Good morning, everyone, and welcome to the MultiPlan Corporation First Quarter 2024 Earnings Call. My name is Angela, and I will be coordinating your call today. [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, Angela. Good morning, and welcome to MultiPlan's First Quarter 2024 Earnings Call. Our speakers today are Travis Dalton, 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 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 2024 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 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 in our annual report on Form 10-K and other documents we file 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 their comparable GAAP measure 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, Travis Dalton. Travis?

Thank you, Shawna. Good morning, everyone, and welcome. I'd like to begin my first earnings call by expressing how excited I am to be leading the MultiPlan team, how inspired I am by the opportunity to work with great clients, passionate associates and serve a mission that really matters, which is to bend the cost curve in health care. I would like to share with you some of my thoughts about my first 2 months, which have been quite eventful at the helm of MultiPlan. As you heard me say during our last earnings call, I chose to join MultiPlan because I saw the critically important and valuable role we play in reducing the cost of health care. We combine data, analytics, and technology with expertise to make health care more transparent and affordable for all. I believe we have a unique opportunity to take this value proposition and serve constituents across the entire health care ecosystem, leveraging data and insights to better serve our core clients and create value across the broader ecosystem is fundamental to how we will complete our journey to becoming a world-class public company that delivers sustainable growth. In my first 2 months on the job, I've engaged with our associates, our clients, strategic industry partners and many provider health systems. These engagements have demonstrated the incredible integrity and professionalism of the MultiPlan team, reinforce my confidence in the potential of the company and validated my commitment to helping this company carry out its critical mission in the health care market, positioning MultiPlan for accelerated and sustainable growth begins with the devotion to business fundamentals that drive performance excellence. Business success will come as we serve clients, understand the problems the market is trying to solve and create mechanisms to deliver value. I've taken two…

Thanks, Travis, and good morning, everyone. I would like to begin by echoing Travis' comments. We're excited about carrying our strategy forward with the new members of our management team. The executive transition has been smooth. We've made several pragmatic changes to our operating model that will accelerate our progress. We successfully navigated a difficult industry-wide challenge and the company is energized. Today, I will walk through the financial results for the first quarter of 2024. I'll then turn to our outlook for Q2, and I'll close with a review of our balance sheet and update on our capital allocation activities. As shown on Page 4 of the supplemental deck, first quarter revenue was $234.5 million, a decrease of 0.9% from Q1 '23 and a decrease of 3.9% sequentially. Our revenues fell just shy of the low end of our guidance range for the quarter despite the disruption to our claims volumes caused by the clearinghouse cyber outage that Travis mentioned previously. While it's difficult to quantify precisely, we estimate this disruption impacted our first quarter revenues by roughly $5 million to $6 million. And excluding this impact, our revenues would have been within our guidance range for the quarter. Turning to revenues by service line, as shown on Page 5 of the supplemental deck. Relative to Q4 '23, network-based revenues declined 11.6% sequentially or $6 million driven largely by the impact of the aforementioned claims volume disruption to our complementary network, fee-for-service and property casualty businesses. Also impacting the service line were a nonrecurring customer credit and some client attrition. Our analytics-based revenues fell 2.1% sequentially, largely due to the claims volume disruption. Our Payment and Revenue Integrity revenues declined 0.6% sequentially also reflecting the impact of the clearinghouse outage on claims volumes for our prepaid solutions, offset by…

Thank you, Jim. Let me say a few closing words before I open up the call to questions. As I said earlier, it's been an exciting and interesting first 2 months on the job. As I mentioned, the experience has strengthened my conviction about the value and potential of this company. I will also note that it has not been without challenges. I'd like to think of myself as realistic but optimistic and every challenge creates opportunity, as I've noted. The reality is that it has been a difficult moment as we contended with a number of external pressures including macro uncertainty in health care as well as some company-specific adversity that was largely out of our control. I believe we should take the challenges head on, stay focused on our clients and the markets that we serve. Optimistically, these challenges have posed an extraordinary opportunity for our management team and associates to band together, sharpen our point of view and develop as a team. I also see tremendous opportunity for the company to execute better and evolve over time across the healthcare continuum. I'm confident that as we continue to enhance our foundation and quicken our execution velocity, we will realize our transformation to a world-class company. Would you kindly open the call for questions? Thank you.

[Operator Instructions] The first question is from Joshua Raskin with Nephron Research LLC.

I just want to talk about the change outage. And you gave guidance the last day of February, which was a couple of weeks into that outage. So relative to guide -- results relative to guidance that was given at that time, did the outage just last longer than expected or were more claims impacted than you expected? And then how did you size that $5 million to $6 million impact? And I'm sort of a little surprised that 2Q guidance wouldn't reflect a little bit more of that pent-up claims processing. I would have thought you would have seen a larger cohort in April.

Okay. Thanks, Josh. It's Jim here. Why don't we kind of march through this? So when we did put out guidance, we were clear that the outage, the clearinghouse outage was days old, maybe a week old. And so we really didn't have a sense for how this was going to play out. And I think at the -- at a conference in March, we kind of updated that a little bit. But we started to see the effects of this -- we actually saw a little bit at the tail end of February, and then it kind of hit us much more squarely in March. So when we sized it up, it was both kind of our average plane volume from a static perspective, we looked at client activity. And what I would say, Josh, it was pervasive. Every kind of every payer client, we were seeing things slow down a little bit. It was less so at some of the larger customers. But as you get into the smaller customers and in some of our primary business, et cetera, it really started hitting. As we march through April, it was persisting in the beginning, and it's starting to abate in the second half of April. So here we are in May, we think this is going to persist. It's going to take a little while to work through the system. And so where you're seeing us be a little bit cautious is, it doesn't feel like it's a complete snapback in 6 to 8 weeks' time period, particularly on the physician claims, which were more, I think, hit more deeply by this outage, and so we're just trying to make sure that we give ourselves a little room for this to work through the system. But importantly, those claims need to be repriced. And our payer clients and the employers they serve need those cost-containment services for all the reasons that we've talked about. So that's kind of how it's playing out right now. We're trying to be as accurate in real-time as possible, but it is -- the upstream flows are somewhat out of our control, and we're working through it.

All right. That's perfect. And then just switching topics to the NSA. I'm curious about demand for some of the NSA-related products, especially the rules-based processing. Are clients reticent at all to sort of lock something in now with the uncertainty that still sort of exists? Or are the plans just moving ahead because they need a solution for the current situation?

This is Travis. Yes. Actually, I think it represents a real opportunity for us over time. I think it's here to stay. I think that's becoming more well understood. I think the rules will continue to be defined. And for us, we think we offer an incredible service in that space, and there'll be continued demand for it. I also think we have the ability to automate some of our process out of that. So my view is as we continue to look at the company, figure out how to grow top line, but also create operating leverage that's actually an area where we can create some automation and operating leverage over time. So we view NSA as a real opportunity for us on the business side, but also an opportunity to serve an important function in the market. So I'd say we remain positive on that and positive on the demand.

The next question is from Daniel Grosslight with Citi.

This is [indiscernible] on for Daniel. I wanted to ask if you change your go-to-market strategy at all given another recent lawsuit has been filed.

Yes. We're having trouble hearing the question. So could you repeat it? Are we changing our go-to-market strategy? And I didn't hear the second part of it.

Yes. Given the recent lawsuit that was filed just wondering if that had any implications in the go-to-market strategy.

No, no, none at all. None at all. We're going to continue to -- yes, we're going to continue to aggressively attack the market. We're going to not only focus on core. But as I mentioned, we're going to look at our adjacent markets, TPAs, consultants, brokers. We're confident in the services we provide. Yes. I said this, but we offer an array of solutions across providers, members, employers and health systems. We're aligned with the goals of NSA and otherwise. And I'm just going to make this comment of my view, I believe that there's a mutual interest out there that providers want fair payments, and they also want to reduce friction. And I think payers want to manage risk and do the same thing. And we play an important function inside of that. But we're going to continue to do what we've done for 44 years, which is deliver quality and capability and products and services to the market. So if anything, we're going to continue to sell aggressively in those markets because we have real value to bring.

Got you. And if I can sneak another one. I want to ask if there's any change in the management that self-employer -- self-insured employer side for PSAV versus PEPM given some of the controversies raised in a recent article.

Yes. I think the -- what you're alluding to is 100,000 plan sponsors that oftentimes are services go-to-market through some of the big ASO platforms or TPAs. We haven't seen a behavior switch because it takes time. I think there's always been -- and we even talk about it varying models that are fit for purpose here. So we have ongoing discussions where we talked -- and this is before any of this -- the press talking about creating more of a subscription or a PEPM type of model or a per-claim model versus a percentage of sale. What you may see over time is a little bit of an evolution over that. But in the end, I think the employer plan sponsors want us to be motivated and some element of that will probably remain in our model. But as we talked about at Investor Day, we are trying to shift the overall model of the overall portfolio of the business to more, call it, subscription-type business, but that's mostly through product introductions versus a shift in the core.

[Operator Instructions] The next question is from Madison Aron with JPMorgan.

First on, you mentioned that, that retirement is could be your focus going forward. Post the quarter, have you repurchased any debt?

We don't disclose that, Rishi (sic) [ Madison ] But we -- I guess the right way to say it is we're in a realm in which we are kind of pay-as-you-go. We -- as I noted, our second quarter cash flow is typically lower because we've got tax payments and a lot of interest payments. And so we're just being very flexible and opportunistic as we march through the year. I'd also note that pricing is changing a lot on our bonds. You saw that particularly post April '25. And so all of it looks a little bit more enticing across the entire capital stack. So we're just going to be flexible as we go along, Rishi (sic) [ Madison ]. And I think you'll measure our progress quarter-to-quarter.

Yes. And so you're reaffirming your guidance. And I realize that the revenue performance is usually split pretty evenly across the quarters. And this time around, it's probably going to be heavily weighted towards the second half. But given all the performance indicators that we're hearing out there, all the increased utilizations, I know in the past, you guys have been somewhat conservative on the utilization views. But what are you not seeing? Or what are you seeing on the utilization front going into -- through the year? I would have thought that at least the revenue guide would have been higher. Is there something -- are you seeing that utilization benefit? And if you are, is there an offset that we're just not thinking about? I'd just love to get your thoughts on why reaffirm the guidance if the performance indicators out there are pretty positive.

Yes. Rishi (sic) [ Madison ], I think there's no doubt that it's back-end loaded. We just -- again, we're starting at, but we start off with a little bit of a deficit here. And so we're just -- we're going to see how this plays out, particularly in the second quarter and see how the clearinghouse outage works its way through the system. So you're right in the sense that the facilities-based claims have been stronger than physician claims. But our book is kind of half position, half facilities, if you will. So we did see some strength year-over-year, clearly on the facility side. Sequentially, though, is a little bit soft, and we think that's because of the outage. And on the physician side, it was relatively flat year-over-year. And so what you saw is you're continuing to see the supply side on the facilities recover and so we're definitely going to be seeing the benefit of that over the year. But we also have a mix of both position and facility, so it mutes some of that upside, but it also creates a little bit more steadiness.

Okay. During -- and Travis, I appreciate your comments from the beginning of the call, and I look forward to just hearing your thoughts on the long-term trends over time. But during the Investor Day, you guys highlighted a number of initiatives and growth plans that include your new acquisitions and you also some leverage targets as well. So when you were talking about reassessing the business or just evaluating all these performance indicators, has something changed in the long-term view on the business or just a view on these acquisitions? And then when you talk about these reassessments, there's a component of your business, I get that you. But given this is all about top line, when you talk about these 30 performance indicators, what does that mean to us?

Yes. There's a couple of questions in the question. So let me just start talking. Yes, we absolutely are committed to the '23, '24 growth plan of roadmap. So we're tracking on that. We're executing on it. If anything, we're working hard to try to drive more velocity with that and move more quickly on those products, which is why we're implementing product life cycle management product processes and interlocks inside the company, I won't bore you with all that, that's operational stuff that helps us produce more faster for the market. So we're absolutely committed to that. Beyond that, we'll be moving -- we'll be looking aggressively at those adjacent markets and products we have. And we'll build out from the core. That's how I look at it. So the core of the business is healthy. We have good products and services that we offer. And we'll look at new market segments, which I've talked about in the past. And then ultimately, I think we have data assets that we can utilize both internally to build better stuff with data science, but also potentially externally. And so that's how I view the business as kind of that inside-out view as we go forward. But we're fully committed to the work that we've done and we'll build and grow from that because it's really a healthy, sustainable way to grow and build the business over time. And so that's a focal point for us for sure. And what was the second half of the question, I probably -- I missed it.

The new acquisition.

We basically identified kind of 5 pillars that we think we need to execute on to run a great public company, serving our clients, being attacking and fit for new growth, so new products and new ideas in development. Operational excellence through the use of our tools like Salesforce and ERP, which we're implementing. So we can get better insights into the business and predictive models around our revenue growth and otherwise, talent and people and then innovation. And we sat down as a group, when we did a bottoms-up and a top-down and we identified metrics and performance indicators, I'm happy to share those. They won't be a secret. And we're going to track benchmarks and performance against that. And I think by looking at those 5 vectors altogether, that will gain momentum and understanding as a company, and we'll be able to predict the business. We'll also be able to accelerate growth. And so that's kind of the operating model that we're seeking to drive through.

I would not call this a revolution. It's more of an evolution. And I think what we're finding is the demand side is strong. We've got a lot of opportunities. And what we're trying to do is sharpen our focus on our operating model so we can stay really aligned on what's going to be the best and highest use of our energy.

Yes. And I said to the team, and we'll -- as we -- there's no shiny lower here, right? That's not what we're doing. We've got a good business. It's fundamental. We're going to build great stuff for our core clients. We're going to continue to enhance our products. We've got 20 product enhancements in the pipeline as part of our process. And then we're going to look for new market insights and opportunities in other segments and across the continuum of health care. I think we have some assets to build on. And we'll see. But that's what I believe, and I think the market will bear that out.

If I could just squeeze in two more questions. One, can you just give us an idea as to you talked about facilities, but how behavioral health and recovery volumes have been trending over the course of the last few quarters? And then second, there's been a lot of negative headlines over the last several weeks. And I get that you guys are just going to continue focusing on what you need to do. Most of the headlines and articles that we saw arguably nothing new for those who have covered this credit for a long time. But there's a domino effect. And you have the Clover chart letter now to the FDA and DOJ. I'd love to just get your thoughts as to how you guys are viewing this, how deep this does go? And how are you managing this process?

James?

Yes. Rishi (sic) [ Madison ], I'll take the behavioral help. I mean, I think the trend -- I think you rightly noticed that the trends are growing in behavioral. And there -- it's interesting. There's a lot of out-of-network activity around that because it just because these companies are sprouting up and rapidly growing there is not a deep level of in-network activity. So we're seeing some trends up there. But it's still not a giant piece of our business, Rishi (sic) [ Madison ], But it's clearly an area of growth. So more to come on that, but I think it's -- the payers are very focused on this as well and making sure that we're staying on top of this arena. And I think the trends will be pretty strong going forward.

And on the second part of the question, yes, I think we spent good part of our call today kind of answering what we believe is the value proposition of the company with facts and information, I think we're going to continue to do that. In my view, I kind of look at this as it just -- to me, it really illustrates that we need to explain what we do. So I think we have an opportunity actually to talk about the value we bring our brand. I view it as us having a bigger voice than we probably ever had. We're known now. We're out there. So that's not a bad thing. We'll go out and educate. I expect for us to go talk to stakeholders, policymakers, those in the industry and really have an open, honest dialogue. And as I said earlier, I truly believe this. I spent 20 years in the provider side that there's a mutual interest in health care, I just truly believe that. And I don't impute motive I believe that everyone wants us to work well, and we play an important role in rationalizing that market. And I think that's an important thing to do. Is it well understood? Not really, but the opaqueness of health care is a problem across lots of different vectors, not just in this space. But we're going to continue to do that. We'll manage through it. We'll engage proactively and we'll continue to express the virtues of our brand as we see it. And that's what -- that's -- but most importantly, we're staying focused, as you noted, and not getting distracted. We have a lot of work to do.

[Operator Instructions] We currently have no further questions. That will be concluding today's call. Thank you, everyone, for joining. You may now disconnect your lines.