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. [Operator Instructions]. I'll now hand over the call to Shawna Gasik, AVP of Investor Relations at MultiPlan Corporation to begin. Shawna, 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.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 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 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, 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 Investor Relations 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, Shawna. Good morning everyone and welcome to the MultiPlan first quarter 2022 earnings call. As Shawna said, joining me today is MultiPlan's 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 confidence 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 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 payor customers, the employers and other health plan sponsors and…

Thanks, Dale. Good morning, everyone. Today, I'll be updating you on our first quarter financial results and our outlook for the remainder of the year. As Dale noted earlier, our positive fundamental momentum continued with another strong quarter of earnings in Q1 2022. Both revenues and adjusted EBITDA exceeded the guidance we except for the quarter. As shown on Page 4 of the supplemental deck, Q1 revenue was $298.0 million up 16.9% over Q1 2021 and essentially flat with Q4 2021. Organic revenue growth remained robust in the first quarter. As shown on Page 5 of the supplemental deck, excluding the revenue contributions from our acquisition of Discovery and normalizing for the decline in the impact of the COVID-19 pandemic during the quarter, revenues in Q1 2022 were up $21 million or nearly 8% over Q1 2021 and down $3 million or about 1% sequentially. As shown on Page 6 of the supplemental deck, Q1 2022 growth over the prior year quarter was driven by 24.8% growth in analytics-based services. 17.5% growth in payment and revenue integrity services, while network services declined a modest 1.1%. Our performance above guidance this quarter reflects a few underlying components. As we have discussed our revenues lag the date of service for the claims by an average of six to eight weeks. Our Q1 revenues largely reflect claims activity from November, December, and January. So the first few months of our quarter reflected calendar 2021 pre-Omicron claims activity, which was quite strong and above our expectations driven especially by analytics-based services and within that financial negotiations. As Omicron began to impact January and some early February claims we saw a slowdown in utilization offset, in part by the benefit of revenues from COVID testing claims. Last week, the impact of NSA only affected a…

Jim thanks very much. Operator, would you kindly open it up for Q&A?

Of course. [Operator Instructions]. Our first question comes from Joshua Raskin of Nephron Research. Joshua, your line is now open.

Hi, good morning. This is actually Marco on for Josh. Thanks for taking the question. I just had a couple quick ones. So first, just wondering if there was any way you could size the impact of No Surprises Act on revenues in the first quarter. Like for example, do you know how much revenue you're generating through the new NSA-related activities that you discussed?

Yes, thanks Marc. This is Jim. The first quarter really did not have a material effect of surprise billing services. I would say in the last month of the quarter in March, we started to see some of that activity dribble in, just the claims lag, et cetera. And we're now seeing in April, we saw a much fuller run rate. So the first quarter really doesn't have any material effect of the NSA claims revenue in it. But as we switch over into the new quarter, and our guidance for Q2 reflects as the claims volume starting to track and it's tracking against our expectations.

Got it. Thank you. And then one last one was there any material changes to the composition of your Top 10 customers in terms of revenue for the quarter?

Nothing material to report.

Thank you, Joshua. Our next question comes from Steve Valiquette of Barclays. Steve, your line is now open.

Hi, everyone. This is Stefanie [ph] on for Steve. I was just wondering if you could give any early progress updates on those smaller customers that you cited that could still maybe come back to MultiPlan to use NSA services.

Sure. This is Dale. We continue to as you know, implement I think you asked the question around the NSA act. And we continue to see more visibility into our -- into what we call our tail that smaller, that smaller end of our customer base. As we indicated to in our last earnings call, we had great line of sight and great visibility, as we move forward with our larger customers. And that and we were engaged in active implementations with the majority of them. Those now over as you could imagine, we've completed 98 completed implementations ranging from, as I said, ranging from managing the full end-to-end process to performing some of the back-end negotiation and arbitration process. So we've moved beyond our top customers and are continuing to move downstream. There's another 26 implementations in process. Most of them again, as we continue to move further into our customer base, and we have another 40 -- another 41, or another NSA-related opportunities with 41 customers in the sales pipeline. So we continue to deepen our penetration with NSA as we move downstream in market.

Okay, got it. And then sort of in a similar vein, you guys like talked about pretty strong like upcoming pipeline, just wondering if that will have any sort of material shift in the customer mix moving forward?

I don't think so, not a significant or material change. But obviously, we're thrilled about the robustness and the velocity of our pipeline and the number of activities in our pipeline across all product lines and all market segments. And of course, we continue to work across all of our market segments and all of our customers, it's always been a goal of ours to deepen our penetration into the health plan market segment and into the third-party administrators segment using the strength of our product portfolio, the depth and breadth of our services and engage with them and focus on the areas that are most important to them, including the government-related programs like Medicare Advantage.

Thank you. [Operator Instructions]. Our next question comes from Daniel Grosslight of Citi. Daniel, your line is now open.

Hi, guys, thanks for taking the question. I want to go back to the guidance and particularly the 2Q guidance in the sequential step down implied by the midpoint of guidance. So if I look at revenue guidance, around $8 million step down sequentially from 1Q, and a little higher so higher detrimental margin of EBITDA of around $15 million. I think I heard you mention that you expect higher COVID headwinds in 2Q because you're not going to benefit from some of the testing amid Omicron. But I'm curious if you can help bridge some of that that additional $6 million of sequential decline on revenue from 1Q. And then same thing on EBITDA with a greater than 100% detrimental margin where are those additional costs coming from sequentially?

Sure. Sure. Thanks, Daniel. Good question. I would say, let's take the top-line and then we'll talk about the cost side. On the top-line, yes, the sequential step down is a function, I would say of a couple of things. But underlying this is the strength of our core business. So on the margin, what we're talking about is, maybe 2% to 3% delta between Q1 and Q2. And the components of that, not digitally precise, but the components of that are, first of all, Q1 had a lot of Q4 data service claims that were really quite strong. We'll be dealing with Q1 data service claims this quarter. So there's a little bit of COVID effect. We had very little impact of NSA in the last quarter; we'll see the NSA impact in this quarter. And I think that really does and a little bit of excess COVID testing, that that it's just going to dissipate. So what you're -- what we're reflecting here is really the March, April run rate of the business, which I will remind everyone is tracking exactly to where we expected it to be. This is not, the first quarter was just add a little bit of extra tailwinds to it. The second quarter is really back on track to what we expected to happen. So we feel very good about Q2, and where the demand side and how we're navigating the NSA, which I'll throw is a testament to how nimble our 2,400 employees have been and how agile they've been in terms of responding to this. So that's just on the revenue side feeling very good. On the expense side, what you're seeing here is the decline in our expenses. As we -- as we move into second quarter into two pieces. Number one, we are adding headcount. But number two, we're starting to see we had merit increases that started flowing in March. And we're seeing some of that come through. So our cost base is now tracking as expected as we march through the year. So you will start seeing it in the first quarter as we guided was just didn't see some of those costs flow in and we're going to start seeing it step up over the course of the year. But again, completely on track with our expectations.

Yes, that's very helpful. And then just going back to the NSA dynamic here, that zero to 2% headwind assumes that the benefits effectively implemented as contemplated by the CMS rule and the lawsuits are effectively thrown out, i.e., the primacy of the QPA stays, right. So any difference in in that meaning if the QPA primacy effectively goes away would that be upside through your numbers?

Well, I -- I think we are -- we started the year with guidance that QPA with under the regulatory expectation that QPA was primacy, and we put out our guidance. Then came along the TMA, which arguably could have helped our pre-negotiation activity. And there's, we've got the HHS lawsuit that might put it back. So as it's bouncing from guardrail to guardrail, what we can tell you is that's fundamentally we feel very good about our guidance. And no matter where it lands from a regulatory perspective, we don't think it's going to materially affect the revenues -- our NSA revenues. What it might affect is geography of whether it's pre-negotiation or pre-payment or post-payment in terms of the outlook. And then we feel really good about our solution set, regardless of which way the ruling -- the ruling comes out. Our ability to provide an end-to-end solution and is spot on and whether the ruling is upheld or overturned we feel very good about assisting our ability to assist our customers and assuring their compliance with the surprise rule regulation, whether the -- that particular part of the law. Because remember, the only part of that that ruling is only changed arbitration is that's the effect that didn't -- the rest of surprise bill and the processes remain in place as originally contemplated by the interim final regulations.

Yes, that makes sense. Thanks for the color and congrats on the strong quarter.

Thank you.

Thank you. [Operator Instructions]. At this time, we currently have no further questions. I'll hand back over to Mr. White for any closing remarks.

Operator, thank you very much. We appreciate the continued trust and confidence and your questions today. And we look forward to talking to you again on Q2. Thank you.

Ladies and gentlemen, this concludes today's call. You may now disconnect your lines.