Good day and thank you for standing by, and welcome to the MultiPlan Corporation's Second Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I'd now like to hand the conference over to your speaker today, Ms. Gasik. Please go ahead.

Thank you. Good morning, and welcome to MultiPlan's Second Quarter 2021 Earnings Call. Joining me today is Mark Tabak, Chairman and Chief Executive Officer; Dale White, President and Chief Operating Officer; and David Redmond, Chief Financial Officer. This 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 2021 earnings call -- or earnings press release issued earlier this morning. We will refer to the supplemental slide deck during our discussion 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 factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2021, and other documents to be 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 more helpful and 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. I would now like to turn the call over to our Chief Executive Officer, Mark Tabak. Mark?

Thank you, Shawna. Good morning, everyone. Let me join in welcoming you to our second quarter 2021 earnings call. I'd like to thank our stockholders for their continued support. I'm pleased to say MultiPlan is reporting its fourth consecutive quarter of strong performance in our first year as a public company, continuing on a track record of consistent, substantial returns with six groups of private equity investors. In the second quarter, our operating results exceeded the guidance that we set out earlier this year and are characterized by strong, sequential, and year-over-year organic growth in both revenues and adjusted EBITDA. Importantly, we had growth across all of our businesses and across all customer groups. As shown on Page 5 of our supplemental slide deck, in the second quarter, total revenues were $277 million representing an increase of 33.5% over the prior second quarter and an increase of 8.4% from Q1 2021. Turning on Page 6, due to the impact of the COVID pandemic, which receded in the quarter and the contribution from our recent acquisitions, organic growth in revenues was 6.9% versus the prior year second quarter and 2.6% versus the first quarter of this year. Adjusted EBITDA for the second quarter was $205.3 million, an increase of 37.1% from Q2 2020, an increase of 7.5% from Q1 of 2021. Excluding the effects of COVID, contributions from our newly acquired businesses and the incremental public company costs, organic growth and adjusted EBITDA was 13.9% versus the prior second quarter and 3.4% versus the first quarter of this year. We continue to be laser-focused on operational excellence and expense control. EBITDA margins in Q2 2021 was 74.3%, up from 72.4% in Q2 of 2020 and down slightly from 75% in Q1 of 2021. Our business continues to exhibit strong free cash…

Thank you, Mark and good morning, everyone. Mark is spot on in his description of the relationships we enjoy with our customers and how the value we deliver is critical to our ability to preserve and grow them. Indeed, our unique position in the industry has been on full display as we help our customers work through the results of the rulemaking for the No Surprises Act as I'll touch on shortly. First, let me spend a few minutes on trends we are seeing in claims and health care utilization. As Mark noted, we generated nearly 7% organic revenue growth in Q2 2021 versus the same quarter last year, normalizing for COVID and our two recent acquisitions. Underneath that, overall claims volume, process charges, and identified savings have continued to grow nicely. As shown on Page 9 of the supplemental slide deck, claim charges processed were up 7% -- nearly 7% sequentially and up about 32% over the depressed prior year quarter while identified savings increased about 3% sequentially and about 20% over the prior year. Within these trends, there are a few crosscurrents worth noting. First, while process charges continue to reflect elevated volumes of COVID testing and vaccine claims, these COVID-related charges declined by about 24% from the prior quarter. At the same time, we've seen an encouraging increase in non-COVID related charges of nearly 19% versus the prior quarter and non-COVID related charges are now tracking over 90% of our pre-pandemic levels, up from about 80% during Q2 2020. These volume trends clearly suggest that the COVID-related impact on our business has begun to normalize, but we have not yet returned to normal. We are closely watching the Delta variant case load, which poses some risk of prolonging the COVID-related effects on our claim mix and our…

Thank you, Dale and good morning, everyone. As Mark and Dale mentioned, Q2 2021 marked another quarter of significant momentum for MultiPlan. As Mark noted earlier, Q2 2021 revenues increased 33.5% over Q2 2020 and increased 8.4% over Q1 2021, exceeding our earlier expectations and the guidance we communicated back in May 2021. Organic growth was strong. Excluding the revenue contributions from HST and Discovery and normalizing for the decline in the impact of COVID-19 during the quarter, revenues in Q2 2021 were up approximately $8 million or 6.9% over Q2 2020 and up about $7 million or 2.6% sequentially. We estimate the COVID-related revenue impact in Q2 was approximately $9 million to $11 million, about $10 million lower than the COVID-related revenues impact in Q1 2021 and approximately $40 million lower than the COVID-related revenues impact in Q2 2020. Of the $9 million to $11 million in Q2 2021, we estimate approximately $3.5 million to $4 million of the impact was related to our network-based revenues with similar dynamics impacting our workers' comp and auto business as we saw in Q1 2021. We estimate approximately $3 million to $3.5 million of the COVID impact was related to our analytics service line revenues, driven predominantly by mix and volume changes in the healthcare delivery. And finally, we estimate approximately $2.5 million to $3.5 million of the impact is related to our payment and revenue integrity service line revenues driven also by a lower mix and volumes of surgical emergency department and anesthesia claims. The total estimated impact of $9 million to $11 million for Q2 2021 primarily reflects trends we are seeing in our claims receipts and does not include indirect costs of COVID on business conditions, such as delayed implementation or a longer sales cycle due to limited in-person…

Thank you, David. Thank you, Dale. So you can see from Dale's business update and Dave's detailed financial report, MultiPlan is making and continues to make great progress. Our relationships with our major customers remains as strong as ever. We have a large number of initiatives underway. We're executing against our growth strategy, and we have built a lot of momentum to carry us into the back half of this year and beyond. Before we go into Q&A, I'd like to discuss the transition planning announced in the press release this morning. MultiPlan is long focused on leadership continuity and development and expansion. I believe now is the right time to begin the transition to a new generation of leaders. I'm pleased to announce an important step in that transition with the appointment of Dale White as our President and Chief Operating Officer. Dale has long propelled the company's success and growth through his tireless commitment to serving our customers most recently in his role as President of Payer Markets; and before that, as Chief Revenue Officer. His promotion to President and COO is recognition of his exceptional leadership and his outstanding track record and execution. Also as noted in the press release, with Dale's promotion to COO and President, early succession by the Board of Directors plans to promote Dale to CEO early in 2022. Dale and I have been working together for many years to prepare him to succeed me. Since he joined us 17 years ago, he has increasingly expanded the scope of his responsibilities and roles touching every aspect of the business. His expansive knowledge of our business brings a customer and growth mindset and has earned deep respect of MultiPlan's colleagues. I could not be more confident that he is the right person at the…

[Operator Instructions]. Your first question comes from the line of Joshua Raskin at Joshua Raskin.

Good morning. This is Marco on for Josh. Thanks for taking the question. The slides show that the analytics segment was one of the major drivers of revenue growth in the second quarter, even though that segment was actually a slight drag in the first quarter. So I was just wondering what caused the growth in that segment to pick up and what types of clients drove that growth? Thank you.

That growth was really across all of our customers. Most of that pickup was a result of more elective surgeries being performed in the period that would generate our revenues in Q2. I think if you remember, we estimated the impact of COVID in Q1 of around $9 million to $10 million for that segment, and it came down by probably $6 million to $7 million. Most of it was just more volume coming through our analytics services and a lot of that was anesthesia-type, ER-type claims that we have historically had in that segment. Dale?

No, I agree, Dave. I think it's two factors that are driving that. One is the changing -- as I said in my comments, the increase in claims charges too we began to see a different mix of claims with a reduction in the lower COVID-related claims charges and starting to see an increase in volume across elective-related procedures and higher cost procedures like orthopedic surgeries and others. So I think that as customer confidence -- well, patient confidence continued within the delivery system and they started taking care. We saw that reflected in our case mix and our volumes across all of our customers.

Returning to normalization of utilization.

Great, thanks. And then if I could just ask one follow-up. It looks like you increased the 2021 EBITDA guidance more than the revenue guidance. While we understand the fixed cost leverage of the model, it would be helpful to know what is driving the incremental savings on the cost side there?

I think as we look at our forecast for the year and kind of get our midyear review of operating expenses, we believe that our operating expenses for the year will come down a little bit. And as a result of that, most of the flow-through of any revenue increase plus a little from reduced operating will drive EBITDA growth.

Great, thank you.

And your next question comes from the line of Daniel Grosslight with Citi.

Thanks for taking the question guys and congrats on a strong quarter. I wanted to go back to surprise billing for a bit. Last year, you noted around 80% of your claims are no surprise bill-related and that more punitive legislation would likely lead to at most a $100 million decline in revenue. Now that we have more details around the bill and rules making, can you quantify the assumed impact of surprise bill legislation in 2022? And does that 80% number still hold? And not to get too technical, but there was some language in the rules making that third parties would have to be considered independent to be used in determining the QPA, that you're obviously 100% paid by payers right now, but it sounds like you think you will be considered independent and you will be able to be used in determining that QPA, is that right?

Dave, do you want to answer the first part of the question. And Dale, you can take the second part.

I'll let Dale lead off, and then I'll fill in the blanks.

I think the -- I think in answer to your -- the second part of your question, Daniel, the answer is we believe we can in instances where the payer needs assistance in helping them to calculate their QPA, we're in a position to do that. They can either calculate their QPA and then give it to us and then we will apply it through the claims process. Or two, they can give us the data that they have because, as you know, QPA for the most part is the payer's media and contracted rate. And in that case, they can give us the data that they have, the rate data that they have and then we can take that in-house, digest it and then work with the payer to determine their media and contracted rates if they don't have the capacity to do that. So from that perspective, in either case, we're prepared to do that. As you know, we own our own provider network. So we will do that on our own network for clients that use us as a primary network, but we are also building the technology and the capability to do that on behalf of payer clients who can't do it themselves.

Okay. And the...

And Daniel, I think back probably almost a little over two years ago, we talked about a worst-case scenario when we had four different versions of surprise billing in the house and a couple of different ones in the Senate. And we talked at that time, we were not a public company, so we talked to our bondholders and said, on a worst-case scenario to look at the worst aspect of all the plans, we thought that it could have an impact of $100 million of revenue if you took a worst-case basis. Obviously, as we've updated that and the legislation has come through, that number has significantly declined to an amount where basically Dale and Mark and I have looked at the analysis, and we did not think it will have a meaningful impact. We'll continue to see the claims. We'll continue to get revenue from those claims, and we'll work with our customers on how they comply with surprise billing. So the $100 million is kind of worst case two years ago and based on more knowledge, more understanding and, obviously, the law and the first set of regs out of HHS, we believe that the impact will be immaterial on our financial statements.

And Daniel not being lost in the detail is that the provisions of No Surprise Act really connect very well with the company's historic trends. They call for -- the requirement calls for extensive claims data and analytics, strong point of MultiPlan. We're integrating into the customers' IT claim platforms so we receive those claims. It deals with the provider relationships. Again, we have our own provider relationships and network, as Dale indicated. It talks about successful negotiation, again another tool that we have. So the tools we use to reduce hundreds and thousands of claims every day on nonsurprise bills will be applicable to the surprise billing as outlined in the inter-regulations to date.

Got it. That's helpful. And maybe just a quick one on the management transition. 2022 is going to be a pivotal year for you guys. You have surprise billing rolling out, you have the potential for United really pushing its Naviguard on its ASO clients. So I was curious if you could just give us a little more details on the decision around timing of the management transition, having a CEO and CFO kind of step back from the day-to-day activities ahead of such a pivotal year, could be a little bit concerning to folks. So just wanted to get your thoughts on timing here. And what drove the transition this year?

Dale and I have worked together as partners for nearly 18 years. We worked together both on operational issues, day-to-day running of the company, as well as looking at transformative opportunities in the preparation of strategy, M&A activities and continue to fuel growth through our three-part strategy of Enhance, Extend and Expand, and we'll continue to do that, and it gives us the additional opportunity and bandwidth to do that coupled with the additional hires we brought into the organization. It's a very efficient, effective way of focusing on the next challenges and defining events in the company as we continue to expand MultiPlan over the coming years.

Okay, thank you.

Your next question comes from the line of Andrew D'silva with B. Riley Securities. Andrew D’Silva: Yeah, good morning. Thanks for taking my questions and congrats on the progress. Just a few quick ones for me. To start, I was just curious, was there any change in customer concentration during the quarter and then do you believe that the second quarter fairly reflects gross margin and operating expenses that are tied to the recent acquisitions of HST and DHP?

Dave, do you want to share the analytics and then Dale and I can supplement that?

Yes. Q2 reflects the gross margins, I think, what is 74.3% that we think is realistic going forward. Obviously, they're slightly down from Q1 because of DHP and HST. As we look at our margins going out into the future quarters, we -- as I said in my comments, we thought they'd be 73% to 74%, which I think is consistent when you just incorporate those two entities. We're a company, which you know all too well, that a significant portion of our revenues come from what we call the big four and then, obviously, our top 10 customers. So we cannot grow revenue organically, sequentially, or anything else without having meaningful growth among those customers. And our revenue mix of our top customers is pretty consistent with what it has been in the past and we expect that to be similar to similar revenue mix moving forward.

And no material change in the concentration there, and our EBITDA margins in Q2 were up, they were 74.3% up from 72.4% on the prior year and just slightly down from Q1. Andrew D’Silva: Perfect. Perfect. Very useful. And was growth in payment and revenue integrity just tied to the acquisition of DHP? Actually, just what was the revenue benefit tied to DHP and HST during the quarter, if you can provide that?

Dave?

Just one second. The total revenues for DHP and HST for the quarter were about $11.5 million. And in Q1, they were about $7.2 million. Obviously, Q2 reflected a full quarter of DHP and a full quarter of HST, whereas Q1 reflected a full quarter of HST, but only about a half quarter of DHP.

Two points I'll make with Dave's timing comment, number one. And number two, recognize part of the rationale for doing those acquisition is to integrate them into our business. So you'll see that HST, which is the -- HST, which is an analytical business, is going to be blended into our analytical vertical. And Discovery Health Partners will go into our Premium and Payment Integrity business, integrate those services and sell them as bundled products to the marketplace, networks, analytics, and payment integrity once we capture that claim and can apply our solutions to generate savings for the customer, payer, savings for their customers and all of these savings for the consumer and providing their real value proposition of affordability, efficiency and with a fair reimbursement wrapped around it. Andrew D’Silva: Okay. And are you viewing the integration of the two acquisitions and just the customer reception related to them favorably, I mean are they tracking to your expectations?

Well down the road in integrating both HST into our analytics and DHP into our payment integrity. Dale, do you want to add some comments to that?

I echo what you said, Mark. From an operational perspective, we're well down the path on both companies. And it's gone extremely well, and we're pleased where we are. As importantly, we're very excited about the pipeline. You heard my comments around the growth in the sales pipeline and the inclusion of HST and DHP products, particularly DHP, right. DHP's product services widens and deepens our revenue and payment integrity suite of services, which we now can snap on to our MultiPlan chassis and drive into our customers. And HST as well has its incredible pipeline, and we're taking advantage of our relationships with our third-party administrators to make that service available. So we're excited about the opportunity on both and in terms of helping to fuel our growth in the coming months.

That commitment to integration is a large part of the rationale why we can deliver straight-through processing with over 95% same-day turnaround with our payer customers in excess of 95% acceptance by our providers. Andrew D’Silva: Yes, I think there might have been some reception issues during the prepared comments and that was useful, thank you. The last question for me, I know you gave color around this, but I want to get a little bit more granular, can you just discuss what you're seeing in the market from a planned pricing sensitivity standpoint, so are you seeing any dynamic changing where employers are moving towards or away from pricing sensitivity or care around member provider abrasion related to out-of-network negotiations, basically, its interest in maybe internally derived payer run out-of-network negotiation platform gaining or losing favor in your opinion? I've just noticed a lot of hiring one of your largest customers related to these initiatives, I'm just trying to understand how that aligns with your expectations, particularly since some of the hiring is around experts in arbitration?

Dale has been the face of MultiPlan into the payer community for nearly 20 years in the marketplace and no one has a better insight into the payer plans than Dale White. Dale, why don't you comment on that, and I'll back you up?

Sure. And look, I think it's twofold. One is the -- I think you made a comment about the arbitration and the arbitration process. I think payers are beginning to gear up and around the compliance with the surprise bill in particular, on the IDR process. Now the interim final rules on the IDR process aren't coming out for several weeks. So we don't have the -- we can't take advantage of the technical details associated with that. But I think the payers are recognizing that there'll be -- that providers will unveil themselves of the opportunity to go to arbitration if they believe that payments made by the payers are unreasonable. And so I think you're seeing that there, too, in terms of the sort of the employer landscape and their approach, I think payers are always focused on -- or employers are always focused on maximizing employee benefits and doing the best most they can to give their employees a pool in which comprehensive set of benefits and to take advantage of services like MultiPlan to help drive down medical costs, which enable them to continue to provide competitive benefits to their employees. And we see that time and time again, we've seen that through the years, both in a difficult economic environment and in a very competitive environment, economic environment and one that we have today where we're hopefully coming out of a pandemic. And so payers and employers are looking -- always looking forward to ways to maximize their benefits for their employees and to drive medical cost savings on behalf of their plan.

Look, as Dale noted, just one case study would be the interim rules for the No Surprise Act. I mean it's incredibly technically complex piece of legislation. But our experience has been it has heightened our customers, our payers interested in working directly with MultiPlan because we have that expertise and that agility. And I think clearly, it plays to the MultiPlan's strength and it builds upon the decade-upon-decade relationship we've had with those payers, result of our claims and analytics capabilities integrated into their IT management program, our pricing and our strategic negotiation capabilities, all of which are tools that those payers are going to need our assistance in complying with the No Surprise Act. We see this as an opportunity for MultiPlan going forward. And we're awaiting the next set of regulations, which will come out on or about October 1st. Andrew D’Silva: Okay. Useful context. So sorry, I do have one more quick one. I just thought as it relates to the surprise billing draft guidance, have you submitted comments yet and can you just let us know what are some of the gives and takes that can be beneficial or negative to your business, things that really are yet to be excited or changed as the final rules are released?

Yes, yes. I think the most important parts of surprise billing legislation and the things that came out, as we said, there was very little material changes on the surprise bill component and in the interim final regulations. And we still feel that it plays, as Mark said, right into our sweet spot and right into our wheelhouse. It's calling for what are the things of importance, identifying a surprise bill, calculating a QPA, managing or working with the payer to make an initial payment offer to the provider, managing the post-payment process if they're -- if the provider is unhappy and then providing post-payment negotiation services, supporting the payer or working with the payer and managing the arbitration process. All of those inflection points in the surprise bill continuum are squarely in MultiPlan's wheelhouse because they all call for extensive claims data analytics, extensive analytics, connected claims processes, effective provider relationships, intelligent pricing and most importantly, strategic negotiation capabilities. And those are tools we use today, as I said, to reduce charges on hundreds of thousands of claims every day. And we expect to optimize these capabilities and leverage them to support our payers and as they work to comply with the surprise going on. Andrew D’Silva: Great, thank you. Also congrats on the promotion and as a company, congrats on a progress and snapback and best of luck going forward.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you. Look forward to speaking with you next quarter. Thank you.