Good afternoon. At this time, I would like to welcome everyone to the MultiPlan Second Quarter 2020 Financial Update Call. [Operator Instructions].

I would now like to turn the call over to [ Erica Bartsch ]. Please go ahead. .

Good afternoon, ladies and gentlemen. Welcome to MultiPlan's Second Quarter 2020 Financial Update Conference Call. .

Please note that our discussion today may include certain forward-looking statements including, without limitation, statements with respect to anticipated future operating performance, growth, acquisition opportunities and of similar forecasts and statements of expectations.

Words such as expects, anticipates, intends, budget, believes, seeks, estimates, could and should and variations of these words and similar expressions are intended to identify these forward-looking statements.

Forward-looking statements made by the company and its management are based on estimates, projections, beliefs and assumptions of management at the time of such statements and are not guarantees of future performance.

We undertake no obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. .

Actual performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the company and its management as a result of risks, uncertainties and assumptions.

Representative examples of these factors include, without limitations, general industry and economic conditions; interest rate trends; cost of capital and capital requirements competition; customer cancellations; the ability to expand certain areas of the company's business; shifting customer demand; changes in operating expenses, including employee wages, benefits and medical inflation; governmental and public policy changes; and the continued availability of financing in the amount and on the terms to support the company's business; the impact of the COVID-19 pandemic on the company's business; the completion of the transaction with Churchill; and the ability to recognize the anticipated benefits and achieve the goals of the proposed business combination.

.

I would now like to turn the conference over to MultiPlan's CEO, Mr. Mark Tabak. .

Thank you. Good afternoon, everyone, and welcome. We are pleased to host today's call and provide you with an update on the business. .

Before I discuss our second quarter performance, I want to address the recent news regarding MultiPlan and Churchill Capital III. .

As many of you have known, MultiPlan entered into an agreement and plan of merger with Churchill Capital III on July 12. In terms of the transaction, Churchill will contribute $1.1 billion of cash raised during its initial public offering in February.

Other additional investors have committed to participate in the transaction with pipe commitments to a $2.6 billion new private capital raise consisting of $1.3 billion of common stock at $10 per share and $1.3 billion of 6% cash interest convertible debt with a conversion price of $13 per share.

Churchill will acquire an equity interest in MultiPlan for a total consideration of $5.7 billion paid in cash and shares of Churchill common stock. .

The business combination will be accounted for as a reverse capitalization with no goodwill or other intangible assets recorded in accordance with GAAP. We firmly believe this is an excellent opportunity for MultiPlan and represents an appropriate next step in the company's evolution.

Churchill's cash infusion and intellectual resources will enable MultiPlan to focus on growth through M&A and internal initiatives which will enable us to better execute our growth strategy. .

The transaction will allow us the opportunity to create payer value beyond the tech-enabled cost management and payment integrity services we offer today. As a public company, we will also have greater strategic and financial flexibility, making us better equipped to expand organically with adjacent acquisitions and by investing in new technologies.

We are excited to join forces with the Churchill team to expand our offerings while continuing to deliver value to all payers, providers and consumers in the United States. .

The new Board of Directors of MultiPlan will include 3 representatives from Hellman & Friedman, Allen Thorpe, Hunter Philbrick and Paul Emery, that went on our Board today; and 3 Churchill-related representatives, Michael Klein, Glenn August and Bill Veghte. Michael is the Chairman and CEO of Churchill Capital.

Glenn is the CEO of Oak Hill Advisors, a significant investor through the convertible debt offering in this transaction. And Bill is a seeded technology professional who held leadership positions at Microsoft for 2 decades and was COO of Hewlett Packard.

In addition, we have a new independent Chairman of the Audit Committee, and Richard Clarke, a distinguished leader in cybersecurity, will continue to serve as an independent director. .

This morning, our team held MultiPlan's first-ever Analyst Day, during which we presented a detailed review of our business and growth strategy to sell-side analysts. Presentation is not open to investors.

However, the transcript, slides and presentation video will be available to you tomorrow through a link found on the multiplan.com website and the Churchill Capital III website. .

Now turning to delivering value. I'm pleased with our execution in the second quarter as our teams worked diligently to manage the business through COVID-19 pandemic. The health and safety of our employees, customers and partners remained their top priority.

We continue to enforce a work-from-home policy, leveraging virtual technologies to keep our teams connected, all while continuing to provide uninterrupted service to our customers. .

As we anticipated, our second quarter results were directly impacted by the pandemic. While we got off to a strong start in Q1, we did experience a slowdown in elective care and elective claim volume in Q2 as individuals paused or delayed elective procedures through the height of the pandemic.

This led to a 15.8% year-over-year decline in Q2 revenues and a 20.3% year-over-year decline in Q2 EBITDA. Dave will discuss the COVID impact in greater detail shortly. .

Year-to-date, cash flow from operations remained strong at $191.9 million. .

Despite the recent headwinds, claim activity in the quarter performed better than expectations. We are hopeful for continued improvements in volume as markets reopen. We also anticipate that due to social distancing measures and a deferral of doctor visits during the pandemic will be a greater need for acute care.

We expect this will drive patients to look out-of-network to access providers that are available to see and treat them quicker than their primary care physicians. .

Despite the fluctuations in claim activity, we continue to see heightened client engagement as they turn to MultiPlan for solutions to help them generate additional revenue streams and greater cost savings. Notably, many of our clients are turning to our Data iSight platform to maximize savings in a defensible and transparent manner. .

For example, we had a large third-party administrator begin using Data iSight in January this year with about 900,000 members. Given their success with this program, they added about 100,000 member group to the program this past July.

We also have a large national carrier who expanded the use of Data iSight in January and is actively planning further expansion of this product and our platform later this month. .

Several Blue Cross Blue Shield plans also have initiatives underway to increase the use of our services.

Notably, a large Blue Cross Blue Shield plan is currently expanding its use of Data iSight and recently added network access inside its service area, while another Blues plan added one large client to our program in the quarter and has a commitment from another in January of '21.

We also are in contract discussions with a new plan which will bring our total Blue Cross Blue Shield client roster to 14, a further validation of our strong working relationship with these plans nationwide. .

We also have several regional plans leveraging MultiPlan's networks and other services to help drive business expansion. This is coupled with a number of regional health plans deploying Data iSight initiatives later this year, including active contract discussions with 3 new plans. .

Finally, we have also signed agreements with 3 Medicare Advantage plans for network build services, help them with their network adequacy, compliance and expansion opportunities.

Discussions are also underway with a number of other plans, including a large national carrier, giving us further confidence that our services remain an integral part of our clients' workflow as they move forward. .

As we move forward, we will continue to be proactive in engaging our customers to ensure they have the right resources and programs in place to manage their businesses and deliver greater cost efficiencies during this challenging time. .

While responding to the COVID has been a primary focus over the last 3 months, we continue to monitor industry regulation and litigation that could impact on Multiplan. With regard to litigation, we routinely see payers and providers use litigation as a means to negotiate reimbursement rates.

There are a number of special disputes underway today, none of which we would characterize as unusual. MultiPlan reserves for any litigation in which we believe our company has a material uninsured exposure, and we feel our balance sheet appropriately reflects those today. .

With regard to government regulation, most of MultiPlan's business is insulated from regulation, given we do not operate insurance plans, deliver care or assume payment responsibility. For years, we have monitored state and federal regulations to address out-of-network care.

And before I hand things over to Dave, I would like to specifically address proposed federal surprise billing rules. .

We, along with our regulatory advisers, believe that there is a low likelihood that Congress will enact any form of surprise billing reform this year.

While 30 states have been active in addressing surprise medical bills to date, the approach has generally been limited to specific settings, categories of care or network situations, which we believe has had a limited impact on us. .

Notably, definitions used in federal and state legislation typically pertain to very specific care, such as emergency services, anesthesiology services or radiology services. They are not written or enforced with the intent of eliminating out-of-network services or plan or provider negotiations. .

Within MultiPlan's 1.2 million provider network, we have contracts with emergency service, anesthesiology and radiology providers that by contract hold members harmless and eliminate the exposure to surprise billing. Further, our negotiation offering also secures signed agreements with these providers, thereby eliminating surprise bills also. .

In summary, I'm very pleased with how our team members responded this quarter, working hand-in-hand with our customers to deliver lasting solutions that drive value and services to all payers, providers and consumers.

Importantly, while visibility into the second half remains challenging, I'm confident we are taking the right steps to position the business for continued success.

As I stated in the earlier portion of my comments, we are excited about the opportunity to work with Churchill and all that it provides for our customers, our employees and our shareholders. .

With that, let me turn things over to Dave Redmond to review our second quarter financials.

Dave?.

Thank you, Mark. .

Let me review first the results from Q2 2020, and then we will share our thoughts on the remainder of 2020. Let's take a look at our Q2 results. .

Revenues for the second quarter 2020 were $206.9 million as compared to $245.7 million in the second quarter last year, a decrease of $38.8 million or 15.8%.

This decline of 15.8% was primarily due to reduced claims from customers as a result of restrictions of elective medical procedures and nonessential medical services related to the COVID-19 pandemic. .

Revenues for the 6 months ended June 30, 2020, were $458.9 million as compared to $490.7 million in the comparable period in 2019, a decrease of $31.8 million or 6.5%.

As discussed in our May 2020 earnings call, revenues in Q1 2020 increased approximately $7 million when compared to the comparable period in '19, and we did not see any meaningful impact from COVID-19 in our Q1 2020 results. .

While we did not experience a material impact from COVID-19 during the 3 months ended March 31, as previously stated, we did experience a 15.8% decline in revenues for the 3 months ended June 30, 2020, as compared to the 3 months ended June 30, '19, due to the restrictions and the reduced volume of claims from customers. .

For the 6 months ended June 30,of 2020, we incurred only about $300,000 of expenses related directly to COVID, primarily for office, cleaning and computer and office place to now -- to enable our employees to work remotely.

We have temporarily closed all of our offices and restricted travel due to concern for our employees' health and safety and also in compliance with state shelter-in-place orders. Most of our approximately 2,000 employees are working remotely. .

Other than these modifications and the claims and revenue reductions mentioned previously, we have not experienced any material changes to our internal operation structure, including receiving and processing transactions with our customers as a result of COVID-19. .

The COVID-19 pandemic is evolving rapidly. We believe the COVID-19's impact on our business, operating results, cash flow and our financial condition primarily will be driven by the severity and the duration of the pandemic; the pandemic's impact on the U.S.

and global economies, and consumer behavior and health care utilization patterns; and the timing, scope and impact of stimulus legislation as well as other federal, state and local responses to the pandemic. Those primary drivers are beyond our direct knowledge and control.

COVID will continue to impact our businesses, our operating results, cash flows and financial condition, but is uncertain how adverse or material the impact will be on our results. .

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will affect our customers, associates and employees, suppliers, vendors and business partners. We're unable to predict the extent of the impact COVID-19 will have on our financial position and operating results due to numerous uncertainties.

These uncertainties include the severity of the virus; the duration of the pandemic; government business or other actions, which include limitations on our operations or mandates to our customers, and our customers and providers; the effect on customer demand or changes to our operations. .

The health of our workforce and the ability to meet staffing needs and other critical functions cannot be predicted and is vital to our operations.

Further, the impacts of a potential worsening of economic conditions and the continued disruptions to and volatility in the credit and financial markets, consumer spending as well as other unanticipated consequences remain unknown.

In addition, we cannot predict the impact that COVID-19 will have on our customers, vendors, suppliers and business partners. However, any material impact on these parties could adversely impact us. .

Effects from the COVID-19 began to impact our business late in Q1 2020 with various federal, state and local governments and private entities mandating restrictions on travel, restrictions on public gatherings, closure of nonessential commerce and shelter-in-place orders.

This situation involving COVID-19 continues to remain fluid, and we are actively managing our response in collaboration with our customers, associates and employees and business partners, and assessing potential impacts to our financial position and operating results as well as adverse developments in our business. .

EBITDA for the second quarter 2020 was $149.8 million as compared to $188.1 million in the second quarter last year, a decrease of $38.3 million or 20.3%. The decrease in the EBITDA amount was slightly less than the revenues decrease because expenses were only about $500,000 less in Q2 2020 than they were in Q2 '19 at being EBITDA expenses. .

EBITDA for the 6 months ended June 30, 2020, were $345.8 million as compared to $376.2 million in the comparable period in 2019, a decrease of $30.4 million or 8.1%. This decrease was approximately $1.4 million less than the decrease in revenues for this period. .

In March 2020, given uncertainty in the global capital markets, we borrowed $98 million under our revolving credit facility, resulting in a total of almost $100 million outstanding at that time, including 3 letters of credit totaling $1.8 million of utilization against our revolver.

We repaid our revolver and all the affiliated amounts in late June of 2020 and now have the full revolver capacity available to us. .

We believe our existing cash resources and expected future cash generation will be sufficient for our liquidity needs for the foreseeable future. At June 30, 2020, we had a cash balance of approximately $180 million in addition to the availability under our revolver. .

At June 30, 2020, our term loan was $2.71 billion. Our first lien leverage was 3.52x, and our total leverage was 7.32. .

Since the acquisition by H&F in June 2016, we have paid down over $760 million of term debt. In Q3, as you know, we purchased and canceled $121.3 million Senior PIK Toggle Notes. The cash purchase of $101 million plus accrued interest resulted in the recognition of a gain of $18.5 million. .

Our restricted payment capacity from MultiPlan Acquisition Holdings LLC under its debt instruments was $106.7 million at June 30, 2020. .

As you all know, MultiPlan has not historically provided guidance. That said, given the unique circumstances arising from the COVID pandemic, we believe it is important to provide an estimate for our full year 2020 financial results.

The complexities and dislocations arising from COVID make providing precise 2020 guidance for MultiPlan somewhat difficult, but we have done our best to incorporate available data on current and projected health care capacity, procedure mix and overall consumer trends to forecast our range for the remainder of 2020. .

In mid-March, management presented to our Board an estimate that COVID could drive $135 million to $150 million negative revenues variance from our 2020 budget. As Mark said earlier, our Q2 performance came in better than expectation.

And given real-time claims trending, we now estimate that COVID may impact us by a total of $110 million to $130 million of revenues for the year. .

As a result, we now expect full year 2020 total revenues to be in the range of $910 million to $930 million and adjusted EBITDA guidance range of $685 million to $705 million. .

The preliminary proxy statement from Churchill stockholders' meeting that was filed with the SEC by Churchill III on July 31, 2020, included selected forecasted financial information for the calendar year ended December 31, 2021, including total revenues in the range of $1.085 billion to $1.125 billion, adjusted EBITDA in the range of $845 million to $875 million, and leveraged free cash flow of $425 million to $450 million.

.

We will be reviewing our year -- by year-end our forecast, as we do every year, with the facts and circumstances then occurring, and prepare a detailed budget for 2021.

However, subject to the assumptions and qualifications stated in the preliminary proxy statement, we are comfortable as of today regarding the ranges presented for such forecasted financial information. .

Please note that such forecasted financial information should not be relied upon as guidance as future events and actual results may differ materially from such forecasts. .

The preliminary proxy statement also included the proposals to be voted on at the meeting, and Churchill is awaiting comments from the SEC after their customary review. We are optimistic that Churchill will receive comments in late August 2020 and hope to have our comments cleared and file a definitive proxy statement in September of 2020.

We hope that Churchill stockholders' meeting will be scheduled for late September or early October and a closing of the transaction shortly thereafter. .

Churchill filed an 8-K yesterday that included our financials, MD&A and pro formas as of and for the 6 months ended June 30, 2020. .

At the closing, we expect to redeem our 8.5% PIK Toggle Notes. Let me walk you through the sources and uses of the transaction and the respective stock ownership after the transaction is completed, assuming there are no redemptions at closing. .

The equity that will be issued to existing MultiPlan stockholders is about $4.2 billion. The cash available from the Churchill spec, as Mark talked about earlier, $1.1 billion. Michael Klein and his team did a fabulous job of raising $1.3 billion of common pipe investments, an additional $1.3 billion of convertible pipe investments. .

The convertible debentures have a 7-year maturity and a 6% rate. That money will be used for debt repayment of the PIK holdco notes of about $1.2 million, estimated expenses, fees, et cetera, of $109 million.

$5.6 million will be the net purchase price related to the acquisition of MultiPlan, and we expect to have net cash on the balance sheet at the closing of between $800 million and $900 million. .

Upon the closing of the transaction, assuming no redemptions, the existing shareholders of Churchill and the common equity pipe investors will own approximately 39% to 40%, and the existing MultiPlan shareholders will own 60.5%.

The existing MultiPlan shareholders are rolling in excess of 73% of their investment into the new company, and management collectively is rolling close to $0.25 billion investment into the new company. .

With that, I will turn it back to Mark to introduce Michael Klein and then open it for questions. .

Thanks, Dave. .

Before we open the call to your questions, I'd like to introduce Michael Klein, Chairman and CEO of Churchill Capital III, for some remarks.

Michael?.

Thank you very much. Thank you, Mark, and thank you very much, Dave. And thank you all for dialing into this. .

As you know, this is the first quarter for the bondholders after the announcement of the transaction, so we've migrated this bondholder update call into an update call also for equity shareholders.

And as we migrate towards being a public company and move to a regularized format, you'll see the company move towards a regular issuance of quarterly earnings. .

For all of you that are interested, and I'm sure you will be, as Mark indicated, we had a MultiPlan Research Analyst Day today that obviously fit the format of the going forward public company. There was 18 analysts there, and it was an extraordinarily detailed presentation provided by Mark and Dale and Dave and Michael Kim and Paul Galant.

That presentation, both in its written form as well as the full video of a couple of hours, will be posted, so you will all see that.

And as you've heard today, and you'll hear from that presentation, management both explained the business, provided the appropriate information for analysts to model as well as reconfirm their forecasts and reconfirmed the strategic plan on a go-forward basis. .

And we all at Churchill remain as excited, if not more excited today than the day we announced the transaction.

As you heard from Dave, the filing of the proxy on July 31 means that we expect to get comments, as we've been told by the SEC, by the end of this month, which will allow us to distribute a final proxy to shareholders mid-September and close as quickly thereafter as possible, plus or minus the end of the month. .

I will remind all of you that because -- as Dave very finely stated, because we raised our $2.6 billion of capital alongside of the public vehicle of Churchill, we now have circa $3.7 billion that was raised. We have met and exceeded any cash condition for the merger. We have met the antitrust issues, if any, because we've cleared.

We have filed our proxy and expect our proxy statement to be done shortly. So we are extremely confident that the transaction will close and close on time because there is limited to no conditionality remaining in the transaction. .

Just to comment on a couple of other items that are material for all of us as investors together. We are very pleased with the performance that this management team has had during this horrific pandemic.

As I think you heard from Dave, the company is outperforming its projections and has updated a more constructive set of forecasts for the year than we understood when we embarked upon the transaction. It's obviously helpful in terms of conservatism when you're negotiating a transaction in the midst of a pandemic.

But to understand the company's outperformance by circa $40 million versus the case that was anticipated in Q2 is encouraging from our perspective. .

I think most of you who follow the industry will know that UnitedHealthcare, an important customer, indicated that for the second quarter, doctors' offices on an outpatient basis were operating at less than 60% of levels around the entire country.

They reported a medical loss ratio that's the lowest in publicly reported history, 1,300 basis points below prior quarter. It was a record disturbed quarter in the health care market. They also indicated that by June, 95% of doctors' offices and hospitals were open and operating. That's quite constructive from our perspective.

And I would say that the plus or minus $700 million EBITDA indication that Dave has just given you is more constructive than we anticipated based upon setting up this transaction.

Put simply, pricing the company at 15x the worst year in medical history in the United States versus companies that are currently trading in the market at 20x forecast, 21, is viewed as extremely constructive. .

Just to close out, we are comfortable that the team is working well together. Dale and Mark and Paul are working very constructively on the plan going forward to ensure 2021 and our base case is achieved. The tech teams are already working well together. Bill Veghte, Paul Galant and Michael Kim are working very well on the tech.

The tech infrastructure is already the best in the business, but the next-stage plan is in place. We at Churchill and Hellman & Friedman and MultiPlan, led by Mark, are working closely on the acquisition plan that we discussed and described with you.

We're very, very pleased as well to hear from all of our shareholders as they call us with any questions and concern. .

We can share with you, there's nothing that we found during this closing that is anything other than encouraging from our perspective. For those who want an outside-in view of the comments that Mark Tabak gave around surprise billing, which has been a question that some had asked, please go to the website of avalere.com.

Avalere.com has just done an independent study that they put forward and posted as of today, which we think more than confirms Mark and the company's view that as of this time, surprise billing in 28 states or more has not impacted the company, and we don't anticipate any material impact from regulatory changes. .

I'll close by saying it's been a pleasure working on integrating with Mark and the team so far. They're outperforming our base plan. We're confident in 2021 and going forward.

We're comfortable and confident that our analysts and our investors are beginning to understand the company and recognize that it's being set up at a roughly 50% multiple discount to its peers. And to outperform in the worst pandemic that we've seen in our lifetime is something that we can only thank the company's management for its operations. .

Let me hand it back to you, Mark. .

Thank you, Michael. .

We're very excited with the merger with Churchill Capital. It gives us additional strategic and financial flexibility to pursue an aggressive growth, both organically as well as inorganically. .

We're going to open the program now to your questions. [Operator Instructions].

[Operator Instructions] We'll take our first question from Franklin Jarman with Goldman Sachs. .

This is actually Andrew Kugler on for Frank. Maybe just a real quick clarification and then a real question after that. So first, pro forma for the deal. You have all this excess cash on the balance sheet. I believe you guys have talked about taking down some of the opco debt with that.

Can you maybe talk about your priorities there?.

And then just on the acquisition side, you've talked about expanding some in in-network opportunities and opportunities in automotive insurance.

Are you essentially just trying to expand your payment integrity business? Or can you maybe elaborate on what the actual opportunity set is there? And then is that being driven by expanding to the white space of the market or are you going to try and take share from competitors?.

Dave, why don't you answer the first part of the question, and I'll answer the second part?.

You did a really good job of getting 3 questions in one, right?.

We have committed, and as I said publicly a few minutes ago and we've said publicly for the last month, that we would take out the 8.5% PIK toggle notes in closing. We are optimistic, hopeful that there will be very few redemptions.

And if there are very few redemptions, we could have as much as $800 million to $900 million of cash on our balance sheet. .

We have made no commitment to pay debt -- to redeem or pay down the [ 7% and an 8% ] opco debentures.

That's something we may do in the future, depending on circumstances, but I think in the initial planning, we want to have as much available cash to capitalize on potential M&A opportunities and investments that we want to make in the extend-and-expand strategy. And so we make no commitment at this point to pay down any opco debt.

And I would think we'd be highly unlikely to do that in 2020. .

Relative to the second part of the question, the financial and strategic flexibility afforded us by the -- as you know, the merger with Churchill, gives us the opportunity to aggressively pursue growth opportunities, which will include, as you noted, in-network; government business; Medicare/Medicaid, where we have a presence already in early innings; also to adjacent lines of business in property casualty, mainly workers' comp and other medical.

.

It really encompasses all those solutions, payment integrity as the lead, but also our network capabilities and our data analytic capabilities also have an opportunity to generate additional savings for our customers, our customers' customers, the employer and the end-user consumers as well.

As you may recall, last year, we received over $100 billion in charges, and we returned savings opportunities in excess of $19 billion to our customers. .

We'll take our next question from Rishi Parekh with Barclays. .

In the beginning of the call, you went through a number of new customer wins, and I apologize, you were talking a little fast and I didn't catch all of them. But it sounds to me that you have a number of Data iSight wins moving in through this year and going into next year. .

And I'm just trying to better understand, given where we are now, adjusting for some of the COVID items, and obviously, your comfort level with your guidance that you're providing for next year, can you help us bridge some of the opportunities that you're seeing from now to that $840 million or $850 million of EBITDA number that you're looking for next year?.

And then is there anything unique to these customer wins, either higher margin or anything that you can maybe call out on these customer wins?.

Well, as you know, we founded the company by identifying a very significant pain point for our customers, and that was out-of-network expense. And we launched the program nearly 40 years ago, addressing that with a network-only product. And that product carried us quite a way.

And in 2010, 2011, we saw an opportunity to introduce data analytics because we'd also aggregated an incredible database of claims and charge data that would supplement and complement and address claims that could not be repriced or discounted from our network business. .

And then in 2014, we saw that health care reimbursement was not going to be solely on volume or frequency, but it's going to be on volume, frequency, outcome, quality and the patient experience. We made a small acquisition of a company called Medical Audit & Review Solutions in 2014, which became the basis of our payment integrity program.

And our Data iSight program and our payment integrity program, together, which leverages incomparable database we've aggregated are our fastest-growing products moving forward. .

We sell into a 700 -- a customer base that number is 700 of the commercial insurers, Blue Cross and Blue Shield (sic) [ Blue Cross Blue Shield ] plans, regional health plans and TPAs, both in the public sector and the government sectors -- well, public sector, government sector and the private commercial sector as well. .

Your next question is from Janegail Orringer from Alliance Bernstein. .

Dave and Mark, congratulations on the deal. Very excited for you. .

Just a question for Michael Klein or, really, for everyone, given the very high margins of the business, there was always a concern with disclosure of those margins in a public market context. And consequently, there was a series of sponsor transactions, and now finally, the company is going public.

What gets you comfortable with disclosure of those margins now that you weren't comfortable with, let's say, a few years ago? And is there any shift in the business that makes it more plausible to have that disclosure?.

Mark, would you like me to take that? Or would you like to take... .

You take it, and I'll provide a footnote or 2 afterwards. .

Sure. Well, first and foremost, thank you for the question. And you may or may not know that we have been around the company since 2013.

In fact, we were first introduced to Mark when Mark approached me in 2013 with a simple question that posed opportunities ahead of him, which has clearly shown in the data analytics space, wanted to get off of a good equity Ferris wheel, if you will, and be in a longer-term held position and less levered.

And at that time, we had Berkshire Hathaway as a potential partner, brought them to be a buyer from Silverlake Solutions. Silverlake prepared to sell at that point in time. So the transaction didn't [ take place ].

[indiscernible] first market, understanding the -- viewing the -- there's a few things I say that made great comfort in where we stand as a public company. .

First and foremost, the company is on the right side of health care, and it does exactly what its customers want, create a set of -- make health care more affordable.

[indiscernible] and their benchmark [indiscernible] data allows them to provide a tool that is critical to care, not to impact or repair, but to reduce the cost of care, to make it more affordable. Now I say that to you as a person that is an investor, but those are the words that I heard directly from the customers.

And the customers have been part of this journey for MultiPlan for decades. And we spoke to customers representing 65% of the revenues, and you can imagine who all of those customers are. And they made a few things very clear to us. .

One, MultiPlan is critical at making health care more affordable; Two, they are a critical partner to the customers in achieving that goal; Three, their -- the group independence and the quality of their data is critical to ensure that the right health care pricing is put in place. .

I would say to you as well, 2 last comments on your question.

First is [indiscernible] view on the data, and just as there's 450 people on this call and there are hundreds of people that have had access to the data that exist for MultiPlan, one would assume that customers that are saving $6 billion a year using MultiPlan have found a way to access those margins.

And of course, they have access and that they share it with us directly. They know the profitability of the business.

They know that the business is profitable, but they really know that the company is a massive payments process, and the $850 million of EBITDA is really driven by $106 billion of claims processing, not by a margin against the revenue stream. And they fully understand that they respect and they appreciate that. .

And finally, many of the prior owners of the business were owners of a network with a discount pricing model, but they weren't owners of the best data analytical tool in the health care space. Today, 75% of the revenues come from data analytics and payment processing tools that didn't exist in 2013.

In fact, the only owner of this business that has seen this margin in this way, as an investor equity owner as Hellman & Friedman, they're comfortable going public because they recognize, just as the customers do, that those data analytical tools and those payment integrity tools have increased the savings for the customers in a period of developing that from $12 billion, almost $20 billion a year.

And those tools are not replaceable at this point. They're not replaceable by anyone that has a data analytic tool, by anyone that has a network, and no one else has them both combined. .

So as you can imagine, since we, as a Board and an investment committee, are putting $1.4 billion of our own money into this transaction, we analyzed this very carefully. We're both comfortable with the margins. We're comfortable with the service that the company [indiscernible] in the marketplace.

And we're comfortable that the margins have the ability to grow. In fact -- and grow not by small amounts, but particularly meaningfully. And the data and analytics business, incremental dollar -- the revenue has very low incremental cost.

So incremental $1 billion of claims that we'll gather will generate an incremental $10 million to $20 million per year of EBITDA because $0.93 of every dollar flows to the bottom line. I'll pause here and hand it back to Mark. .

I would just -- Mike. That's spot on, Michael, I would just add the following a couple of comments. .

Look, as you know, because you've been a longtime follower of the company, our recurring revenue business model generates revenues based on a modest percentage of savings formula based upon the savings we've returned to our customers.

Six years ago, we captured about $70 billion in charges and we generated just under $12 billion of savings opportunities. Last year, we captured $106 billion of charges, and we've returned savings opportunities to our customers of over $19 billion.

And that was a function of an incomparable database that we could leverage for payment integrity and analytics, which represent almost 70% of our revenue today. .

For every dollar we save, that drives savings for the customer and revenue for us. It speaks to the relationship, speaks to the incomparable database, and it speaks to the incredible automation we have in the company. If you take the network business as an example, less than 1/2 of 1% of those claims require any manual intervention.

If you take the 3 integrated offerings together, networks, payment integrity and analytics, 96% of those claims are returned the very same day to our customer because of the extreme automation that we have in our program and the operational efficiencies. .

[Operator Instructions] Your next question is from Elie Radinsky with Cantor Fitzgerald. .

I just want to send my congratulations again on the transaction. .

Just a quick question regarding the PIK holdco bonds.

Is your expectation to close the end of September and then call the bonds, which would -- I believe, there's a 15-day call? Or is it your expectations to call the bonds in the middle of September, co-terminus with the closing?.

We hope to call the bonds as soon as we know and have the total confidence of the closing. So I expect that they will be called either after closing or shortly thereafter. We probably will not call them before we close. .

You have an additional question in queue from Janegail Orringer from Alliance Bernstein. .

Just a follow-up question for Michael on the other one.

So as you were doing your due diligence, how did you get comfortable with the surprise billing issue, given what a high percentage of revenues out-of-network claims adjudication represents?.

I'm happy to address that. And Mark and team can, of course, jump in. If my line is okay, I understand it was a bit spotty before. .

One, we [indiscernible] you would anticipate with the company, including hiring consulting firms and multiple law firms to get our full arms around the data on a state-by-state basis for the 28 states.

That's the highest degree of comfort we got is that this existing model is in place and has not had a material impact on the company because the company's data is the most robust and used in already adjudication, the specific any kind of difference of opinions that exist between payers and providers, it's this data that's utilized. .

Secondly, we are comfortable on the state-by-state basis because -- and you'll see this if you see the analyst deck, it's actually a fraction of the revenue base that is even in the line of sight of the potential surprise billing legislation that's outstanding.

So the potential "at-risk" revenues under the worst-case scenarios range between 0 and $95 million under the analysis that we've seen. So in any outcome that could potentially be the worst case our boundary, we would not see a [ material ] outcome.

And in fact, from each of the state-by-state processes that have been put in place, we've seen no material outcome. .

So we've done the work both on a state-by-state basis. We've done it with the overall review of the potential federal legislation actually and all the claims by category to determine the confidence in our [ sight ] of clear on material impact.

And of course, we've relied upon as well on legal and consulting analysts to see the potential direction of travel. .

But most importantly, because I've been around the company now for approaching 8 years, there's always been a potential regulation that was going to put MultiPlan out of business. Obamacare, the Affordable Care Act, there's always been something.

But in the end, in the same way as the customers have shared with us, because this company is so critical in creating affordable health care, the company is a critical part of the infrastructure. .

So we have high confidence in general. We have high confidence in specific. We have high confidence based upon a review of our state-by-state data, and we have high confidence based upon the external third-party review.

And I would strongly encourage you, if you're interested, to go to the avalere.com website to see independent research which summarizes clearly positions that we would also agree with. .

Okay. That was very helpful. And if I could just have one more follow-up.

Can you talk about how you think about post-closing the M&A cadence?.

We're not prepared on this call to talk about specific M&A transactions, but there are a number of opportunities in the marketplace. One of the unfortunate byproducts or results -- consequences of the COVID-19 pandemic, there are a number of companies out there of a number of sizes that have been hurt by COVID-19 endemic. .

And when you look at MultiPlan's capabilities in terms of our incredible payer relationships, the robust IT platform we have, the operational excellence, coupled with the financial flexibility that we have with the merger of Churchill and the availability of new public currency, we think there's a lot of opportunities for us.

And we're going to be disciplined and look at these opportunities and pursue ones that we think are highly accretive and can be value-added to the overall company, as we've done in the past. .

Can you share with us a little bit of what type -- the types -- kind of add-ons you might be looking at? Is it mostly in the payment integrity space or... .

Jane, three comments I would give you one. One, it will be across the entire offering today of networks, analytics and payment integrity, number one. It could be additional products and services that we received, because we -- last year, we did receive over $100 billion in charges. So what else could we do once that claim is captured.

Or it could be our acceleration into those adjacent lines of business or acceleration to serve new customers. .

[Operator Instructions] And there are no further questions in queue at this time. .

I'll turn the call back over to CEO, Mark Tabak. .

Thank you. .

These are exciting times for us. We appreciate your continued support, and we look forward to speaking with you again next quarter. Thank you very much. .

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..