Hello, and welcome to today's MultiPlan Corporation First Quarter 2023 Earnings Conference. My name is Bailey, and I'll be the moderator for today's call. All lines have been muted during the presentation portion of the call. There’s an opportunity for questions and answers at the end. [Operator Instructions]. I would now like to hand the conference over to Shawna Gasik, AVP of Investor Relations. Thank you. Please go ahead.

Thank you, Bailey. Good morning, and welcome to MultiPlan's first quarter 2023 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 2023 earnings press release, issued earlier this morning. Before we begin, a couple of reminders. Our remarks and responses to questions today may include forward-looking statements. These forward-looking statements represent management's beliefs and expectations only as of the date of this call. Actual results may differ materially from those forward-looking statements due to a number of risks. A summary of these risks can be found on the second page of the supplemental slide deck and a more complete description on our annual report on Form 10-K and other documents we filed with the SEC. We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of MultiPlan's underlying operating results. An explanation of these non-GAAP measures and reconciliations to those most comparable GAAP measures can be found in the earnings press release and in the supplemental slide deck. With that, 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 call. I am excited to share with you today the meaningful progress we are making on a variety of fronts. It's an understatement to say we've been busy this quarter. So let me give you an update on our business results and progress against our guidance, our most recent contract renewals and most importantly, our growth plan. First, we've delivered results toward the higher ends of our revenue and adjusted EBITDA guidance ranges for the quarter. We will review the details of the quarter in a moment, but I wanted to underscore that the first half is playing out as we expected, and we are reaffirming our 2023 guidance. Second, on our fourth quarter earnings call, we indicated we would renew another multiyear contract with a larger customer in the first half of this year. I'm pleased to announce that we have completed this renewal in Q1. We now have renewed multiyear contracts with three of our larger customers since the third quarter of last year. As a result, our visibility in our business has materially improved and we are increasingly confident that our revenues are stabilizing and poised for growth over the next several years. As we communicated last quarter, the cumulative impact of contract renewals with these larger customers, including this latest renewal is already incorporated in our 2023 guidance. Third, we are executing on our growth plan. We are on pace to launch several new products and enhancements within our core service lines this year. I am also pleased with the significant progress we have made forming our new Data & Decision Science service line, which will be instrumental in expanding our footprint beyond our out-of-network claims processing and deepening our penetration in larger and growing markets…

Thanks, Dale, and good morning, everyone. Today, I'll do the usual walk-through of our Q1 financial results, provide some commentary on our Q2 outlook and discuss the state of our progress towards our fiscal '23 guidance. And I'll close with some commentary on our balance sheet and provide an update on our capital allocation plans. As shown on Page four of the supplemental deck, first quarter revenue was $236.6 million, declining 21% from Q1 '22 and declining 2% from the prior quarter, but landing in the top half of our range of guidance for the quarter. Turning to revenues by service line, as shown on Page five of the supplemental deck, network-based and payment and revenue integrity service lines showed strength sequentially. Network-based services declined about 17% from the prior year quarter and increased about 5% sequentially. Analytics-based services revenues declined about 22% from the prior year quarter and declined about 5% sequentially. And Payment and Revenue Integrity services revenues declined about 19% from the prior year quarter and increased about 3% sequentially. And as Dale said, we continue to execute well on the regional player, Blues and TPA customer channels, and we're seeing robust growth in the services acquired through HST and Discovery Health Partners. Our first quarter revenues were driven by a modest sequential uplift in core volumes which partially offset a contraction in our revenue as a percentage of savings. As detailed on Page six of the supplemental deck, medical charges processed increased 2% from Q4 '22 to $39.7 billion and potential medical cost savings increased 3% from Q4 '22 to $5.6 billion. In the core commercial health plans category, the sequential increases in medical charges processed and potential medical cost savings identified were also 2% and 3% sequentially. This growth in volumes helped absorb some of…

Jim, thanks. Let me close with one more comment. We are going to deliver a lot in 2023, but we are not stopping there. We have several additional product and service line expansion opportunities slated for launch in 2024 and are already advancing those initiatives this year. We look forward to expanding on all of this at our Investor Day on June 28. Please join us. Operator, will you kindly open up the call for Q&A, please.

[Operator Instructions] Our first question today comes from the line of Joshua Raskin from Nephron Research. Please go ahead, your line is now open.

Hi, thanks. Good morning, guys. Can you provide a little bit more color on NSA in terms of the update? I'm just curious how trends are emerging early in the year. I'm also curious, there's been sort of a lot of media attention on the long backlog on arbitration cases. I'm curious how that's impacting your business and how you're working with your clients on that?

Sure, Josh. That's a great question. I think as you know, in 2022, we reported that we repriced about 1.75 million claims through NSA. We processed about 150,000 requests from providers who asked for -- who asked to negotiate a settlement. And of those 150,000, we closed 124,000 of them, and it was only at 6% higher than what the QPA and the QPA is the median contracted rate of the providers was that it was just slightly higher than what the original payment was. And of that, when you get down the -- down to the arbitration component of it, is all of last year was 57,000 claims and we closed about 11,000 of them. Why so little is because, as you said, the arbitration process was in a state of flux. Going into Q1, we see the same kind of activity in terms of volumes. And we're -- they're on par with what we expected. So in Q1 of 2023, we repriced about 560,000 claims through the NSA process of that. So that's the lion's share of the claims. The claims comes in, they get repriced, they return to the payer, the payer adjudicates it and pays the claim. 557,000 claims. Of that, just a small percentage, about 92,000 of that came to us through negotiations where the provider asked to negotiate. Of that, we settled 74,000 of those claims. 74,000 of the 92,000 were settled through the negotiation process and only 28,000 or 5% of the total NSA volume went to arbitration. Inside of that, when the Fed resumed -- told the arbiters to resume processing cases, we saw about 7,100 claims settled.

So it is -- maybe a quick takeaway, Josh, on this. This is Jim here. The kind of the underlying top of the waves trend is playing out exactly -- and we've said it before, it's very -- it's a pretty steady business because it's non-discretionary. It's emerging in large part. What we are seeing is the tick up in the negotiations. And listen, CMS has been putting out the initiating parties and the non-initiating parties in terms of where it is. And it's -- it's -- we're seeing a lot of the usual suspects are the ones who are negotiating and initiating arbitrations. So it's not completely surprising to us. This makes it more complicated, and that's exactly why we exist.

Yes, yes. And then of those ones that you closed, the settled, the 74,000 this year, is that similar to that sort of the rate coming in, the total payment coming in 6% above the QPA again?

Yes, it's pretty consistent.

Yes. It's pretty consistent, Josh.

Okay. So no change on that. And then just a second question. Just, network-based revenues were up sequentially. I know it's not the biggest component, and I know the categories can blend together with some of the customers. But and that was sequentially. Is that just you had repriced two of the big three? Or I'm just curious what led to the sequential increase in network-based revenues?

Well, actually, the two bright spots inside the network were primary, which is not really kind of anything with our bigger customers, it's with the regional payers and the TPAs. So we had some strength there. We also had strength in our workers' comp business, which was pretty more on for the last several years. So that was really the two big components. It was kind of steadier. And as you know, there's always been a little bit of, call it, a competition between the analytics side of the business and the network side of the business this staved off a little bit of that sequentially.

Okay. All right. That's perfect. All right, thanks.

The next question today comes from the line of Steven Valiquette from Barclays. Please go ahead, your line is now open.

Thanks, good morning. I got on the call here a couple of minutes late. I apologize if you provided color on this. But just on the Slide seven, talking about the revenues as a percent of identified savings, that table is pretty helpful. For the PSAV, just curious, any color on how that might trend for the rest of the year? Are we -- the downtick in '23 versus '22 kind of makes sense given some of the contract renewals, et cetera. But is 1Q the trough? Or just directionally, how about that trend for the rest of the year? Thanks.

Yes. And so listen, I think this data has been helpful for you, the investor, and I think it allows us to bridge some things. So just to kind of give you a sense. In Q1, if you think about our PSAV business, which is the main driver, over 90% of our revenues, volume was up 4.2%. Rate -- I'm just -- I'm not talking about basis points, but our rate was down 6.4% and revenues were down 2.3%. So it's kind of holding together. So that's 6.4% is really kind of the impact of those contract renewals. Steve, we did say that there is a little bit left in that. So you could see a modest tick down in Q1 as we get the full -- sorry, Q2, as we get the full-flow effect of the contract adjustments. But I will just emphasize, this is all playing out as we anticipated, particularly because of -- it's as simple as the volume environment is normalizing and we kind of know what the rate is as it rolls through our book. So in Q2 of '23, I think you are going to see that stabilize. And we've actually gotten a little bit of benefit over -- in the quarter for mix which was not our friend at the back half of last year. So that is one of the reasons why our rate has come down 6.4% when the contract adjustments that we highlighted were a little bit higher closer to 8% for the year.

Look, I think it's important, yes, I think it's important. Our key -- our business has normalized. You can see that in the volumes. You can see that with the renewals of our three larger customer contracts. You can see that the adjustments are coming through as we expected. We feel really good about the first half and we expect to see growth in the second half. And that's why we're confirming guidance for 2023. We are super-excited about our growth plan. And we've identified a number of unmet customer needs that our products, the four products that we plan to launch on our platform can serve. And that's why we're so excited about the new products and the product pipeline that we're working on this year to launch next year. So we believe, we're in a great position to resume growth in the second half of the year and -- as we indicated, and we'll have a full year of growth in 2024.

Okay. I appreciate the color. Thanks.

[Operator Instructions] Our next question today comes from the line of Luismario Higuera from Citigroup. Please go ahead, your line is now open. Please do ensure, you are unmute totally.

Can you hear me? Sorry this is Luis, for Daniel Grosslight.

I can hear you.

Yes, thank you. Providers have been reporting normalized utilization across the board. I just wanted to ask, would you be able to walk us through when MultiPlan should benefit from these trends? Thank you.

Yes, I guess a couple of things. We're definitely seeing -- because there's two aspects. There's the leading indicators, hospitals, ASCs, et cetera, have shown some real strength in Q1. And then there's our own kind of out-of-network skew that is our own circumstances. I think it is fair to say that the volume environment has gotten better. We saw a little bit of ourselves, 3% up in our -- or excuse me, 4% in our PSAV volumes. So it's moving in the right direction. I think what you're hearing from us is we're just not going to get over our skis on calling a turn, okay? So we're not cautious because we're worried. We are just trying to make sure that, that translates into our book because we've got a lag of 8 to 12 weeks. And so, our second quarter viewpoint is that we're going to have kind of a stable, solid volume environment like we had in Q1. You may argue that there's upside as it rolls through our book, but we're not ready to call that yet. And so we're just -- we're not going to get ahead of ourselves on the rebound. And as you know, for 2023, we did not predict a massive upswing in volume for our '23 guidance.

Thank you. That’s helpful.

[Operator Instructions] There are no questions waiting at this time. So that will conclude today's conference call. Thank you all for your participation. You may now disconnect your lines.