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Welcome to the MultiPlan Corporation Third Quarter 2023 Earnings Conference Call. My name is Harry, and I’ll be your operator today. [Operator Instructions] I’d now like to turn the conference over to Shawna Gasik, AVP of Investor Relations. Thank you. Please go ahead.

Thank you, Harry. Good morning, and welcome to MultiPlan’s third 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 third 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 their 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. Well, what a difference a year makes. This time last year, I had the unfortunate job of informing you that our results had fallen short of our expectations and visibility had become more challenging. In the four quarters since then, we wasted no time pivoting the company. We stabilized our revenue base and reset financial expectations, formalized a new strategy to transform our business, and initiated a growth plan to execute on that transformation. As I sit here today, I’m happy to report that we are both tracking to our full year 2023 expectations and making excellent progress executing on our growth plan. We delivered third quarter results that were in line with our guidance and that met our expectation to resume growth in the back half of 2023. And during the quarter, we achieved several milestones in our growth plan, with a number of new product initiatives rolling out on or ahead of schedule. With our business now stable, our visibility increasing, and our pipeline of new business growing, we are even more confident that we are well positioned to deliver accelerated growth in 2024 and beyond. Starting with our third quarter results as shown on Page 4 of the supplemental deck. Revenues were $242.8 million, and while that was 3.1% lower than the prior year quarter, it was up about $5 million, or 2% sequentially. Revenues came in at the midpoint of our third quarter guidance range, driven by increases in our identified potential savings. Adjusted EBITDA was $152.3 million, down about 12% from the prior year, but in line with the second quarter of 2023. Adjusted EBITDA was also in line with our third quarter guidance, albeit closer to the lower end of the range, reflecting the impact of accelerated investments this quarter in integrating Benefits Science Technologies, or BST, and launching our new Data & Decision Science Services line. Our adjusted EBITDA margin was 62.7%, down from 64.2% the prior quarter, again reflecting cost exceeding revenues for BST. Adjusted EBITDA margin declined from 68.7% the prior year due to the impact of our contract resets, as well as investments in the business that we expect to generate new revenue starting in 2024. That’s a good segue to an update on our growth plan progress. As I mentioned, during the third quarter, we delivered several new products to the market on or ahead of schedule. In fact, we have now delivered on initiatives spanning across each of our four growth plan objectives, which are detailed on Page 9 of the supplemental deck. We also have a deep pipeline of new products, and the roadmap for our 2024 product initiatives is already coming into focus, which will help us drive our growth in 2025 and beyond. As we noted at our Investor Day, this successive layering of new products into our revenue base is integral to our plan of generating $200 million to $275 million of incremental annual revenue with our growth plan over the next several years. Let me expand on the progress we are making. Starting with the initiatives to enhance our core services, which are described in the first three rows of the table on Page 9. In the third quarter, we launched our smart scoring solution called Pro Pricer ahead of schedule. Pro Pricer leverages the combination of machine learning technology and the unrivaled breadth of our repricing solutions to intelligently and dynamically route claims to arrive at the optimal pricing recommendations, giving the customers unique business objectives. We completed the first release of this product during the third quarter and onboarded a larger customer on October 1, which we expect to translate to approximately $6 million of annualized revenue. And that is just the beginning. For 2024, we are planning additional releases of Pro Pricer to increase its functionality and flexibility, including giving customers the option to attach our Balance Bill Protection service. Speaking of Balance Bill Protection, as we noted on our last earnings call in the second quarter, we launched this new product for the value-driven health plan services offered on our HST platform. We onboarded 11,000 lives this year, and we expect that number to double by January 1, 2024. These lives alone translate to over $5 million of incremental annualized Balance Bill Protection revenue for our HST business. For 2024, we’re continuing to build out the HST platform with our employer solution in a box strategy by adding pharmacy and care navigation services and also by integrating aspects of our BenInsights technology into our HST platform and upselling these services to our existing base and new customers. The BenInsights technology, which came to us from our acquisition of BST, will add descriptive, predictive and prescriptive analytics to enhance employer benefit intelligence and reporting for our HST customers. Next, we have been focused on fortifying our leadership in NSA-related claims processing. During the third quarter, we launched the first version of our Rules-based claims processing initiative and the beta version of our Insights Portal. Both of these initiatives are aimed at enabling more sophisticated and better informed compliance with the NSA regulations. For 2024, we will continue to advance both of these, and we plan to build a service that helps payers comply with the State Surprise Bill regulations. Additionally, we believe payers will demand increased assistance from us with the administration of their qualifying payment amounts or QPAs. Let me expand on this QPA topic. As many of you are aware, throughout 2023, courts have ruled largely in favor of providers on several lawsuits filed by the Texas Medical Association, and for payers these rulings have increased the complexity of complying with the NSA regulations. This dynamic continued in the third quarter when the court ruled that QPA schedules must be calculated at the plan level, reversing CMA’s [ph] July 2021 final rules, which allowed for calculations based on the payer’s book of business and for as few as one QPA schedule to price all claims. The latest TMA ruling will require a huge increase in data creation, data storage, maintenance and processing logic. Our customers are telling us this will be very difficult for them to do, and they are looking to us for assistance. We’ve already built into our NSA services a variety of approaches to creating QPA schedules, including at the plan level, so we are very well positioned to provide that assistance. As a result, depending on whether CMS appeals, the latest TMA ruling and the outcome of any appeal, QPA administration enhancements could be one of the key NSA related initiatives for us in 2024. Wrapping up our list of core service Enhancements during the third quarter, we introduced functionality enhancements to our Itemized Bill Review Service, or IBR, and we are already starting to get traction in the market with the addition of a couple of significant customers in the quarter. IBR is a payment integrity service that reviews high dollar inpatient facility claims during the adjudication process to identify billing errors and prevent overpayments. Our IBR enhancements include the ability to mine claim data by leveraging our prepayment integrity analytics to identify and prioritize the most promising cases to pursue. For 2024, we are shifting our attention to our network based services with a plan to pilot [ph] a next generation customized network model, which would bundle services from each of our service lines, including payments, and will be targeted initially to the direct-to-employer channel. Moving on to the initiatives that expand our service offerings, which are detailed in the fourth row of Page 9. During the third quarter, we made solid progress marketing our new Data & Decision Science Services line, which, as most of you know, includes the products acquired through BST. We’ve wasted no time introducing these new services to our payer customers. The reception has been strong and even though we acquired BST just a few months ago, we are rapidly building a sales pipeline to help drive our growth in 2024. As part of this effort, we launched the first two phases of PlanOptix, our software suite that ingests the newly required payer price transparency data and uses this data to deliver critical market insights to our customers. In July, we released PlanOptix Search, and in October we launched the first version of our PlanOptix Intelligence solution, which goes beyond simply querying the data to helping payers with their network contracting and market expansion strategies. For 2024, we are working on a number of Data & Decision Science Services lined initiatives. This includes expanding the features and functionality of PlanOptix intelligence and designing a price transparency data solution for the provider market. This would open up a new product opportunity in a channel that is very familiar to us. It also includes standing up our risk scoring models as a standalone service that can add value to every claim we process through our platform and which is critical to deepening our penetration of Medicare advantage and in network claims. Also, during the third quarter we began to build our sales pipeline for our new B2B healthcare payment service, which, as we have previously discussed is being offered through a partnership with ECHO Health. I’m pleased to announce that we have already secured our first customer and will begin implementing that mandate shortly. For 2024, we continue to focus on the rollout of this exciting new service to our customer base. So, as you can see, we have been very busy, but I’m extremely pleased with the progress we have made on each of our four growth plan objectives. Our 2023 initiatives are on track. We are already setting some of our 2024 initiatives in motion, which are creating more ways to grow our revenues at MultiPlan. We still have a lot of work ahead of us, but we are already making a ton of progress thanks to the dedication of our product team, our sales team and the rest of our 2,700 MultiPlan colleagues. As I have said several times, the strategy is in place. From here, it’s all about execution and we will continue to be relentless in our day-to-day execution. With that, I’d like to turn the call over to our CFO, Jim Head. Jim?

Thank you, Dale, and good morning everyone. Before I begin, I just want to echo Dale’s view that we’re really pleased with our solid execution in the quarter and how we’re progressing through the year as planned. I’m going to start with a review of the quarterly financial results. I’ll follow that by commenting on our fourth quarter outlook, and I’ll finish up by providing an update on our balance sheet and capital allocation. As shown on Page 4 of the supplemental deck, third quarter revenues were $242.8 million, declining 3% from Q2 2022 as year-over-year volume growth helped us absorb a meaningful portion of the annual headwind of approximately 8% related to contract renewals with our larger customers. Importantly, revenues increased 2% from the prior quarter as we delivered on our expectation to resume growth in the second half. Excluding a $3.6 million contribution to revenues from BST, third quarter revenues were $239.2 million, down 4.5% from prior year quarter and up about 1.4%, or $3 million sequentially, despite one less business day in Q3. Turning to revenues by service line as shown on Page 5 of the supplemental deck, network based services revenues declined about 4% from the prior year quarter and were down less than 1% sequentially. Analytics based services revenues declined about 3% from the prior year quarter, but were relatively strong sequentially increasing about 5% from the prior quarter, inclusive of $1.5 million of incremental BST revenues. Payment and revenue integrity services revenues were flat from the prior year and declined 6% sequentially or about $1.8 million. The sequential decline was driven primarily by lower clinical negotiation volumes, which were partially substituted by additional activity in our analytics business. We also had lower revenues in our revenue integrity services, which can exhibit lumpy quarter-to-quarter performance. Our third quarter revenues reflect a sequential shift in potential identified medical cost savings despite a flattish quarter for utilization, which plateaued in Q3 after a strong first half. As detailed on Page 6 of the supplemental deck: at the top of the funnel, medical charges process declined by 1% from Q2 2023 to $42.5 billion. Given our claims lag, this looked more or less consistent with the mixed healthcare utilization trends in the second quarter that were reported by some of the publicly traded payers and hospital operators. Identified potential savings increased 2% from Q2 2023 to $5.8 billion. In the core commercial health plans category, medical charges process declined 1% sequentially to $18.5 billion, but identified potential savings increased 2% sequentially to $5.5 billion. Our highest quarter for commercial health plan savings since Q1 2022 reflecting our core savings performance and strength from HST. As shown on Page 8 of the supplemental deck, identified potential savings in our PSAV revenue model increased 1% sequentially to $4.2 billion. Also, as shown on Page 8, revenues as a percentage of identified savings or revenue yield was very stable this quarter, declining just 1 basis point for our overall business, which includes both PSAV and PEPM. More to the point, the revenue yield for our core percentage of savings revenue model, which is approximately 90% of our revenues, was effectively flat, declining just 1 basis point. As we have previously indicated, the impact of the contract renewals was fully reflected in the quarterly run rate in the second quarter, and we expect a revenue yield to look stable for the foreseeable future with modest changes up or down driven by products and customer mix, and this is precisely what we saw in the third quarter. Turning to expenses. Third quarter adjusted EBITDA expenses were $90.5 million, up $12.2 million from the prior year quarter and up $5.2 million sequentially. For the sequential comparison about 60% of the increase in expenses was driven by cost increases in our core business, which reflects the combination of investments in headcount to support our new products and services, and costs to support our NSA, IDR activities. The other 40% of the expense growth reflects the expenses contributed by BST in Q3 2023, which was the first full quarter post acquisition. The attribution of expense increases was similar to what we saw in Q2, reflecting deliberate upfront investments we’re making to enact our growth plan in our core business and absorbing the BST cost structure and some upfront costs related to the BST integration, much of which will not recur. We expect our expense trajectory to normalize in the fourth quarter with expenses down slightly sequentially. As we finish the year and complete our expense budgeting for 2024 we are actively assessing our cost structure to preempt inflationary pressures and mitigate growth in core expenses to free up room for investment in our initiatives. Adjusted EBITDA was $152.3 million in Q3 2023 versus $172.2 million in the prior year quarter and $152.7 million in Q2. Our Q3 adjusted EBITDA landed toward the lower end of our guidance for the third quarter, driven by the affirmation investments in the core business and in BST. As a result, our third quarter adjusted EBITDA margin including BST was 62.7%, down 150 basis points versus 64.2% in Q2 2023. Excluding the impact of BST, the margin in our core business was above our consolidated margin for Q3, and consistent with the second quarter overall margin. Turning to Q4 2023 and full year 2023 guidance. We expect revenues of $240 million to $250 million in the fourth quarter. We are narrowing the range of our full year 2023 revenue guidance to $960 million to $970 million, which implies no change at the midpoint from our prior 2023 guidance range of $950 million to $980 million. For adjusted EBITDA, we are projecting $155 million to $165 million in the fourth quarter, which includes less of a drag from BST. We expect adjusted EBITDA expenses in Q4 to be lower than in Q3, as some additional expenses in our core business related to hiring for new products and additional NSA expenses should be more than offset by cost controls and a drop off of some one-time costs related to BST. For the full year 2023 we are now expecting adjusted EBITDA in the range of $615 million to $625 million, which at the midpoint implies a very modest reduction relative to our full year 2023 guidance range of $615 million to $635 million, and reflects the impact of those additional investments that we have mentioned. Combination of our revenue adjusted EBITDA assumptions implies an improvement in the adjusted EBITDA margin in Q4 closer to our annual expectations than in Q3. We remain on track to achieve an adjusted EBITDA margin of 64% to 65% for full year 2023, consistent with our guidance. Moreover, we remain confident that as BST scales we should feel upward lift on our adjusted EBITDA margin, while still making additional investments to drive growth. Moving on to balance sheet and capital management. In the third quarter, operating cash flow was $78.4 million, while our leverage free cash flow was $49.2 million. As a reminder, the first and third quarters are typically our higher quarters for cash flow given the timing of our interest and tax payments. As shown on Page 14 of the supplemental deck, we ended the quarter with $101 million of unrestricted cash, up from about $90 million in the prior quarter, with the increase reflecting our quarterly free cash flow offset by $35 million of cash used to repurchase $46 million of face value of our 5.75% senior unsecured notes. Net of cash, our total and operating leverage ratios were 7.3% and 5.2% respectively. We continue to be active and disciplined in allocating our capital. Over the last four quarters, we have deployed over $400 million of capital, including $248 million on debt repurchases and retirement, $140 million on M&A, and $13 million on share repurchases. Our highest long-term priority remains investing in the business both organically and through M&A to drive growth and long-term value. That priority is followed closely by debt reduction. Of note, we have reduced the face value of our debt by $333 million over the last four quarters. As we’ve mentioned previously, and is shown on Page 12, following the acquisition of BST in the near-term we are likely to deemphasize M&A that’s near-term. As a result, you should expect us to continue making a series of small but critical organic investments to support our platform, including our new core products and our new data and decision science service line. In near term, you should expect the bulk of our incremental capital generation to be allocated towards debt retirement. We will continue to assess share repurchases, but as we’ve consistently said that will likely be limited to a small allocation of our capital. Stepping back to the bigger picture, our transformation is on-track and we’re very pleased with how our organization has responded to the call to be nimble and action oriented. We’ve deliberately accelerated some investments this year to put us in a position to deliver growth in 2024, and we expect to grow in 2024. Admittedly, it’s – put a bit of near term pressure on our margins, but rest assured, we have not lost our historical discipline around costs. Even now, as we head into our 2024 budgeting exercise, we are prudently thinking through our cost base, making adjustments as we always do, and looking for ways to maintain our industry-leading adjusted EBITDA margins while creating additional capacity to fund our investments in growth. It’s a delicate balance, but achieving this balance is paramount to how our leadership team manages this business. And it’s absolutely part of our execution roadmap. So that wraps up my comments. I’ll turn it back over to Dale.

Thanks, Jim. Before we open the call for questions, it bears repeating that we’ve been on quite a journey over the past 12 months. The headwinds have dissipated and the tailwinds are picking up. We’ve stabilized revenue and pivoted to a refresh strategy, and the execution of our growth plan is in full swing. We remain confident that the initiatives we are working on will amplify our growth in the coming years and that we are marching down a path of transformation. As a result, I see great things on the horizon for our company. And as we said at our Investor Day, within five years, MultiPlan will be a stronger, more diversified, faster growing and better capitalized company. And as Jim just mentioned, we expect to grow in 2024. Operator, would you kindly open the call for Q&A?

Thank you. [Operator Instructions] Our first question today is from the line of Daniel Grosslight of Citigroup. Daniel, your line is open. Please proceed. Daniel Grosslight of Citigroup, your line is now open.

Hey, guys, thanks for taking the question. I want to go back to some of the comments that Jim made on utilization this quarter and the lag, as you mentioned, Jim, there’s always this lag. So the sequential decline in volumes, I think you were implying was due to kind of what providers and payers had said in 2Q. As we look towards 4Q and 2024, it seems like the payers and providers are seeing an increase in utilization. So, I’m curious how that is transferring to how you’re thinking about 4Q and 2024, and if you can provide any additional detail around the composition of that utilization?.

Yes, so maybe to talk a little bit about the arc of this year and what it pretends for 2024, but we saw a nice uptick in the first half of the year in our savings. It raised about 5% in the first two quarters compared to fourth quarter of last year. So we saw that and it was actually pretty consistent with what we saw in the provider universe, the hospitals, et cetera. And it’s the best way to describe it is it’s plateauing. I don’t know whether that’s consolidating to get to a higher level. We’ve always been a little cautious about calling the uptick, but obviously we look at the leading indicators, and it seems to be ticking upwards. So that obviously doesn’t feel bad for our business, but we’re just not ready to call another upswing in volume. But what it is not is going backwards, it’s not coming down, it’s not falling, but I think it’s consolidating at a new level and grinding upwards. So that bodes well for our business, but we’re not hanging our hat on that for growth next year. I think we’re kind of planning for a flat that may be slightly up volume environment, but very low. That’s just not part of our planning process. As it pertains to the mix of our business, we’ve got a pretty big mix on the physician side, and then we’ve got a pretty big portion of our mix on the facility side. So what you see out of the hospitals, et cetera, is actually consistent with us, which is we’re seeing some upswing in volume surgeries, et cetera. So that is rhyming very closely to what some of the hospitals have described. On the physician side, it’s relatively flat. And so just given our mix, it’s a little bit slower than what the hospitals see across the board. So, to summarize, feels good consolidating in a new plateau, doesn’t feel like we’ve got risk on the downside, it’s a little bit more about how do we – whether we call the upside here.

Got it. Thanks. And as we think about 2024 and looking at your longer term guidance that you provided during Investor Day of 4% to 5%, you just mentioned, Jim, that you expect utilization to be flattish to maybe slightly up. Is there any change in how you’re thinking about that 4% to 5% growth rate for 2024 or anything that would prevent you from hitting that in 2024? And then as we think about EBITDA margin too, is 4Q the right margin run rate that we should think about for full year 2024? Or are there some additional investments that you need to make that might lead to some additional margin degradation?

Okay, so let’s break it into two parts. So is utilization a big part of our growth algorithm? And the answer is it never has been. Medical inflation, membership growth, productivity improvements, if you go back to our Investor Day, those are bigger pieces of the overall puzzle. So it’s not inconsistent with – our statements are not inconsistent with our long term model, Daniel, in terms of how we think about things. I look at utilization uptick as all upside. If it really ticks upwards, then that’s super helpful for us. But medical inflation, productivity improvements are bigger pieces of the overall puzzle. On the expense side, I think you can equate third quarter to be the [indiscernible] of our margins. And as we march into 2024 and going forward, I can’t say that we’re expecting any major uplift in margins because we’re continuing to make investments here. But obviously in February, we’ll come out with guidance and give you a sharper point of view. But we’ve been clear that we’re aiming for mid-60s type of margins in the business. That is deliberate, and it’s also indicator that we see growth opportunities and we’re willing to invest in them.

Got it. Thanks for the comment.

[Operator Instructions] Okay. And it appears we have no further questions in the queue today. So this will conclude the MultiPlan Corporation – oh, my apologies, we do have – we have just had a question registered from the line of Madison Aron of JPMorgan. Madison, your line is open. Please go ahead.

Hi. Thanks for taking my questions. With regards to the QPA stuff that you noted earlier that you’re working with your payers to provide them assistance, is there anything that you could quantify around what that opportunity looks like going into next year since it’s going to be incremental to what you’re doing? And then as we think about margins going into the first half, I know you’re making a number of investments to prepare for 2024, especially with BST, how should we think about the progression of margins? Do you expect it to be under some pressure in the first half due to these investments and then to ramp up more in the second half of next year? Thank you.

I can answer the first part of the question. It’s still too early to size the opportunity going forward in 2024. The federal court in Texas just released the opinions on the two NSA related cases in August, what was called then as TMA 3 and TMA 4. And it was in TMA 3 where the court found primarily for the challengers and addressed issues around how the QPA is calculated, like prohibiting ghost [ph] rates, requiring the QPA to be calculated by specialty, and prohibiting the payers from calculating QPAs across multiple plan sponsors. So it addressed a number of open issues. We believe the administration is set to appeal the decision and update its guidance documents to accommodate these changes. In fact, the administration just on October 30, released a proposed rule to the IDR process under the NSA, and it largely focused on the efficiency and communication between the disputing parties and tried to decrease the volume of disputes that are being submitted for the IDR process. The administration has requested comments from the industry for those proposed rules. Those comments, I think, have to be submitted by the beginning of January, and then we’ll wait for the publication of a final rule. So it’s still early in the process to declare what impact it will have in 2024. But we’ve already in the work we’ve done to date and the work we’re doing now, we’re positioning the company to respond to the growing complexity that we recognize continues to come with NSA.

Rishi [ph], why don’t I just address the margin question. As we go into 2024, I think there’s a couple tailwinds, which will help lift margins, and then there’s the investments we’re making in the business. And my first statement would be we’re trying to maintain this balancing act, which is maintaining our margins and putting ourselves in a position to go capture these new growth opportunities. So I don’t view that as a massive J-curve in 2024. I think it’s more of just kind of maintaining and some of the things that are positive, we’re going to get some lift as some of those one timers start dissipating and BST starts contributing a little bit more on the top-line. We’re going, obviously as volumes increase, that’s beneficial to us. We’ve got – we do have in our mix, some of the mix in our growth is going to slow our margin expansion down and then we’ve got investments in the business. So think about a balancing act for 2024 in advance of providing any guidance. I think that’s the best message we can give you. But Q3 certainly the nader.

Great. Thank you.