Good day and thank you for standing by, and welcome to the MultiPlan Corporation's Second Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded.

[Operator Instructions]. I'd now like to hand the conference over to your speaker today, Ms. Gasik. Please go ahead..

Thank you. Good morning, and welcome to MultiPlan's Second Quarter 2021 Earnings Call. Joining me today is Mark Tabak, Chairman and Chief Executive Officer; Dale White, President and Chief Operating Officer; and David Redmond, Chief Financial Officer.

This 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 second quarter 2021 earnings call -- or earnings press release issued earlier this morning. We will refer to the supplemental slide deck during our discussion this morning.

Before we begin, I'd like to remind you that our remarks and responses to questions may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business, which are discussed in the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2021, and other documents to be filed or to be filed with the SEC.

Any such forward-looking statements represent management's expectations, beliefs and forecasts based on assumptions and information available as of the date of this call. While we may elect to update such forward-looking statements at some point in the future, please note that we assume no obligation to do so.

Certain financial measures we will discuss on this call are non-GAAP financial measures. We believe that providing these measures help investors gain a more helpful and complete understanding of our financial results and is consistent with how management views our financial results.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure, to the extent available without unreasonable effort, is available in the earnings press release and in the slides included in the Investor Relations portion of our company's website.

I would now like to turn the call over to our Chief Executive Officer, Mark Tabak.

Mark?.

Thank you, Shawna. Good morning, everyone. Let me join in welcoming you to our second quarter 2021 earnings call. I'd like to thank our stockholders for their continued support.

I'm pleased to say MultiPlan is reporting its fourth consecutive quarter of strong performance in our first year as a public company, continuing on a track record of consistent, substantial returns with six groups of private equity investors.

In the second quarter, our operating results exceeded the guidance that we set out earlier this year and are characterized by strong, sequential, and year-over-year organic growth in both revenues and adjusted EBITDA. Importantly, we had growth across all of our businesses and across all customer groups.

As shown on Page 5 of our supplemental slide deck, in the second quarter, total revenues were $277 million representing an increase of 33.5% over the prior second quarter and an increase of 8.4% from Q1 2021.

Turning on Page 6, due to the impact of the COVID pandemic, which receded in the quarter and the contribution from our recent acquisitions, organic growth in revenues was 6.9% versus the prior year second quarter and 2.6% versus the first quarter of this year.

Adjusted EBITDA for the second quarter was $205.3 million, an increase of 37.1% from Q2 2020, an increase of 7.5% from Q1 of 2021.

Excluding the effects of COVID, contributions from our newly acquired businesses and the incremental public company costs, organic growth and adjusted EBITDA was 13.9% versus the prior second quarter and 3.4% versus the first quarter of this year. We continue to be laser-focused on operational excellence and expense control.

EBITDA margins in Q2 2021 was 74.3%, up from 72.4% in Q2 of 2020 and down slightly from 75% in Q1 of 2021. Our business continues to exhibit strong free cash flow conversion of 56% in Q2 2021 and 73% year-to-date. Our confidence in our business remains strong.

We've continued to enhance our services and continue to provide exceptional customer service, which has led to strong customer retention and growth.

While we expect COVID-19 to continue to affect our business through the back half of this year, the sequential improvement from the first and second quarter suggested that the effects of the pandemic may be starting to normalize in some markets.

Whether based on the strength of our first half results and on our pipeline of new business, our outlook for 2021 has improved. As a result, we are raising our financial guidance for the year. Dave will detail that momentarily.

Before I turn it over to Dale to discuss the business and Dave to discuss the financials, I'd like to say a few comments addressing the recent volatility in our share price.

As most of you know, MultiPlan stock again came under pressure, this time from speculation regarding a coverage policy change one of our customers, a change that based on our current understanding and economic analysis, will have no material impact on our business.

The speculation resurfaced a number of narratives about MultiPlan's ability to retain customers and revenue, which continue to insufficiently appreciate the value proposition we offered to our customers, the competitive attributes and operating strength of our company and the dynamic nuances of the markets in which we operate.

And we once again, try to set the record straight. The fact is MultiPlan continues to increase the scope of what we do for our core customers because these customers operate in a complex and dynamic environment, and they continuously seek our help adapting to change that they confront.

Requirement to reconfigure workflows to comply with the specifications to No Surprise Act is only the most recent case point.

While it's conceivable that with enough time and investment, our customers could develop processes to comply with The No Surprise Act without our help, they are turning to us for help because we have the speed, we have the flexibility, we have the agility to customize solutions that meet their needs.

Dale will talk about some of these efforts momentarily. Our MultiPlan -- what MultiPlan does for its customers is neither easy nor easily replicated. Over the span of four decades, we have invested heavily in intellectual and technological capital.

Result of our unique path is a set of differentiated operating assets will be difficult, if not nearly impossible, for any competitor or customer to reproduce. These assets include a national network of 1.2 million providers that included database of over 1 billion claims and over 3 petabytes of structured claims data from across 700 payer customers.

They include proprietary processing algorithms that are deeply integrated into the claim management IT processes of our core customers. Our embeddedness and our customer workflow means the cost, time and effort to change vendors can be very high for our customers.

But our customers don't stay with us because switching is time-consuming or costly, they stay with us because we have the scale to provide the services they need more cost effectively and the expertise to perform these services more efficiently, resulting in higher cost savings and less work and churn.

We add substantial value to our customers and our set of differentiated and difficult-to-replicate services give us confidence in our cash flow stability and in growth.

Assertions that a Medicare reference pricing cost management solution is intended to displace MultiPlan, demonstrates an insufficient graph of the diversity and planned designs and preferences across the health plan sponsor universe.

While employers and other health plan sponsors prefer a cost management solution that leverages our provider network, Data iSight negotiation services, a Medicare reference pricing solution, or some combination of those approaches depends on many, many considerations.

These include the incidence and volume of out-of-network spend, the prioritization of cost savings relative to the design, degree of member of choice, acceptable level of provider abrasion, desire for member support, and the risk tolerance of the plan sponsor.

The fact that no single solution is right for every health plan is reflected in the large number of configurations sold by our payer customers to their clients.

Many of these configurations include one or more MultiPlan services, and we are unique in offering an end-to-end set of solutions and services that can serve the full spectrum of health plan designs encompassing a wide range of desired member benefits, provider reimbursement baselines, and cost management approaches.

It's true some plan sponsors are highly focused on steering your members to stay in network to manage their own cost.

To that end, some of these sponsors will elect a Medicare reference pricing approach to an in-network cost management approach and permit more balanced billing to reinforce member behavior, so others may elect to use Medicare reference pricing in lieu of part of their network -- as part of their network.

The demand for solutions that prioritize cost management, particularly in the downstream TPA regional hub plan and direct-to-retail market was a key driver behind our decision to acquire and invest in HST, which we believe represents the next-generation reference-based pricing solutions.

We call these solutions value-driven health plans -- we call these solutions value-driven health plan services because they extend beyond the typical program that offer pricing with back-end efficacy.

HST offers innovative, pre-care tools and help consumers make decisions around cost, quality, and selection of providers, whether it's seamlessly paired with MultiPlan's professional provider network.

We believe HST has a highly differentiated and effective approach for managing member provider abrasion and providing both pre and post-care consumer advocacy. We think HST is one of the most compelling Medicare reference pricing solutions available, and we are well positioned in the marketplace today.

At the same time, Medicare reference pricing approaches have been around for a long time. Against that backdrop, the use of Data iSight, the pricing engine at the core of our analytics-based service business has continued to grow. Today, it is our biggest single revenue-generating service across all our largest payers.

They rely on Data iSight because it represents a state-of-the-art and cost-based pricing methodology.

This methodology achieves an attractive balance between cost savings and provider member abrasion and it outperforms on cost savings relative to reasonable and customary pricing approaches that overweigh provider build charges, and it outperforms on reducing member provider abrasion relative to less flexible, reference-based pricing methodologies like Medicare.

It derives objective market-based prices that yield provider acceptance rates in excess of 95%, driving fewer playing resubmissions and less reliance on subsequent negotiations.

It is enabled by our vast database, our proprietary algorithms, and a technology platform that is uniquely situated in our customers' EDI gateways and that delivers straight-through processing with over 95% same-day turnaround.

In short, it is an attractive and durable value proposition, and we believe it will be extremely difficult for anyone else to develop a solution that could compete with its technology, its scale, and its independence. To be clear, MultiPlan encounters a number of competitors and rival solutions in the marketplace across many services.

We are required to prove our value day in and day out by competing to provide services on the basis of savings effectiveness and provider acceptance. That has been the case throughout the entire life of this company and that's why we've always focused tirelessly on operational excellence.

This means capturing and repricing more claims and charges, managing operational expenses while delivering excellent service with minimal churn, adjustments in rework and identifying pursuing every entrepreneurial opportunity. We've always believed that if we take care of the business and our customers, the share price would take care of itself.

We continue to believe that will be the case over the long haul. This management team has overseen six accretive transactions as a private company and has now reported four consecutive quarters of strong performance as a first year public company.

The key to our longevity extends beyond our unique resources with is differentiated MultiPlan as our agility and reconfiguring those resources and acquiring new resources to meet every challenges and opportunities our payer, customers and the plan sponsors and members for those customers are served.

The recent rhetoric from some quarters in the investment community that we have -- would have you believe the change is a negative for MultiPlan. In contrast, we see change as an opportunity to adapt and capture new opportunities to serve our customers.

There's no better example of our dynamic capabilities and the investments we've been making in machine learning and artificial intelligence, where our vast proprietary data sets and the large volume of claims we process position us leveraging new technologies to identify more clinical aberrations that generate incremental cost savings for healthcare payers.

Relative to in-network, we are continuing to capture opportunities in our provider network as payers move into and expand their presence in Medicare Advantage.

Meanwhile, the No Surprise Act presents opportunities to collaborate with our customers, requires significant modification of business and processing logic, and rerouting workflows to comply with these new rules.

And in payment and revenue integrity services, now greatly enhanced by the acquisition of Discovery Health Partners, we have created new and meaningful opportunities to address Medicare Advantage and in-network claims, market segments we have historically underpenetrated. We continue to strategically engage with our core customers.

We are managing dozens of projects with each of them, plan on implement service offerings. Already this year, we have deployed some two dozen service enhancements to increase identified savings. We have a number of machine learning initiatives in flight and underway to increase savings and enhance operational effectiveness.

In summary, the second quarter marks our fourth [Technical Difficulty] efficient and fair. As always, I'd like to express my gratitude to our customers for their enduring trust and partnership and to our more than 2,200 outstanding MultiPlan colleagues, whose tireless effort makes this success possible.

With that, I'd like to turn things over to our President, Dale White, who will provide a business update.

Dale?.

one acted in production; four awaiting approval for production; and three as active projects. These initiatives span across MultiPlan solution categories and will deliver both increased savings and operational efficiencies. We are also concepting 10 to 15 additional initiatives.

We're tailoring price strategies for several customers, including one which enables compliance with select state surprise billing regulations and are now promoting this service to other payers. In Q2, we grew covered lives for our value-driven health plan services by about 50%.

We have another 100,000 lives and another 100,000 in potential covered lives from an active pipeline opportunities with employers. Speaking of the pipeline, we're about 90 days into a new coverage model for our sales and relationship management that we put in place and the team is starting to hit its stride.

We've added over 470 new deals to the pipeline under the new model, of which about 35% have already progressed. We have closed 60 deals totaling about 5.7 million that are in backlog.

This is great progress for a process that's in its early stages, particularly since we have been simultaneously integrating the sales pipelines of our acquired businesses and have been busy cross-training our team -- our newly reshaped and augmented sales team.

Regarding our progress on our Extend strategy, we are particularly delighted with the market reception for value-driven health plan services, as Mark said, which were introduced with the acquisition of HST and which accelerated MultiPlan's ability to enable its customers to offer flexibility and health plan design.

MultiPlan legacy services have long resonated with employers ranging from midsize to very large, including those that incorporate reference-based pricing as part or all of its added network cost management strategies.

Now with HST's value-driven health plan services, we have built an important gap in our functionality that allows us to better target small and midsized employers who often prioritize cost over other planned features and who typically view Medicare-based reference pricing as the most feasible approach for achieving their cost objectives.

As Mark mentioned earlier, Medicare reference-based pricing programs have historically caused greater member and provider abrasion. Our value-driven health plan approach is different, providing member education and tools to help plan members identify and select the most cost and quality effective providers.

Importantly, our approach includes similar education and tools for providers. The result is a plan design that offers many of the provider mindful benefits of a network while delivering deeper savings for the plan sponsor and maintaining value for its plan members.

HST was a differentiated solution before we acquired it, and we believe it is even more differentiated when combined with MultiPlan's legacy capabilities, including our provider network and our Payment Integrity services.

On that score, we believe we offer the only Medicare reference-based pricing solution that can seamlessly integrate partial network access on a national scale, providing even greater potential for minimizing and managing the member provider abrasion typical of Medicare reference-based pricing plan designs.

Continuing on, I'd like to offer a few thoughts about the No Surprises Act, including the recently released first interim final rule.

Referring to Page 11 of the supplemental slide deck, while the requirements are very detailed and very technical, at a high level, the first interim rule was broadly in line with our expectations and supported our continued view that the NSA is likely to have a material negative or positive impact on the company's operating results.

That view is supported by the basic observation that although members cannot be balance billed for certain out-of-network charges under the No Surprises Act, the legislation established no payment standard for those out-of-network claims.

As such, providers and payers will still need to negotiate the reimbursement of these claims and, therefore, MultiPlan believes that we'll continue to see claims related to procedures covered by the NSA and we believe our network, negotiation, and pricing services will continue to have application to processing those claims.

This includes and especially pertains to helping payers calculate the qualifying payment amount, determine an initial payment to the provider, negotiate settlements with providers, and support payers in the arbitration process.

The highly technical specifications outlined in the first interim final rule underscore the complexity and burden of administering the requirements, and we believe only heighten our customers' interest in working with MultiPlan since we have the expertise and agility to help them quickly and effectively achieve compliance.

During the quarter, we continued to spend a great deal of time working with our customers to explain the No Surprises Act and how they can best adapt existing programs or build new programs to comply with the new requirements. Since April, we have had discussions with over 100 customers, some with more -- one or more follow-up sessions.

We participated on a couple of industry panels and last week, we held a webinar to discuss the first interim final rule, which attracted over 400 customer registrants. As noted, the No Surprises Act establishes requirements that are squarely in MultiPlan's wheelhouse.

They call for extensive claims data and analytics, connected claims processes, effective provider relationships, intelligent pricing, and strategic negotiation capabilities, tools we use to reduce charges on hundreds of thousands of claims every day. We are optimizing these capabilities to leverage their use under the new requirements.

For example, we are building on our robust provider-matching capabilities to create a service that identifies a claim as a surprise bill. This will be an automatic step in the repricing process when we are the customer's primary provider network, but we can also perform this function for other customers as needed.

Our sophisticated healthcare economics team is driving development of a QPA calculation service, which again will be an automatic step in our primary network pricing and one we can offer to other customers on an outsourced full-time or an ad hoc business process.

We are focusing payment integrity factor development on emergency and other surprise bill-related services. And we are enhancing our extensive pricing, prepayment, and post-payment negotiation services to capture and leverage the QPA, to minimize dispute resolution costs and risk for both payers and providers.

We expect to receive the second interim final rule in the next several weeks, which will focus on the independent dispute resolution process and put to rest an important debate taking place over the weighting of factors listed in the legislation as required considerations during arbitration.

Before I turn it over to Dave, I want to elaborate on recent expansions in our leadership talent. As we previously mentioned, Andrew Cone joined us as our Chief Revenue Officer from Optum in January.

Over a short time, he has made impressive strides in reorganizing our sales function and implementing new sales processes to accelerate the creation and consummation of deals. I am also pleased to announce the creation of a new position, Senior Vice President of Products filled by Navin Nagiah.

In this role, Navin will spearhead initiatives under our Expand growth strategy. He comes to MultiPlan from McKinsey's healthcare practice where he focused on incubating and building new healthcare IT and digital health businesses inside large enterprises.

He has built four high-tech companies over two decades, most recently as CEO of DNN, a contact management company. He grew DNN from five employees to a profitable enterprise with over 1,500 customers in 25 countries.

Navin will usher in a new product-centric focus that will be instrumental to our Expand growth initiatives, as surprise billing and other industry changes create opportunities for MultiPlan to transform the nature of our value to payers and providers.

Andrew and Navin are just two examples of how our expansion and development of leadership has introduced new perspectives and tools and augmented a leadership bench that is already deep in subject matter expertise and creativity and commitment to operational excellence.

In summary, our leadership team is capable of expanding our business, and our customer relationships are healthy and we continue to execute against our growth initiatives all of which give us considerable confidence in our future. With that, I will now turn it over to Dave, who will talk about the financials.

Dave?.

Thank you, Dale and good morning, everyone. As Mark and Dale mentioned, Q2 2021 marked another quarter of significant momentum for MultiPlan. As Mark noted earlier, Q2 2021 revenues increased 33.5% over Q2 2020 and increased 8.4% over Q1 2021, exceeding our earlier expectations and the guidance we communicated back in May 2021.

Organic growth was strong. Excluding the revenue contributions from HST and Discovery and normalizing for the decline in the impact of COVID-19 during the quarter, revenues in Q2 2021 were up approximately $8 million or 6.9% over Q2 2020 and up about $7 million or 2.6% sequentially.

We estimate the COVID-related revenue impact in Q2 was approximately $9 million to $11 million, about $10 million lower than the COVID-related revenues impact in Q1 2021 and approximately $40 million lower than the COVID-related revenues impact in Q2 2020.

Of the $9 million to $11 million in Q2 2021, we estimate approximately $3.5 million to $4 million of the impact was related to our network-based revenues with similar dynamics impacting our workers' comp and auto business as we saw in Q1 2021.

We estimate approximately $3 million to $3.5 million of the COVID impact was related to our analytics service line revenues, driven predominantly by mix and volume changes in the healthcare delivery.

And finally, we estimate approximately $2.5 million to $3.5 million of the impact is related to our payment and revenue integrity service line revenues driven also by a lower mix and volumes of surgical emergency department and anesthesia claims.

The total estimated impact of $9 million to $11 million for Q2 2021 primarily reflects trends we are seeing in our claims receipts and does not include indirect costs of COVID on business conditions, such as delayed implementation or a longer sales cycle due to limited in-person interactions.

Second quarter adjusted EBITDA expenses were $70.9 million and included operating expenses for the full quarter of HST and Discovery of approximately $10 million or $5 million greater than their expenses in Q1 2021.

The increase of $14 million over Q2 2020 was predominantly $5 million of additional public company costs and $10 million of growth initiatives net of some reductions in overhead, including approximately $10 million associated with HST and Discovery. Our annual run rate of public company cost runs at approximately $20 million.

The combination of increased revenues and controlled expenses resulted in adjusted EBITDA of $205.3 million in Q2 2021 or 37.1% higher than Q2 2020 of $149.8 million and 7.5% higher than Q1 2021 of $191.1 million.

Excluding the EBITDA contribution from HST and Discovery and normalizing the decline of the impact of the COVID pandemic during the quarter, EBITDA for Q2 2021 were up $26 million or 13.9% over Q2 2020 and about $7 million or 3.4% sequentially. Adjusted EBITDA margin was 74.3% in Q2 [Technical Difficulty] in Q1 2021.

The decline from Q2 2021 was primarily driven by lower incremental margins from the acquired businesses and as Discovery and HST have naturally lower margins and the impact of both of those entities was factored into Q2.

They have continued to invest to drive product development and growth, but will probably have lower margins than we historically have had. Moving to our 2021 guidance, as noted in our press release this morning and on Page 12 of the supplemental slide deck, we are raising guidance for the full year 2021.

We now expect revenues to be approximately $1.09 billion to $1.13 billion. This includes revenues in 2021 of approximately $50 million in total from the recent acquisitions of Discovery and HST.

Our revenue guidance assumes a smaller impact of approximately $18 million to $22 million or $9 million to $11 million per quarter for the third and fourth quarters of 2021 from COVID in the second half of 2021. This compares to approximately $30 million for the first half of 2021.

We have methodically worked through a variety of assumptions, including emerging risk from the Delta variant to drive these estimates and we have incorporated these into the guidance range I mentioned a few minutes ago. As I've said previously, given the nature of MultiPlan's business, forecasting the COVID impact is at best in estimation.

As we look out to the back of the year, we are optimistic the effects of COVID on our results will further subside, but we also believe the impact will continue to be meaningful in Q3 and Q4, especially with the emergence of the Delta variant and believe that some caution is warranted given recent case load increases associated with the Delta variant.

Moving to adjusted EBITDA as shown on Page 12, we expect adjusted EBITDA for 2021 of approximately $810 million to $835 million.

As previously communicated, our adjusted EBITDA expectations incorporated approximately $10 million to $12 million of additional investments in the business in 2021, primarily around our IT spend, including machine learning and artificial intelligence, expansion of our sales force and other minor initiatives.

We expect these investments to evolve our solutions portfolio and deliver incremental savings and functionality to our customers and believe that they will yield meaningful returns to MultiPlan over time, but will not generate material revenues in 2021.

Our full year 2021 adjusted EBITDA guidance reflects an estimated quarterly COVID impact of $7 million to $9 million per quarter for the back half of 2021. The combination of our revenue and adjusted EBITDA guidance imply an adjusted EBITDA margin in the 73% to 75% range for full year 2021 and in the 73% to 74% range for both Q3 and Q4.

These ranges are a few percentage points lower than we had achieved historically, reflecting the increased public company costs, investments in the businesses acquired, and the lower incremental margins from the acquired businesses as I previously mentioned.

For 2021, we are now expecting operating cash flow of approximately $410 million to $440 million. As a reminder, due to interest and payment timing, Q1 and Q3 tend to be our high cash flow quarters as we have interest payments, both on the convertible debentures and the bonds in Q2 and Q4.

Our adjusted unlevered free cash flow conversion remained strong at 56% in Q2 2021 and 73% year-to-date. Additionally, we now expect depreciation of approximately $65 million to $70 million and amortization of intangible assets of approximately $335 million to $345 million for 2021.

As outlined on Page 13 of the supplemental slide deck and in the press release this morning, for Q3 2021, we anticipate revenues of $280 million to $295 million and adjusted EBITDA of $205 million to $215 million, which again includes a COVID impact of $9 million to $11 million of revenues in Q3 2021, similar to what we experienced in Q2 2020.

Lastly, we thought it would be helpful to walk through a comparison of our full year 2021 guidance outlined a few moments ago to the 2021 forecast used by Churchill [ph] in their analysis of MultiPlan and included in the 2020 proxy statement filed with the SEC late last summer.

As shown on Slide 14 of the supplemental slide deck, excluding the estimated potential impact of the COVID pandemic and contributions from acquired businesses, the company's fiscal year 2021 guidance implies a range of revenues of $1.085 billion to $1.135 billion compared to a range of revenues of $1.085 billion to $1.125 billion for the fiscal year 2021 forecast provided in that proxy statement filed with the SEC late last summer.

Excluding the estimated potential impact of the COVID-19 pandemic, contributions from acquired businesses and public company costs, the company's guidance implies a range of adjusted EBITDA of $848 million to $883 million compared to a range of adjusted EBITDA of $845 million to $875 million for the fiscal year 2021 forecast that was, as I've mentioned earlier, provided in the 2020 proxy statement filed late last year.

The fiscal year 2021 forecast in the 2020 proxy statement were based on numerous variables and assumptions known to the company at the time of preparation, which was very early in 2020, and these assumptions and variables did not include any estimated potential impact from the COVID-19 pandemic, acquisitions or public company costs.

With that, I will turn it back to Mark for his closing remarks.

Mark?.

Thank you, David. Thank you, Dale. So you can see from Dale's business update and Dave's detailed financial report, MultiPlan is making and continues to make great progress. Our relationships with our major customers remains as strong as ever. We have a large number of initiatives underway.

We're executing against our growth strategy, and we have built a lot of momentum to carry us into the back half of this year and beyond. Before we go into Q&A, I'd like to discuss the transition planning announced in the press release this morning. MultiPlan is long focused on leadership continuity and development and expansion.

I believe now is the right time to begin the transition to a new generation of leaders. I'm pleased to announce an important step in that transition with the appointment of Dale White as our President and Chief Operating Officer.

Dale has long propelled the company's success and growth through his tireless commitment to serving our customers most recently in his role as President of Payer Markets; and before that, as Chief Revenue Officer. His promotion to President and COO is recognition of his exceptional leadership and his outstanding track record and execution.

Also as noted in the press release, with Dale's promotion to COO and President, early succession by the Board of Directors plans to promote Dale to CEO early in 2022. Dale and I have been working together for many years to prepare him to succeed me.

Since he joined us 17 years ago, he has increasingly expanded the scope of his responsibilities and roles touching every aspect of the business. His expansive knowledge of our business brings a customer and growth mindset and has earned deep respect of MultiPlan's colleagues.

I could not be more confident that he is the right person at the right time to lead our journey forward. I want to assure our shareholders that I'm not going anywhere and look forward to continuing to steer the strategy and growth of the company as Chairman of the Board.

As noted in the press release, Dave has informed the Board of his plans to retire at the end of the year. We are working to quickly identify his successor and have engaged an executive recruiting firm to conduct a national search. We are confident the transition will be smooth with Dale's assistance and given the strength of our finance functions.

On that note, I want to reemphasize our efforts to continue to expand and develop leadership talent here. As Dale already mentioned, we have recently expanded our sales and marketing and product development capabilities.

We've also brought in new leaders in critical areas across the company, including hires in accounting, financial controls and investor relations to meet our expanding needs as a public company and has recently announced, a new Chief Information Security Officer has been named to the company as well as we operate in a digital world.

These highlights add to the deep talent among our MultiPlan colleagues and further position the company in our pursuit for operational excellence and growth. In short, I could not be more excited about the future of the company. Operator, I'd now like to open up for questions and answers..

[Operator Instructions]. Your first question comes from the line of Joshua Raskin at Joshua Raskin..

Good morning. This is Marco on for Josh. Thanks for taking the question. The slides show that the analytics segment was one of the major drivers of revenue growth in the second quarter, even though that segment was actually a slight drag in the first quarter.

So I was just wondering what caused the growth in that segment to pick up and what types of clients drove that growth? Thank you. .

That growth was really across all of our customers. Most of that pickup was a result of more elective surgeries being performed in the period that would generate our revenues in Q2.

I think if you remember, we estimated the impact of COVID in Q1 of around $9 million to $10 million for that segment, and it came down by probably $6 million to $7 million. Most of it was just more volume coming through our analytics services and a lot of that was anesthesia-type, ER-type claims that we have historically had in that segment.

Dale?.

No, I agree, Dave. I think it's two factors that are driving that.

One is the changing -- as I said in my comments, the increase in claims charges too we began to see a different mix of claims with a reduction in the lower COVID-related claims charges and starting to see an increase in volume across elective-related procedures and higher cost procedures like orthopedic surgeries and others.

So I think that as customer confidence -- well, patient confidence continued within the delivery system and they started taking care. We saw that reflected in our case mix and our volumes across all of our customers..

Returning to normalization of utilization..

Great, thanks. And then if I could just ask one follow-up. It looks like you increased the 2021 EBITDA guidance more than the revenue guidance.

While we understand the fixed cost leverage of the model, it would be helpful to know what is driving the incremental savings on the cost side there?.

I think as we look at our forecast for the year and kind of get our midyear review of operating expenses, we believe that our operating expenses for the year will come down a little bit. And as a result of that, most of the flow-through of any revenue increase plus a little from reduced operating will drive EBITDA growth..

Great, thank you. .

And your next question comes from the line of Daniel Grosslight with Citi..

Thanks for taking the question guys and congrats on a strong quarter. I wanted to go back to surprise billing for a bit. Last year, you noted around 80% of your claims are no surprise bill-related and that more punitive legislation would likely lead to at most a $100 million decline in revenue.

Now that we have more details around the bill and rules making, can you quantify the assumed impact of surprise bill legislation in 2022? And does that 80% number still hold? And not to get too technical, but there was some language in the rules making that third parties would have to be considered independent to be used in determining the QPA, that you're obviously 100% paid by payers right now, but it sounds like you think you will be considered independent and you will be able to be used in determining that QPA, is that right?.

Dave, do you want to answer the first part of the question. And Dale, you can take the second part..

I'll let Dale lead off, and then I'll fill in the blanks..

I think the -- I think in answer to your -- the second part of your question, Daniel, the answer is we believe we can in instances where the payer needs assistance in helping them to calculate their QPA, we're in a position to do that. They can either calculate their QPA and then give it to us and then we will apply it through the claims process.

Or two, they can give us the data that they have because, as you know, QPA for the most part is the payer's media and contracted rate.

And in that case, they can give us the data that they have, the rate data that they have and then we can take that in-house, digest it and then work with the payer to determine their media and contracted rates if they don't have the capacity to do that. So from that perspective, in either case, we're prepared to do that.

As you know, we own our own provider network. So we will do that on our own network for clients that use us as a primary network, but we are also building the technology and the capability to do that on behalf of payer clients who can't do it themselves..

Okay. And the....

And Daniel, I think back probably almost a little over two years ago, we talked about a worst-case scenario when we had four different versions of surprise billing in the house and a couple of different ones in the Senate.

And we talked at that time, we were not a public company, so we talked to our bondholders and said, on a worst-case scenario to look at the worst aspect of all the plans, we thought that it could have an impact of $100 million of revenue if you took a worst-case basis.

Obviously, as we've updated that and the legislation has come through, that number has significantly declined to an amount where basically Dale and Mark and I have looked at the analysis, and we did not think it will have a meaningful impact. We'll continue to see the claims.

We'll continue to get revenue from those claims, and we'll work with our customers on how they comply with surprise billing.

So the $100 million is kind of worst case two years ago and based on more knowledge, more understanding and, obviously, the law and the first set of regs out of HHS, we believe that the impact will be immaterial on our financial statements..

And Daniel not being lost in the detail is that the provisions of No Surprise Act really connect very well with the company's historic trends. They call for -- the requirement calls for extensive claims data and analytics, strong point of MultiPlan. We're integrating into the customers' IT claim platforms so we receive those claims.

It deals with the provider relationships. Again, we have our own provider relationships and network, as Dale indicated. It talks about successful negotiation, again another tool that we have.

So the tools we use to reduce hundreds and thousands of claims every day on nonsurprise bills will be applicable to the surprise billing as outlined in the inter-regulations to date..

Got it. That's helpful. And maybe just a quick one on the management transition. 2022 is going to be a pivotal year for you guys. You have surprise billing rolling out, you have the potential for United really pushing its Naviguard on its ASO clients.

So I was curious if you could just give us a little more details on the decision around timing of the management transition, having a CEO and CFO kind of step back from the day-to-day activities ahead of such a pivotal year, could be a little bit concerning to folks. So just wanted to get your thoughts on timing here.

And what drove the transition this year?.

Dale and I have worked together as partners for nearly 18 years.

We worked together both on operational issues, day-to-day running of the company, as well as looking at transformative opportunities in the preparation of strategy, M&A activities and continue to fuel growth through our three-part strategy of Enhance, Extend and Expand, and we'll continue to do that, and it gives us the additional opportunity and bandwidth to do that coupled with the additional hires we brought into the organization.

It's a very efficient, effective way of focusing on the next challenges and defining events in the company as we continue to expand MultiPlan over the coming years..

Okay, thank you. .

Your next question comes from the line of Andrew D'silva with B. Riley Securities..

Yeah, good morning. Thanks for taking my questions and congrats on the progress. Just a few quick ones for me.

To start, I was just curious, was there any change in customer concentration during the quarter and then do you believe that the second quarter fairly reflects gross margin and operating expenses that are tied to the recent acquisitions of HST and DHP?.

Dave, do you want to share the analytics and then Dale and I can supplement that?.

Yes. Q2 reflects the gross margins, I think, what is 74.3% that we think is realistic going forward. Obviously, they're slightly down from Q1 because of DHP and HST.

As we look at our margins going out into the future quarters, we -- as I said in my comments, we thought they'd be 73% to 74%, which I think is consistent when you just incorporate those two entities.

We're a company, which you know all too well, that a significant portion of our revenues come from what we call the big four and then, obviously, our top 10 customers. So we cannot grow revenue organically, sequentially, or anything else without having meaningful growth among those customers.

And our revenue mix of our top customers is pretty consistent with what it has been in the past and we expect that to be similar to similar revenue mix moving forward..

And no material change in the concentration there, and our EBITDA margins in Q2 were up, they were 74.3% up from 72.4% on the prior year and just slightly down from Q1..

Perfect. Perfect. Very useful.

And was growth in payment and revenue integrity just tied to the acquisition of DHP? Actually, just what was the revenue benefit tied to DHP and HST during the quarter, if you can provide that?.

Dave?.

Just one second. The total revenues for DHP and HST for the quarter were about $11.5 million. And in Q1, they were about $7.2 million. Obviously, Q2 reflected a full quarter of DHP and a full quarter of HST, whereas Q1 reflected a full quarter of HST, but only about a half quarter of DHP..

Two points I'll make with Dave's timing comment, number one. And number two, recognize part of the rationale for doing those acquisition is to integrate them into our business. So you'll see that HST, which is the -- HST, which is an analytical business, is going to be blended into our analytical vertical.

And Discovery Health Partners will go into our Premium and Payment Integrity business, integrate those services and sell them as bundled products to the marketplace, networks, analytics, and payment integrity once we capture that claim and can apply our solutions to generate savings for the customer, payer, savings for their customers and all of these savings for the consumer and providing their real value proposition of affordability, efficiency and with a fair reimbursement wrapped around it..

Okay.

And are you viewing the integration of the two acquisitions and just the customer reception related to them favorably, I mean are they tracking to your expectations?.

Well down the road in integrating both HST into our analytics and DHP into our payment integrity.

Dale, do you want to add some comments to that?.

I echo what you said, Mark. From an operational perspective, we're well down the path on both companies. And it's gone extremely well, and we're pleased where we are. As importantly, we're very excited about the pipeline. You heard my comments around the growth in the sales pipeline and the inclusion of HST and DHP products, particularly DHP, right.

DHP's product services widens and deepens our revenue and payment integrity suite of services, which we now can snap on to our MultiPlan chassis and drive into our customers. And HST as well has its incredible pipeline, and we're taking advantage of our relationships with our third-party administrators to make that service available.

So we're excited about the opportunity on both and in terms of helping to fuel our growth in the coming months..

That commitment to integration is a large part of the rationale why we can deliver straight-through processing with over 95% same-day turnaround with our payer customers in excess of 95% acceptance by our providers..

Yes, I think there might have been some reception issues during the prepared comments and that was useful, thank you.

The last question for me, I know you gave color around this, but I want to get a little bit more granular, can you just discuss what you're seeing in the market from a planned pricing sensitivity standpoint, so are you seeing any dynamic changing where employers are moving towards or away from pricing sensitivity or care around member provider abrasion related to out-of-network negotiations, basically, its interest in maybe internally derived payer run out-of-network negotiation platform gaining or losing favor in your opinion? I've just noticed a lot of hiring one of your largest customers related to these initiatives, I'm just trying to understand how that aligns with your expectations, particularly since some of the hiring is around experts in arbitration?.

Dale has been the face of MultiPlan into the payer community for nearly 20 years in the marketplace and no one has a better insight into the payer plans than Dale White.

Dale, why don't you comment on that, and I'll back you up?.

Sure. And look, I think it's twofold. One is the -- I think you made a comment about the arbitration and the arbitration process. I think payers are beginning to gear up and around the compliance with the surprise bill in particular, on the IDR process. Now the interim final rules on the IDR process aren't coming out for several weeks.

So we don't have the -- we can't take advantage of the technical details associated with that. But I think the payers are recognizing that there'll be -- that providers will unveil themselves of the opportunity to go to arbitration if they believe that payments made by the payers are unreasonable.

And so I think you're seeing that there, too, in terms of the sort of the employer landscape and their approach, I think payers are always focused on -- or employers are always focused on maximizing employee benefits and doing the best most they can to give their employees a pool in which comprehensive set of benefits and to take advantage of services like MultiPlan to help drive down medical costs, which enable them to continue to provide competitive benefits to their employees.

And we see that time and time again, we've seen that through the years, both in a difficult economic environment and in a very competitive environment, economic environment and one that we have today where we're hopefully coming out of a pandemic.

And so payers and employers are looking -- always looking forward to ways to maximize their benefits for their employees and to drive medical cost savings on behalf of their plan..

Look, as Dale noted, just one case study would be the interim rules for the No Surprise Act. I mean it's incredibly technically complex piece of legislation. But our experience has been it has heightened our customers, our payers interested in working directly with MultiPlan because we have that expertise and that agility.

And I think clearly, it plays to the MultiPlan's strength and it builds upon the decade-upon-decade relationship we've had with those payers, result of our claims and analytics capabilities integrated into their IT management program, our pricing and our strategic negotiation capabilities, all of which are tools that those payers are going to need our assistance in complying with the No Surprise Act.

We see this as an opportunity for MultiPlan going forward. And we're awaiting the next set of regulations, which will come out on or about October 1st..

Okay. Useful context. So sorry, I do have one more quick one.

I just thought as it relates to the surprise billing draft guidance, have you submitted comments yet and can you just let us know what are some of the gives and takes that can be beneficial or negative to your business, things that really are yet to be excited or changed as the final rules are released?.

Yes, yes. I think the most important parts of surprise billing legislation and the things that came out, as we said, there was very little material changes on the surprise bill component and in the interim final regulations. And we still feel that it plays, as Mark said, right into our sweet spot and right into our wheelhouse.

It's calling for what are the things of importance, identifying a surprise bill, calculating a QPA, managing or working with the payer to make an initial payment offer to the provider, managing the post-payment process if they're -- if the provider is unhappy and then providing post-payment negotiation services, supporting the payer or working with the payer and managing the arbitration process.

All of those inflection points in the surprise bill continuum are squarely in MultiPlan's wheelhouse because they all call for extensive claims data analytics, extensive analytics, connected claims processes, effective provider relationships, intelligent pricing and most importantly, strategic negotiation capabilities.

And those are tools we use today, as I said, to reduce charges on hundreds of thousands of claims every day. And we expect to optimize these capabilities and leverage them to support our payers and as they work to comply with the surprise going on..

Great, thank you. Also congrats on the promotion and as a company, congrats on a progress and snapback and best of luck going forward..

This concludes today's conference call. Thank you for participating. You may now disconnect..

Thank you. Look forward to speaking with you next quarter. Thank you..