical. It really encompasses all those solutions, payment integrity as the lead, but also our network capabilities and our data analytic capabilities also have an opportunity to generate additional savings for our customers, our customers' customers, the employer and the end-user consumers as well. As you may recall, last year, we received over $100 billion in charges, and we returned savings opportunities in excess of $19 billion to our customers.

We'll take our next question from Rishi Parekh with Barclays.

In the beginning of the call, you went through a number of new customer wins, and I apologize, you were talking a little fast and I didn't catch all of them. But it sounds to me that you have a number of Data iSight wins moving in through this year and going into next year. And I'm just trying to better understand, given where we are now, adjusting for some of the COVID items, and obviously, your comfort level with your guidance that you're providing for next year, can you help us bridge some of the opportunities that you're seeing from now to that $840 million or $850 million of EBITDA number that you're looking for next year? And then is there anything unique to these customer wins, either higher margin or anything that you can maybe call out on these customer wins?

Well, as you know, we founded the company by identifying a very significant pain point for our customers, and that was out-of-network expense. And we launched the program nearly 40 years ago, addressing that with a network-only product. And that product carried us quite a way. And in 2010, 2011, we saw an opportunity to introduce data analytics because we'd also aggregated an incredible database of claims and charge data that would supplement and complement and address claims that could not be repriced or discounted from our network business. And then in 2014, we saw that health care reimbursement was not going to be solely on volume or frequency, but it's going to be on volume, frequency, outcome, quality and the patient experience. We made a small acquisition of a company called Medical Audit & Review Solutions in 2014, which became the basis of our payment integrity program. And our Data iSight program and our payment integrity program, together, which leverages incomparable database we've aggregated are our fastest-growing products moving forward. We sell into a 700 -- a customer base that number is 700 of the commercial insurers, Blue Cross and Blue Shield (sic) [ Blue Cross Blue Shield ] plans, regional health plans and TPAs, both in the public sector and the government sectors -- well, public sector, government sector and the private commercial sector as well.

Your next question is from Janegail Orringer from Alliance Bernstein.

Dave and Mark, congratulations on the deal. Very excited for you. Just a question for Michael Klein or, really, for everyone, given the very high margins of the business, there was always a concern with disclosure of those margins in a public market context. And consequently, there was a series of sponsor transactions, and now finally, the company is going public. What gets you comfortable with disclosure of those margins now that you weren't comfortable with, let's say, a few years ago? And is there any shift in the business that makes it more plausible to have that disclosure?

Mark, would you like me to take that? Or would you like to take...

You take it, and I'll provide a footnote or 2 afterwards.

Sure. Well, first and foremost, thank you for the question. And you may or may not know that we have been around the company since 2013. In fact, we were first introduced to Mark when Mark approached me in 2013 with a simple question that posed opportunities ahead of him, which has clearly shown in the data analytics space, wanted to get off of a good equity Ferris wheel, if you will, and be in a longer-term held position and less levered. And at that time, we had Berkshire Hathaway as a potential partner, brought them to be a buyer from Silverlake Solutions. Silverlake prepared to sell at that point in time. So the transaction didn't [ take place ]. [indiscernible] first market, understanding the -- viewing the -- there's a few things I say that made great comfort in where we stand as a public company. First and foremost, the company is on the right side of health care, and it does exactly what its customers want, create a set of -- make health care more affordable. [indiscernible] and their benchmark [indiscernible] data allows them to provide a tool that is critical to care, not to impact or repair, but to reduce the cost of care, to make it more affordable. Now I say that to you as a person that is an investor, but those are the words that I heard directly from the customers. And the customers have been part of this journey for MultiPlan for decades. And we spoke to customers representing 65% of the revenues, and you can imagine who all of those customers are. And they made a few things very clear to us. One, MultiPlan is critical at making health care more affordable; Two, they are a critical partner to the customers in…

I would just -- Mike. That's spot on, Michael, I would just add the following a couple of comments. Look, as you know, because you've been a longtime follower of the company, our recurring revenue business model generates revenues based on a modest percentage of savings formula based upon the savings we've returned to our customers. Six years ago, we captured about $70 billion in charges and we generated just under $12 billion of savings opportunities. Last year, we captured $106 billion of charges, and we've returned savings opportunities to our customers of over $19 billion. And that was a function of an incomparable database that we could leverage for payment integrity and analytics, which represent almost 70% of our revenue today. For every dollar we save, that drives savings for the customer and revenue for us. It speaks to the relationship, speaks to the incomparable database, and it speaks to the incredible automation we have in the company. If you take the network business as an example, less than 1/2 of 1% of those claims require any manual intervention. If you take the 3 integrated offerings together, networks, payment integrity and analytics, 96% of those claims are returned the very same day to our customer because of the extreme automation that we have in our program and the operational efficiencies.

[Operator Instructions] Your next question is from Elie Radinsky with Cantor Fitzgerald.

I just want to send my congratulations again on the transaction. Just a quick question regarding the PIK holdco bonds. Is your expectation to close the end of September and then call the bonds, which would -- I believe, there's a 15-day call? Or is it your expectations to call the bonds in the middle of September, co-terminus with the closing?

We hope to call the bonds as soon as we know and have the total confidence of the closing. So I expect that they will be called either after closing or shortly thereafter. We probably will not call them before we close.

You have an additional question in queue from Janegail Orringer from Alliance Bernstein.

Just a follow-up question for Michael on the other one. So as you were doing your due diligence, how did you get comfortable with the surprise billing issue, given what a high percentage of revenues out-of-network claims adjudication represents?

I'm happy to address that. And Mark and team can, of course, jump in. If my line is okay, I understand it was a bit spotty before. One, we [indiscernible] you would anticipate with the company, including hiring consulting firms and multiple law firms to get our full arms around the data on a state-by-state basis for the 28 states. That's the highest degree of comfort we got is that this existing model is in place and has not had a material impact on the company because the company's data is the most robust and used in already adjudication, the specific any kind of difference of opinions that exist between payers and providers, it's this data that's utilized. Secondly, we are comfortable on the state-by-state basis because -- and you'll see this if you see the analyst deck, it's actually a fraction of the revenue base that is even in the line of sight of the potential surprise billing legislation that's outstanding. So the potential "at-risk" revenues under the worst-case scenarios range between 0 and $95 million under the analysis that we've seen. So in any outcome that could potentially be the worst case our boundary, we would not see a [ material ] outcome. And in fact, from each of the state-by-state processes that have been put in place, we've seen no material outcome. So we've done the work both on a state-by-state basis. We've done it with the overall review of the potential federal legislation actually and all the claims by category to determine the confidence in our [ sight ] of clear on material impact. And of course, we've relied upon as well on legal and consulting analysts to see the potential direction of travel. But most importantly, because I've been around the company now for approaching 8 years, there's always been a potential regulation that was going to put MultiPlan out of business. Obamacare, the Affordable Care Act, there's always been something. But in the end, in the same way as the customers have shared with us, because this company is so critical in creating affordable health care, the company is a critical part of the infrastructure. So we have high confidence in general. We have high confidence in specific. We have high confidence based upon a review of our state-by-state data, and we have high confidence based upon the external third-party review. And I would strongly encourage you, if you're interested, to go to the avalere.com website to see independent research which summarizes clearly positions that we would also agree with.

Okay. That was very helpful. And if I could just have one more follow-up. Can you talk about how you think about post-closing the M&A cadence?

We're not prepared on this call to talk about specific M&A transactions, but there are a number of opportunities in the marketplace. One of the unfortunate byproducts or results -- consequences of the COVID-19 pandemic, there are a number of companies out there of a number of sizes that have been hurt by COVID-19 endemic. And when you look at MultiPlan's capabilities in terms of our incredible payer relationships, the robust IT platform we have, the operational excellence, coupled with the financial flexibility that we have with the merger of Churchill and the availability of new public currency, we think there's a lot of opportunities for us. And we're going to be disciplined and look at these opportunities and pursue ones that we think are highly accretive and can be value-added to the overall company, as we've done in the past.

Can you share with us a little bit of what type -- the types -- kind of add-ons you might be looking at? Is it mostly in the payment integrity space or...

Jane, three comments I would give you one. One, it will be across the entire offering today of networks, analytics and payment integrity, number one. It could be additional products and services that we received, because we -- last year, we did receive over $100 billion in charges. So what else could we do once that claim is captured. Or it could be our acceleration into those adjacent lines of business or acceleration to serve new customers.

[Operator Instructions] And there are no further questions in queue at this time. I'll turn the call back over to CEO, Mark Tabak.

Thank you. These are exciting times for us. We appreciate your continued support, and we look forward to speaking with you again next quarter. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.