Q2 2021 Multiplan Corp Earnings Call
Good day, and thank you for standing by and welcome to the multi play and corporations second quarter 2021earnings 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 to ask a question. During the session you will need to press star 1 on your telephone. Please be advised today's conference is being recorded.
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. Our earnings press release issued earlier. This morning, we will refer to the supplemental slide deck during our discussion this morning before.
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 and the risk factors included in our annual report on form 10-K for the fiscal year ended December 31st 2000, and 'twenty and our quarterly report on form 10-Q for the fiscal quarter ended March 31.2020.
And other documents to be filed or to be filed with the SEC any such forward looking statements represent managements expectations beliefs and forecast 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 and 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.
Reconciliation of these non-GAAP financial measures to the most comparable GAAP measure to the extent available without unreasonable effort is available and 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 Payback Mark.
Thank you Shannon good morning, everyone. Let me join and welcome you to our second quarter 2021 on earnings call I'd like to thank our stockholders for their continued support.
We used to say multi play and as reported its fourth consecutive quarter and strong performance and our first year as a public company continuing on a track record of consistent and substantial returns and 6 groups and private equity investors.
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 and both revenues and adjusted EBITDA.
Fortunately, we had growth across all of our businesses and across all customer groups.
And then on page 5 of our supplemental slide deck and the second quarter total revenues were 276 million.
Presenting and increase was 33, 5% over the price.
Second quarter, and an increase of 8.4% from Q1 'twenty 1.
And then on page 6 really the impact of the Covid pandemic, which receded in the quarter and the contributions from our recent acquisitions organic growth and revenues 6.9% versus the prior year second quarter, 2.6% versus the first quarter of this year.
Adjusted EBITDA for the second quarter was $205.3 million and increases 37, 1% from Q2, 2020, and an increase of 7.5% from Q1 of 2021.
And the effects of Covid and contributions from our newly acquired businesses and the incremental public company costs and organic growth and adjusted EBITDA was 13, 9% versus the prior second quarter, 3.4% versus the first quarter of this year.
We continue to be laser focused on operational excellence and expense control.
On margins in Q2, 'twenty, 1 with 74, 3% up from 72, 4% and Q2 of 2020 and.
Down slightly from 75% and Q1 of 'twenty 1.
Our business continues to exhibit strong free cash flow conversion and <unk>.
56% and Q2, 'twenty, 1 and 73% year to date.
Our confidence and our business remains strong and we've continued to enhance our services.
And you need 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 sequential improvement from the first and second quarter suggested that the effects of the pandemic may be starting to normalize and some markets.
And based on the strength of our first <unk> first half results and on our.
Pipeline of new business and our outlook for 'twenty..1 is improved as a result, we are raising our financial guidance for the year day will detail that momentarily.
Before I turn it over to Dale to discuss the business and day to discuss the financials I would like to say a few comments addressing the recent volatility and our share price is.
Most of you know multi play and stock again came under pressure. This time from speculation regarding a coverage policy change 1 of our customers. He changed that based on our current understanding and economic analysis will have no material impact on our business the speculation and resurface a number of narratives about multi plan's ability to regain custom.
And revenue, which continued to insufficiently appreciate the value proposition, we offer to our customers.
Generative attributes and operating strengths of our company and then.
And the dynamic nuances of the markets and which we operate.
Let me once again try to set the record straight. The fact is multi play and continues to increase the scope of what we do for our core customers because these customers operating in a complex and dynamic environment and they continuously seek out help adapting to change the day, they confront requirement to reconfigure workflows to comply with the <unk>.
Vacations No surprise act is only the most recent case point.
Well, it's conceivable debt with enough time and investment and our customers could develop to complex processes to comply with the new surprise Act without our help and they were 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 and we will talk about some of these efforts momentarily.
On loyalty plan with multi plan does for its customers is neither easy nor easily replicated over the span of 4 decades, we have invested heavily and intellectual and technological capital.
All of our unique path as he set of differentiated operating assets would be difficult if not nearly impossible for any competitor or customer to reproduce these assets, including national network of $1.2 million providers.
And so the database of over 1 billion claims and over 3 Petabytes and Petabytes of structured claims data from across 700 payer customers.
And include proprietary processing algorithms that are deeply integrated into the claim management processes of our core customers are embeddedness and our customer workflow. It means the cost time and effort to change vendors and be very high for our customers, but our customers don't stay with us because switching is time consuming or costly.
Day 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 and our cash flow stability and growth.
Assertion that a Medicare reference pricing cost managed solution is intended to displace and multi plan demonstrates and insufficient grasp of the diversity and plan designs and preferences across the health plan sponsor universe.
What employers and other healthy and sponsors prefer a cost management solution that leverages, our provider network data eyesight negotiation services and Medicare reference pricing solution with some combination of those approaches depends on many many considerations.
These include the incidents and volume of add on network spend.
Organization of cost savings relative to the design and degree of member of choice and acceptable level of provider abrasion desire from member support and the risk tolerance of the plan sponsor.
The fact that no single solution is right for every health plan reflected and the large number of configurations slowed by our payer customers to their clients. Many of these configurations include 1 or more and multi plan services and we are unique and offering and into and that our solutions and services that can serve the full spectrum of health plan designs and.
Accomplishing a wide range of desire and member benefits provider reimbursement baselines and cost management approaches.
It's true some plan sponsors are highly focused on Stewart and your members to stay in network to manage their own cost that and some of these sponsors will elect and Medicare referenced pricing approach to and net to an in network cost management approach and permit more balance billing to reinforce member behavior. So others may elect to use Medicare reference pricing and Lula.
Part of their net worth as part of their network demand for solutions that prioritize cost management.
And the downstream Tpa regional health plan and director retail market was a key driver behind our decision to acquire and invest in HST, which we believe represents the next generation referenced based pricing solutions. We call. These solutions value driven health plans health plans, we call these solutions.
<unk> driven health plan services, because they extend beyond the typical program and offer pricing with back and efficacy HST offers innovative free care tools.
And help consumers make decisions around cost quality and selection of providers.
It seamlessly pairs with multi plants professional provider network. We believe HST has a highly differentiated and effective approach for managing member and provider abrasion and providing both pre and post care consumer advocacy.
<unk> is 1 of the most compelling and Medicare reference pricing solutions available.
And well positioned and the marketplace today.
At the same time Medicare reference pricing approaches have been around for a long time and against that backdrop. The use of data eyesight. 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 of you on all of their largest payers. They rely on data I said because it represents.
The state of the art and cost based pricing methodology, this methodology and cheese and attractive balance between cost savings and provider and member abrasion.
Outperforms on cost savings relative to reasonable and customary pricing approaches that overweight provider and build charges and and outperforms on reducing member provider abrasion relative to less flexible referenced based pricing methodologies like Medicare and <unk>.
Our objective and market based prices that youll provider acceptance rates and excess of 95% drives and fewer planed resubmission and less reliance on subsequent negotiations it.
It is enabled by our vast database and proprietary algorithms and a technology platform that is uniquely situated and our customers' <unk> gateways and that deliver straight through processing with over 95% same day turnaround and short and is an attractive and durable value proposition and we believe it would be extremely difficult for anyone.
And to develop a solution that could compete with its technology its scale and its independence.
To be clear multiplayer and counters and counters, a number of competitors and rival solutions and 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 and.
It's been the case throughout the entire life of this company and it's why we've always focused tirelessly on operational excellence. This means capturing and repricing work claims and charges managing operational expenses, while delivering excellent service with minimal churn adjustments and rework and identifying pursuing every entrepreneur opportunity.
And we've always believed that if we take care of the business and our customers share price would take care of itself.
We continue to believe that that will be the case over the long haul. This management team has overseen 6 accretive transactions as a private company and has now reported 4 consecutive quarters of strong performance as the first year public company Quito and longevity extends beyond our unique resources, what does differentiate multi play and as their agility.
And and Reconfiguring, those resources and acquire new resources to meet the ever challenges.
And opportunities and our payer customers and the plan sponsors and members for those customers.
Serve the recent rhetoric from some quarters and the investment community that we have.
Have you believe that changed a negative for multi plan and contracts, we see changes and opportunities to adapt and capture new opportunities to serve our customers. There's no better example of our dynamic capabilities and the investments we're making.
We're making and chi and learning and artificial intelligence.
And its proprietary datasets and and the large volume of claims we process position us leverage these new technologies to identify more clinical aberrations that generate incremental cost savings for health care payers.
Relative to and network, we are continuing to capture opportunities out there and our provider network as payers move into and expand their presence and Medicare advantage. Meanwhile, the new surprised that presents opportunities to collaborate with their customers and requires significant modification of business and processing logic, and reroute and workflows to comply with these new <unk>.
Rules and.
And 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 and network claims market segments, we have historically underpenetrated.
We continued to strategically engaged with our core customers were managing dozens of projects with each of them plan and implement service offerings already this year, we have deployed some 2 dozen and 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 and effectiveness.
Yes.
In summary, the second quarter marks our fourth.
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Efficient and fair.
And as always I'd like to express my gratitude to our customers for their enduring trust and partnership and to our more than 200 and outstanding multi play and colleagues.
This effort and make this success possible and.
With that I'd like to turn things over to our President and Bill White, who will provide a business update.
Thank you Mark and good morning, everyone.
Mark is spot on and his description of the relationships, we enjoy with our customers and how the value we deliver it's critical to our ability to preserve and grow them. Indeed, our unique position and the industry has been on full display as we help our customers work through the results of the rulemaking for the no surprises act as I'll touch.
On shortly.
First let me spend a few minutes on trends, we are seeing and claims and healthcare utilization is.
And as Mark noted, we generated nearly 7% organic revenue growth and 2 in Q2.2021 versus the same quarter last year normalizing for Covid and our 2 recent acquisitions.
Underneath that overall claims volume processed charges and identified savings have continued to grow nicely.
As shown on page 9 of the supplemental slide deck claim charges processed were up 7 and nearly 7% sequentially and up about 32% over the depressed prior year quarter, while identified savings increased about 3% sequentially and.
And about 20% over the prior year.
Within these trends there are a few cross currents worth noting.
First while process charges continue to reflect the elevated volumes of Covid testing and vaccine claims. These COVID-19 related charges declined by about 24% from the prior quarter.
At the same time, we've seen and encouraging increase in non COVID-19 related charges of nearly 19% versus the prior quarter and non COVID-19 related charges are now tracking over 90% of our pre pandemic levels up from about 80% during Q2.2020.
These volume trends clearly suggests that the COVID-19 related impact on our business has begun to normalize, but we have not yet returned to normal.
We are closely watching the delta Varian, caseload, which poses some risk of prolonging the COVID-19 related effects on our claim mix and our revenues.
We also note that average charges remained somewhat depressed.
The average charge on non Covid professional claims was 8.6% lower sequentially and 7% lower than Q2.2020.
Average facility claim charges were down 3% versus Q1, 2021 and down 1% versus Q2.2020.
Deeper analysis suggest 2 key drivers first while demand is starting to return and higher charge categories like orthopedic surgeries and Q2, we saw lower average acuity.
Secondly, volume and Q2 rose dramatically for lower cost elective surgeries and services such as cosmetics skin procedures.
These dynamics reduced the average claim charge, but also encouragingly suggests that consumers are increasingly willing to seek non critical services.
We continue to execute on the growth of our core business through our enhanced and extend strategies and with sales initiatives.
<unk> had some nice client wins that we expect to drive revenue and growth and cash flow growth and future quarters.
Among these we were awarded primary care network business with a national payer, which is set to deploy and January and mobile AD access for about 1 million lives.
We have 9 new payment and revenue integrity service deals committed for an estimated $1.4 million and new annual revenues.
Data eyesight usages is exceeding expectations with our larger payers and we are in discussions with several payers to expand its use.
We now have each machine learning initiatives underway, 1 active and production for awaiting approval for production and 3 active projects.
And these initiatives spanned across multi plant solution categories and will deliver both increased savings and operational efficiencies.
We were also concept and 10 to 15 additional initiatives.
We're tailoring price strategies for several customers, including 1 which enables compliance with select states 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%.
Have another 100000 lives and protecting and another 100000 bin and 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 well.
We have closed 60 deals totaling about $5.7 million better and backlog.
This is great progress for our 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 and health plan services that smart set.
Which were introduced with the acquisition of the HST, and which accelerated multiplayer and ability to.
Multi play its ability to enable its customers to offer flexibility and health plans to die.
We plan on legacy services have long resonated with employers ranging from mid size to very large including those that incorporate reference based pricing as part.
Or all of its out of network cost management strategies.
Now with HST is value driven health plan services, we have built and important GAAP and art 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 is the most feasible approach.
And we're achieving their cost objectives.
As Mark mentioned earlier Medicare reference based pricing programs have historically caused greater member and provider abrasion.
And our value driven health plan and approach is different and providing member education and tools to help plan members identify and select the most cost and quality effective providers and.
Accordingly, 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 meaning maintaining value for its plan members.
H S. T was a differentiated solution before we acquired it and we believe it is even more differentiated when combined with multi plants 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.
And 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 and I'd like to offer a few thoughts about the notes surprises act, including the recently released first interim final rule.
Referring to page 11 of the supplemental slide deck, while their 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 debt adult members cannot be balance builds 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, our multi play and believes it will 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.
Chairman and initial payment to the provider negotiate settlements with providers and support payers in the arbitration process.
The highly technical specifications outlined and the first interim final rule underscore the complexity and burden of administering their requirements.
And we believe only heightened our customers' interest and working with multi plan 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've had discussions with over 100 customers some with more 1 or more <unk>.
Flow obsessions, we participated on a couple of the industry panels and last week, we held a webinar to discuss that first interim final rule, which attracted over 400 customer registrants as.
As noted the no surprises act establishes requirements that are squarely and multi plants wheelhouse.
All 4 extensive claims data and analytics connected claims processes and effective provider relationships and 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 ended 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 and automatic step and the repricing process. When we are the customers primary provider network, but we can also perform this function for other customers as needed.
Our sophisticated health care economics team is driving development debit Q P. A calculation surface, which again will be and the automatic step and our primary network pricing and 1 we can offer to other customers on an outsourced fulltime or add.
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 Q P. A to minimize dispute resolution cost and risk for both payers and providers.
We expect to receive the second interim final rule and the next several weeks, which will focus on the independent dispute resolution process and put to rest and important debate taking place over the waiting 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 and our leadership talent.
As we previously mentioned, Andrew Cohen joined US as our Chief revenue Officer from Optum and January 1.
For a short time, he has made impressive strides and reorganizing our sales function and implementing new sales processes to accelerate the creation and consummation of deals.
I'm also pleased to create 2 announced the creation of a new position senior Vice president of products filled by and the beam Mcgarry.
And this role the Dean will spearhead initiatives under our expand growth strategy. He comes to multi plan from Mackenzie health care practice, where he focused on incubating and building new healthcare it.
And digital health businesses inside large enterprises. He has built for high tech companies over 2 decades, most recently as CEO of DNN, a content management company and grew DNN from 5 employees to a profitable enterprise with over 500 customers and 25 countries.
<unk> will usher in a new product centric focus that will be instrumental to our expand growth initiatives and surprise billing and other industry chain other industry changes create opportunities for multi plan to transform the nature of our value to payers and providers.
Andrew and the Dean are just 2 examples of how our expansion and development of leadership has introduced new perspectives and tools and augmented our leadership bench that is already deep and subject matter expertise and creativity and commitment to operational excellence.
In summary, our leadership team is capable and 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 and our future with that I will now turn it over to Dave who will talk about the financials David.
Thank you Dale and good morning, everyone as Mark and Dale mentioned Q2, 2021marked another quarter of significant momentum for multi plant as Mark noted earlier Q2, 'twenty..1 revenues increased 33, 5% over Q2, 'twenty and increased 8.4% over Q1 'twenty 1.
Feeding our earlier expectations and the guidance, we communicated back in May 2021, organic growth was strong and excluding the revenue contributions from HST and discovery and normalizing for the decline and 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-19 related revenue impact in Q2 was approximately $9 million to $11 million about $10 million lower than the COVID-19 related revenues impact and <unk>.
Q1, 2020, 1 and approximately $40 million lower than the Covid related revenue impact in Q2.2020.
Of the $9 million to $11 million and 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 on Q2 Q1.2021, we estimate approximately 3 to 3 and a $5 million and co.
That impact was related to our analytics service line revenues, driven predominantly by mix and volume changes and the health care delivery and finally, we estimate approximately 2.5 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 volume of surgical.
2020 at about 7 million or 3.4% sequentially adjusted EBITDA margin was 74.3% and cute.
220th and queue on 2021 the declined from Q2.21 was primarily driven by lower income mental margins from the acquired businesses and just as discovery and HST have naturally lower lower margins and the impact of both of them.
Saturday's was factored into Q2.
They have continued to invest to drive product development and growth, but we'll probably have lower margins. Then we historically have had moving.
Moving to our 2021 guidance as noted and our press release. This morning and on page 12 of the supplemental slide deck, we are raising guidance for the full year 2021, and we now expect revenues to be approximately 1.09 billion to 1.1 and 3 billion. This includes revenues and 2021 of approximately 50 million.
And total from recent acquisitions of discovery and H S. T. R revenue guidance assumes a smaller impact of approximately 18 to 22 million or $9 million to $11 million per quarter for the third and fourth quarters of 2021.
From Covid and 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 merging risks 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 multi plans business forecasting the COVID-19 impact is at best and 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 be continued to be meaningful and Q3 and Q4, especially with the emergence of the delta very and.
And believe that some caution is warranted given recent caseload increases associated with the Delta variant moving to adjusted EBITDA shown on page 12, we expect adjusted EBITDA for 2021 of approximately 800, and Canada $835 million as previously communicated our adjusted EBITDA Bechtel.
Spectation incorporate approximately $10 million to $12 million of additional investments and the business and 2021, primarily round are it spanned including machine learning and artificial intelligence expansion of our sales force and other minor initiatives. We expect these investments to above our solutions portfolio and deliver incremental saved.
<unk> and functionality to our customers and they and believe that they will yield meaningful returns to multiply and overtime, but will not generate material revenues and 2021 are full year 2021, adjusted EBITDA guidance reflects and estimated quarterly COVID-19 impact of $7 million to $9 million per quarter for the <unk>.
Back half of 2021.
Combination of our revenue and adjusted EBITDA guidance imply and adjusted EBITDA margin and the $73 and 75% range for full year 2021, and then the $73 and 74% range for both Q3 and Q for these ranges are a few percentage points lower than we had achieved historically, reflecting the increased public company.
Costs investments into businesses required and the lower incremental margins from the required businesses as I previously mentioned for 2021, and 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.
Low quarters, as we have interest payments, both on the convertible debentures and the bonds.
And Q2, and Q4 are adjusted Unlevered free cash flow conversion remains strong at 56% and Q2, 2021, and 73% year to day. Additionally, we now expect depreciation of approximately $65 and $70 million and amortization of intangible assets of approximately $335.
$345 million for 2021 as outlined on page 13 of the supplemental slide deck and and 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 and closed a COVID-19 impact of.
$9 million to $11 million of revenues and Q3.2021 similar to what we experienced in Q2.20.
Oh, and 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 and their analysis of Multiplan and included in the 2020 proxy statements filed with the SEC late last summer and.
Show and on fly 14 up this supplemental fly deck floating 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 billion and $85 million to $1 billion 135.
Compared to a range of revenues of $1 billion and 85 to 1 billion 125 for the fiscal year 2021 forecast provided and that proxy statement filed with the SEC late last summer excluding the estimated potential impact as of COVID-19, pandemic contributions from required businesses and public company and costs come.
And he's guidance implies a range of adjusted EBITDA of $848.883 million compared to a range of adjusted EBITDA of $845 million to $875 million for the fiscal 2000 and fiscal year 2021 forecast.
That was as I've mentioned earlier provided and the 2020 proxy statement files late last year.
Fiscal year 2021 forecast in the 2020 proxy statements 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 are public.
Company costs with that I will turn it back to Mark for his closing remarks Mark.
Thank you David Thank you deal.
So you can see from sales business update and days.
These detailed financial report and multiplied is making and continues to make great progress and relationships with our major customers retreat remains as strong as ever and we have a large number of initiatives underway. We're.
Executing against our growth strategy, and we've built and a lot of momentum to carry us into the back half of this year and beyond.
Before we go into Q&A.
And to discuss the transition planning announced and the press release this morning on.
Deeply and as long focused on leadership continuity and development and expansion on.
And we've now is the right time to begin the transition to a new generation of leaders and I'm pleased to announce and important step and that transition.
And a deal white as our president and Chief operating Officer.
There was long propelled the company's success and growth through his tireless commitment to serving our customers. Most recently and his roles as president and payer markets and before that as Chief revenue officer promotion to President and CEO is recognition of his exceptional leadership and is outstanding track record and execution.
Also a note on the press release.
With the health promotion to see a low and president and only succession by the board.
Directors plans to promote deal to CEO early in 2002.
And I've been working together for many years to prepare him to succeed me and <unk>.
He joined a 17 years ago and he is increasingly expanded the scope of his responsibilities and roles touching every aspect of the business is expansive knowledge of our business and as a customer and growth and mindset and is her and deep respect of multi plans colleagues I could not be more confident that he has the right person at the right time lead air journey forward.
And went 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 and.
Note on the press release Davis and formed avoided his plans to retire at the end of the year, we're working to quickly identify his successor and and engaged and executive recruiting firm to conduct a national search we are confident the transition will be smooth with deals assistance and giving you 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 the already mentioned, we have recently expanded our sales and marketing and product development capabilities and also.
And who brought and new leaders and critical areas across the company, including hires and accounting and initial controls and Investor Relations media are 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 as we operate and a digital world.
These hires add to the deep talent among are among a multiplayer and colleagues and further position and the company and I pursued for operational excellence and growth and should I could not be more excited about the future of the company.
Operator, and now like to open up for questions and answers.
As a reminder to ask me questions and you need to price start 1 on your telephone to withdraw your question press. The pound key your first question on line of Joshua Raskin at Josh go Raskin.
Good morning. This is Marco on for Josh. Thanks for taking the question. The slide show that the analytic segment was 1 of the major drivers of revenue growth and the second quarter and.
Even though that segment was actually slight drag and the first quarter.
And I was just wondering what caused the growth and that segment to pick up and and what types of clients drove that growth. Thank you.
Yeah.
That growth was really across all of our all of our customers most of that pick up what is the result of more elective surgeries being performed and the period that would generate our revenues and Q2 I.
I think if you remember.
He estimated the impact of Covid in queue.
Q1 of around $9 million to $10 million for that segment and it came down by.
627.
$7 million most of it was just more volume coming through our analytic services and a lot of that was.
Anesthesia type ER type claims that we have historically.
Had and that segment Dale.
No I agree gave I think it's I think it's 2.2 factors that are driving that and.
1 is the the the the changing and as I said and my comments, the increase and and claims charges too we began to see a different mix of claims with with a with a reduction and the lower COVID-19 COVID-19 related claims charges and and and.
Starting to see an increase in volume across and elective related procedures and higher cost procedures like orthopedic surgeries and others. So I think is the.
And it's customer confidence and <unk>.
And will member patient confidence continued and the <unk> within the delivery system and they started cheek and care, we saw that reflected in our case mix and our volumes across all of our customers.
And returned to normalization of utilization.
Great. Thanks, and then if I could just ask 1 follow up it looks like your increased the 20th 21 EBITDA guidance more than the revenue guidance uhm, while we understand the fixed costs leverage we understand the fixed costs leverage of the model it'll be helpful to know what is.
Driving the incremental savings on the cost side there.
I think as we looked 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.
And as a result of that most of the flow through of any revenue increase plus a little from reduced operating.
Will drive EBITDA.
Alright, thank you.
And your next question on line up Daniel gross lies with C D.
Thanks for taking my question guys and congrats on a strong quarter.
I wanted to go back to surprise billing for for a bit last year. You noted around 80% of your claims are non surprise bill related and that more punitive legislation would likely lead to at most 100 million dollar decline and revenue now that we have more details around the bill and.
And rules, making can you quantify the and assumed impact of surprise Bill legislation and 2022 and does that 80% number still hold and you know not to get too technical but there was some language and the rules, making that third parties would have to be considered independent to be used and determining the Q P. A and you.
Obviously 100 per cent pay by payers right now, but it sounds like you think you will be considered independent and you will be able to be used and determining that <unk> is that right.
The day that you want to ask you. The first part of the question and Daily you take the second part.
Sure.
I don't know I led Dale lead off and then I'll fell and the blacks.
And I think the I think and answered you're you're the second part of your question.
Daniel I hope the answer is we we believe we can uhm and instances, where the pair needs assistance and and helping them to calculate their queue P. A we're in a position to do that they can either bacon and they can either calculate through <unk> and then give it to us and then we will apply it.
Through the through the claims process or 2 they can give us the data that that they had because there's you know <unk> for the most part is the is the payers media and contracted right and and in that case. They can they can give us the data that that that that they have the right data that day.
And then we can take that and have digested and then work with the pay or to determine their media and contracted rates and they don't have the capacity to do that so from that perspective and either case, we're prepared to do that as you know we own our own provider network. So so we will do that on the <unk> you know, we will do that on and.
Our own network for clients that use those as a primary network, but we are also building that the technology and the capability to do that on behalf of parrot clients, who can't do it themselves.
[noise], Okay, and and the <unk> and Danny.
Daniel I think back probably almost low over 2 years ago, we've talked about a worst case scenario and we had 4 different versions of surprise billing and the house and a couple of different ones and the Senate and we.
At that time, we were not a public company, so we talked to our bondholders.
And said on a worst case scenario and looked at the worst aspect of all the plans that we thought that it could have an impact of $100 million of revenue. If you took a worst case basis, obviously as we've update that and the legislation has come through that number is significantly declined.
To and amount or basically Dale and Mark and I have looked at the analysis and we did not take it will have a meaningful impact will continue to see a claims will continue to get revenue from those claims and will work with our customers on how they comply with surprise billing. So the $100 million was you know.
Kind of worst case, 2 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 and material on our financial statements and.
And Daniel Okay, I'd be lost and the detail is that the that the provisions of those surprise act really connect very well with the companies and historic strengths.
They call for excellence the requirement cause for extensive claims data and analytics strong point and Multiplan were integrated into the customers I T. Clean platform. So we received those claims deals with the provider relationships again, we have our own provider name and relationships and network is.
Indicated.
It's place it talks about.
Successful negotiation again, another another tool that we have so the tools, we use to reduce hundreds and thousands of claims every day on non surprise bills, we'd be applicable to the surprise billing and as outlined and the regulations to day.
Got it and that's helpful and maybe just a quick 1 on the management transition you know 2022 is gonna be a pivotal year for you guide you have surprise billing rolling out you have the potential for for United really pushing its navigate out on a chance have clients. So.
So and I was curious if you could just give us a little more details on the decision and around timing of the management transition, having a C E O and 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 folk. So just wanted to get your thoughts on on timing here and and what drove.
The transition this year.
Dale and I have worked together as partners for nearly 18 years.
And we worked together on on operational issues day to day running and the company as well as looking at transformed of opportunities and the preparation of strategy and then.
Activities and continue to fuel growth through our 3 part strategy of enhance.
And and expand and what we do we will 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 and it's a very efficient effective way of focusing on the next challenges and defining events and the company as we can do to expand on.
Multiplan over the coming years.
[noise] Okay. Thank you.
Your next question on line up and you discover with B Rally Securities.
Yeah. Good morning, Thanks for taking my questions and and congrats on the progress and.
Just a few quick ones for me to start and I was just curious and was there any change and customer concentration during the quarter and then do you believe the the second order fairly reflects gross margin any operating expenses and.
On that are tied to the recent acquisitions of H S D and D H T.
And you want to share the analytics, and then I'll walk down and I can supplement.
Yes, Q2 reflects COVID-19 gross margins I think it <unk>.
And what is $74.3 that we think is realistic going forward, obviously, they're slightly down from Q1 because of D. H P and HST as we look at our margins going out into the future quarters, we as I said and my comments, we've got 50, $73 and 74%, which I think is consistent when you just.
Incorporate those 2 entities.
<unk>, we're company from which you know all too well that a significant portion of our revenues come from and what we call. The big 4 Uhm and then I'll, 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 similar.
Similar revenue mixed moving forward and that.
No material change and and and the concentration there and our even our margins and Q2.
Up there was 74.3% up from 70, 272, 4 and 4% on the.
Prior prior year, and just slightly down from from from Q1.
Perfect perfect very useful and.
What's growth and payment and revenue integrity, just tied to the activation of DHA Uhm actually what was the revenue benefit type Kid, the H P and and H S. T on an accord.
And she can provide that.
[noise] [noise] [noise] and Dave.
Okay, 1 second.
The total revenues for D H P and HST for the quarter or about 11, and a half million dollars.
Okay.
Reported.
And and Q on there were about 7.2.
Obviously.
Good day finished.
Obviously Q2 reflected a full quarter of D. H P and a full quarter of HST, whereas Q1 reflected a full quarter of HST, but only about a half a quarter of.
<unk>.
[noise] 2 points on on aggregate.
Point Omega date days timing comment number 1 and number 2 recognized.
Part of the rationale for doing those acquisition is to integrate them into our business. So you'll see that debt HST.
Which is the.
[noise] 8 HST, which is.
Which is and analytical business is be blended into our overall animal and our analytical vertical and discovery health partners will go into our premium and payment and integrity business.
Great those services.
And sell them as bundled products to the marketplace networks analytics and payment integrity once recapture that claim and.
And apply our solutions to generate a things for the customer payor savings for their customers and ultimate savings for the consumer and providing that real value proposition of affordability efficiency and and and with a fair reimbursement wrapped around it.
Okay and are you viewing the integration of the 2 acquisitions and and just the customer reception and related then Ah favorably and motivate tracking to your expectations and.
Well down the road and integrating both HST into our analytics and D. HP into our payment integrity day, you want to add some comments to that.
Oh wait you said mark from and operational perspective, we're well down the pass on on on on both companies and and it's gone and extremely well and we're pleased where we are as importantly, we're very excited about the pipeline and you heard my my.
Comments around the the the growth and the sales pipeline and the and the the inclusion of the H S. T and the D. H P products, particularly D. H P right Php's products services widens and deepens, our revenue and payment and integrity suite of services, which we know comes.
Nap on to our multiplan chassis, and and and and and and and and debt stripes and to our customers and the HST as well as his has with incredible pipeline and we're taking advantage of our our relationships with our third party administrators can make that service available.
So we're excited about the the opportunity on both and the in terms of helping to cure growth and the coming months and.
That that day.
And commitment to integration.
Large part the rationale why we can deliver straight through processing with over 95% same day turnaround that our payer customers and in excess of 95% acceptance by our providers.
Yeah, I think they might have it from reception issues during your favorite comics and.
Oh and.
That would be so thank you last question for me and I know you get color around it but I want to get a little bit more granular can you discuss.
And what you're seeing and the market from a plane pricing that security standpoint. So.
Are you seeing any dynamic changing where employers are moving toward or away from pricing and sensitivity or care around remember.
Remember provider abrasion on the way.
And it out and network negotiations and basically intra.
<unk> and maybe internally derive payer run out of network negotiation platform, gaining or losing favor and your opinion and I've just noticed a lot of hiring.
1 of your largest customers related and.
And just try and understand how the the lines with your expectations, particularly can and some of the hiring is.
Is around experts and arbitration.
Sales bid in the face of Multiplan to the pair community for nearly 20 years and the marketplace and no..1 has a better better insight into the Payors, Eric plans and day or White day, I want to comment on that and I'll back you up and.
Sure and and look I think there's it's 2 fold 1 is <unk> and has the <unk> I think you've made a comment about the the the arbitration and the arbitration process I think payers are beginning to gear up and and around the compliance and.
And with the surprise Bill and particular on the idea or process now the interim final rules on the idea or process aren't coming out from for several weeks. So we don't have the we can't take advantage of the the the technical details associated with that but but I think the payers are recognizing that they'll be.
And the put that providers will avail themselves of the opportunity to go to arbitration if they believe the payments made by the payers and.
And are unreasonable and and so I think you're you're seeing that there too in terms of the the the the the sort of the employer.
<unk> landscape and and and and their approach I think payers are always focused on her and her employers are always focused on maximizing employee benefits and and doing the best most day can to give their employees are full and rich comprehensive set of benefits and to take advantage of services like molten.
Glad to help drive down medical costs, which enable them to continue to provide competitive and benefits to their employees and and and we see that time and time again, we've seen that through the years, both and a a difficult economic environment and and a very competitive environment economic environment and 1 that we have today where.
And we're hopefully coming out of the pandemic and so payers and employers are looking always looking for 2 ways to maximize their benefits for their employees and and to drive and medical cost savings on behalf of the plant.
And like his deal noted that just just 1 case study would be the interim rules for the no surprise Act I mean, it's and incredibly technically complex.
Piece of legislation.
Our experiences and it is heightened our customers are payers interest and working directly with Multiplan, because we have that expertise and and then agility and I think clearly plays to the multiplan strength and it builds upon the decade upon decade relationship we've had with those payers vs. All of our claims and analytic capabilities.
Integrated into their management program are pricing and our strategic negotiation capabilities all of which are tools that those payers are going to need our assistance and complying with the no surprise Act.
We see that we see this as an opportunity for multi plan going forward and we were waiting. The next set of regulations will come out on or about October 1st.
Okay, you still calm contact so sorry, I had and you have 1.1 more quick 1.
As it relates to the Spice, Billy and graph side and have you submitted comments, yet and can you just let us know what are some of the give and take that can be beneficial or negative.
<unk> to your business things that really are yet to be decided on exchange as a final rule with it really.
<unk>.
Yeah.
Yeah, I think the look the most important parts of surprise Bill and like you can play translation and the things that came out as we said there was very.
Little material changes on the surprise bill component and and within.
And the with the interim final regulations, and and we still we still feel that that it plays guys Mark said right into a sweet spot and right into our wheelhouse and <unk>, it's calling for <unk> <unk> what are the things of importance identifying a surprise bill calculating a Q P. A.
Managing or working with the pair to make an initial payment offered to the provider managing the post payment process, if they're if the provider's unhappy and and providing post payment negotiation services supporting the payer or working with the payer and managing the arbitration process all of them.
<unk> inflection points and the surprise Bill continuum are squarely and multi plans wheelhouse because they all call for extensive claims data analytics extensive analytics connected claims processes effective provider relationships and intelligent pricing and and most importantly, strategic negotiation capabilities and thought.
These are tools, we use today and as I said on and 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 spelling law.
[noise] great. Thank.
They also congrats on on the promotion and and.
As a comprehends rats, and the progress and snap back and that's the left on board.
This includes today's conference call. Thank you for participating you may now disconnect.
And you look forward to speaking with you next quarter. Thank you.
[noise] [noise] [noise] [noise] [music].