Q4 2022 Multiplan Corp Earnings Call

Ladies and gentlemen, welcome to multiplayer Corporation fourth quarter two earnings Conference call. My name is Glenn and I'll repeat and moderator for today's call if you'd like to ask a question. During this presentation you may do so by pressing star one.

On key pad.

I would now like to hand, the conference over to shallow gas Zug AVP of Investor Relations. Thank you. Please go ahead.

Thank you good morning, and welcome to the marketplace fourth quarter 2022 earnings call. Joining me today is bill White, Chief Executive Officer, and Jim <unk>, Chief Financial Officer.

Call is being webcast and can be accessed through the Investor Relations section never website at Www Dot lumpy plan Dot 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 fourth quarter 2022 earnings press release issued earlier this morning.

Before we begin a couple of reminders, our remarks and responses to questions. Today may include forward looking statements. These forward looking statements represent managements beliefs and expectations only as of the.

Yes.

Actual results may differ materially from those forward looking statements due to a number of risks and summary of these risks can be found on the second page of the supplemental slide deck and a more complete description on our annual report and Form 10-K, and other documents we file with the SEC.

We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of multi plans underlying operating.

Operating results and explanation of these non-GAAP measures and reconciliations to the most comparable GAAP measure can be found in the earnings press release and in the supplemental slide deck with that I would now like to turn the call over to our Chief Executive Officer would be Hawaii yeah.

Thank you, Sean and good morning, everyone and welcome to the call as we close 2022 and reflect on the past year I'm proud of the progress we have made as an organization.

While we have endured a period of softness in the second half and recent performance of the business has fallen short of your expectations and ours.

We have taken tangible steps to improve the position of the company and have now reset to a stable base from which we can invest in the business and resume growth.

We have made meaningful strides throughout the year. Once again, we demonstrated the critical value we provide to the health care ecosystem processing $155 $2 billion of medical charges and identifying $22 3 billion of potential medical cost savings.

In 2022.

We implemented our new no surprise Act services, taking advantage of our domain knowledge and considerable investment and turning what many viewed as a threat into a real strength of the company.

We executed a holistic review of our growth strategy to prioritize our most strategic opportunities for growth and we reinforced our case for investing in our business.

And we continue to execute on a variety of fronts by selling new business continuing to drive strong enrollment growth in our HST services building, our sales pipeline investing in our people and solutions and managing our costs, all while continuing to deliver a high level.

The value and service to our customers.

During the fourth quarter, we made we made further headway with actions we've been taking to strengthen the company's position.

Since our last earnings call, we renewed a multiyear contract with another of our larger customers. We have now signed multiyear contract renewals with two of our larger customers in the last six months, increasing the stability and visibility of our business for the next several years.

Also we made progress on reducing our debt by repurchasing $136 million of base value of our 575% unsecured bonds in the open market at a greater than 25% discount to par and even after that repurchase still ended the quarter with over 300 million.

Of cash that we can use for further debt reduction accretive M&A or opportunistic share repurchases.

And importantly, we enacted a new growth plan, which includes concrete initiatives to expand and diversify our products and our service lines and to reposition our business for growth and success in the coming years.

Turning to our fourth quarter results as shown on page three of the supplemental deck revenues of $2.

$241 $1 million were at the midpoint of our guidance range and declined about $8 million from the prior quarter.

Adjusted EBITDA of 161 $5 million was also at the midpoint of our guidance range and declined about $11 million from the prior quarter.

Our adjusted EBITDA margin was 67% in the quarter down slightly from 68, 7% for the prior quarter.

While the external environment remains sluggish for the fourth quarter. Overall, we are encouraged that health care utilization may be normalizing as December was our strongest month for identified potential savings since may of 2022.

For full year 2022 revenues were 1.079 billion down about 3% from the prior year.

And adjusted EBITDA was $768 7 million down about 8% from the prior year.

Adjusted EBITDA margin was 71, 2% for fiscal year 2022 versus <unk>, 75% in 2021.

We generated over $370 million of operating cash flow in 2022.

And our Levered free cash flow was over $280 million.

We ended the year in the fourth quarter with $334 million of cash on the balance sheet, even after the considerable cash we used to repurchase our debt.

As a result, we maintained significant flexibility to invest in our growth plan and also allocate our capital Opportunistically.

I'd like to spend a few minutes discussing our new our new growth plan, which I and the manage and the entire management team I am tremendously excited about.

Over the last several months, we have embarked on a collaborative extensive and forward looking review of our service line and product positioning.

We engaged our leadership to take stock of our existing offerings are untapped or underutilized capabilities and the gaps we need to fill and we have read all of that against the evolving needs of our customers and our markets.

As a result of this effort we identified numerous tangible opportunities to invest in our business to increase the value we provide to our customers by expanding our core service lines and adding new service lines.

To give you an idea of what this means in 2023 alone we expect to launch four new products or products enhancements within our core service lines and to add a new exciting service line.

As shown on page nine of the supplemental deck. These four core expansions include a next generation of added network claim processing product that Leverages machine learning and data science.

It also includes a product focused on improving member protections against balanced bills on non NSA related claims.

And enhanced NSA product that improves our customer's ability to tailor their approach to better fit their business goals.

And an expansion of the features and functionality of our itemized Bill review product.

We believe these 2023 core expansions alone.

Have the potential to generate $50 billion to $100 billion of ink.

Incremental revenue within the next few years with very affordable investments in operating and capital expenditures.

Also in 2023, we plan to launch a new data and analytics service line, which we believe holds transformative potential for multi plan.

We have already identified a number of use cases that enable healthcare payers to benchmark their performance.

Understand their risks and.

And optimize their benefit plan designs among others.

The data and analytics service line will help us deliver a broader set of products and services to address the significant claims in charge volume already flowing through our platform from over 700 payers.

And it will help us expand beyond our commercial health out of network footprint by enabling us to address new flows it in network commercial and Medicare advantage charge volumes in claims, which we anticipate to increase significantly for multi plan by year end 2023.

Hi.

And importantly, the 2023 launches represent only what is at the front of our pipeline as our growth strategy review surface. Several additional expansion opportunities across all of our core service lines and within the new data and analytics service line that we.

We intend to execute over the next few years.

We are also working this year to advance the potential of an additional service line to be introduced in 2024.

We look forward to discussing this and our other growth initiatives with all of you in greater detail at our Investor Day later in the second quarter.

Before I leave the topic of our growth plan and move on to our guidance, let me spend a few minutes on NSA.

Services <unk>.

During the inaugural year of these products, we priced over 175 million surprise Bill claims and processed about 150000 requests from providers to negotiate a settlement closing 124000 of them at only 6% over the <unk>.

We also received request to arbitrate over 57000 claims closing over 11000 of them Needless to say there has been a sharp increase in <unk> volumes as providers sought to test the process given the flux in the regulations.

We are very pleased with the value we have delivered thus far in helping our customers navigate this highly complex new set of requirements.

Our NSA products have leveraged every core competency from fee schedule creation and management to claim routing to pricing to provider negotiation data analytics and data science. We believe we offer the industry's most sophisticated and flexible offering and with the <unk>.

Spansion initiatives in our growth plan for 2023, this will become even more apparent.

We are focused in three areas, one and advanced product that uses our proprietary patient severity score and machine learning to determine the most effective approach to navigating each surprise bill through the process based on the customers' experience too.

<unk>.

Portal that gives our customers progress and performance reporting analytic tools and insights across the entire claim process in near real time, and three continued data science enabled models and tools to improve our success in negotiation in arbitration.

Another thing we learned from our NSA implementation effort is the importance of being nimble.

It's been a turbulent first year for the legislation with four lawsuits from the provider community challenging various aspects of the regulations and a much higher than anticipated volume of claims taken through arbitration.

Two of those four lawsuits have now had rulings in favor of the plaintiffs.

We benefited from the decision we made early on to provide flexibility to incorporate all of the arbitration considerations allowed in the law, but both rulings call for even greater sophistication in how arbitration offers are formulated and defended and we are well a clip we are well.

Ill equipped to pivot as needed.

Moving on to our guidance.

I am sure by now by now many of you have had an opportunity to review our outlook for 2023 presented in our press release and the supplemental deck.

Jim will review the full details with you momentarily, but let me provide some overarching context.

As discussed on previous earnings calls, we have been anticipating that a multi year contract renewal with one of our larger customers would mute our 2023 revenue growth all things being equal.

As I mentioned previously during the last few months, we also renewed a multiyear contract with another one of our larger customers.

In aggregate, we expect the impact of these contract renewals and other renewals with larger customers anticipated this year to pose a headwind against growth in 2023, which is fully reflected in our guidance.

Additionally, as we discussed last quarter, we began encountering volume softness during the second half of 2022 and while we are encouraged by the early signs of improvement in health care utilization that I mentioned earlier at this time, we are not banking on any material recovery.

As our 2023 guidance assumes the volume run rate, we experienced in the fourth quarter and through January with only a modest uptick.

Throughout the course of the year.

Partially offsetting these headwinds in 2023, we expect growth contribution from the combination of net new sales medical inflation and early gains from the growth plan initiatives.

In total we expect our 2023 top line to decline about 10% to 14% from fiscal year 2022, and be flat to down 4% from the annualized Q4 2022 revenue run rate of 964.

<unk>.

While we understand our guidance fall short of expectations. We believe 2023 will be a pivotal year for our company as the steps we are taking to reposition that business will help us land on solid footing with greater visibility and re groom our growth in the coming years more.

Specifically, we expect 2023 to be a low point for revenues and EBITDA.

As the contract renewals with our largest customers stabilize our core business over the next several years as healthcare utilization eventually recovers and as our new growth plan lifts our results and allows us to resume our growth in 2024 and beyond.

I'd like now to turn the call over to our Chief Financial Officer, Jim Head Jim.

Thanks, Dale and good morning, everyone before I begin let me just.

Say that I share the enthusiasm about the steps that were taken to reposition this business.

And I shared enthusiasm that we have an opportunity to drive growth going forward I'm going to walk through today, the financial results and the balance sheet for the fourth quarter and full year 'twenty. Two I will then turn to our outlook for 'twenty, three and I will close by commenting on our plans for capital allocation.

As shown on page five of the supplemental deck fourth quarter revenue was $241 1 million a decline of 19, 2% over Q4, 'twenty, one and a decline of three 7% from the prior quarter.

The quarter was characterized by consecutive monthly improvements in our volumes of identified potential savings as.

As October was the nadir for the year November showed improvement and December was our strongest month for savings since may of 2022.

Total revenues for the full year were 107 hundred $9 7 million down three 4% from the prior year.

As shown on page six of the supplemental deck relative to Q3 'twenty two network base revenues declined seven 6% analytics based revenues declined two 2% and payment and revenue integrity revenues declined four 8% in aggregate. These revenue trends were in line with our Q4 of 'twenty two guidance, which was largely informed by the <unk>.

Run rates, we were experiencing as we exited the third quarter.

Versus the prior year quarter fourth quarter revenues were about 20% declines for each of our service lines, reflecting a more challenging environment for utilization in the second half of 'twenty two the customer shifts disclosed in our third quarter earnings calls.

Paul and difficult comparisons with a record fourth quarter of 2021.

For full year 2022 network base revenues declined 11, 9% analytic space revenues grew <unk>, 6% and payment and revenue integrity revenues declined 7%.

Turning to expenses fourth quarter, adjusted EBITDA expenses were $79 6 million up $5 2 million from $74 4 million in the prior year quarter and up $1 3 million from Q3 2022.

The increase of $5 2 million over Q4, 'twenty, one was driven by structural cost increases and investments in our business.

Our adjusted EBITDA expenses for the year were $311 million.

As discussed in our last earnings call in the fourth quarter, we took actions to reduce costs.

We expect the benefit of those cost reductions to be fully realized in 2023 as we seek to contain adjusted EBITDA expense growth while funding our investments in our platform and our growth plan.

Adjusted EBITDA was $161 5 million in Q4, 22 down 27, eight from $223 6 million in Q4 of 'twenty, one and down 6% from $172 2 million in Q3 22.

Full year, adjusted EBITDA was $768 7 million down eight 3% from $838 $3 million in 'twenty one.

Turning to our margins adjusted EBITDA margin was 67.0% and Q4 'twenty two versus $75 <unk> in Q4, 'twenty, one and $68 seven in the prior quarter. Our full year 22, adjusted EBITDA margin was 71, 2% down from 75% for the full year 'twenty one.

Driven largely by the combination of lower revenues at high incremental margin structural cost increases and investments in the business.

As you are aware from our press release, we conducted our annual impairment test in the fourth quarter of 2022, which incorporates current financial market conditions, including the recent performance of our share price market discount rates and other factors.

Based on this test the estimated fair values of our goodwill and indefinite lived assets were less than their carrying values.

As a result noncash impairment charges of $657 9 million for goodwill and $4 3 million for our indefinite life intangibles were recorded and recognized in our GAAP earnings results.

As Dale reported our operating cash flow totaled $372 million for full year 'twenty two our full year.

'twenty two free cash flow was $283 million.

As shown on page 14 of the supplemental deck, we ended the year with $334 million of unrestricted cash which is net of the $100 million, we used for debt repurchase in the fourth quarter.

Net of cash our total and operating leverage ratios were $5 eight and $4 one respectively.

As you will see from our press release and earnings deck. We've also made some changes to our disclosures.

First we are breaking out medical charges process and identified potential savings slide into two categories, which reflects the performance of two distinct claim flows on our platform commercial health plans and the remainder of our business including payment integrity.

Second based on feedback from investors, we are providing more detail on our share of savings slide which shows performance of our <unk> and <unk> models.

We hope these changes will provide additional clarity into our business performance.

Separately the estimated COVID-19 related impact on our results were de Minimis in the second half of 'twenty, two and therefore, we plan to eliminate the disclosure of the COVID-19 related impacts on our revenue and adjusted EBITDA going forward.

Moving on to 2023 outlook our guidance is presented on page 10 of the supplemental deck.

We anticipate 2023 revenues of $925 million to $975 million down 10% to 14% from 2022.

The revenue bridge on page 11 of the supplemental deck illustrates the key components and assumptions in our guidance.

First we are entering 2023 at a lower run rate of revenues versus full year 22, driven by the dynamics discussed in our third quarter earnings calls, including weaker utilization of healthcare services unfavorable mix shift of claim volume and some customer shifts.

The lower run rate accounts for a gross contribution of 11 percentage points of the expected revenue decline in 2023.

Importantly, our guidance does not assume a meaningful recovery in health care utilization. During 2023. Instead, we are assuming volumes of claims flows remain largely flattish from the Q4 run rate.

Second as Dale noted earlier, we have now renewed multiyear contracts with two of our larger customers.

We expect these renewals and other renewals with larger customers slated for this year.

Pose a headwind to revenues of about 8% and.

In 'twenty three.

Despite this impact these renewals improve our competitive positioning.

Increase the visibility of our core business and provide a more stable base of revenue from which we can grow in the coming years.

Partially offsetting the volume run rate and contract related headwinds, we expect the combination of core business growth and early returns from our new growth initiatives to contribute 4% to nine percentage points of growth to our revenues in 2023.

Within that we expect 3% to 7% core business growth driven mostly by net new sales and some medical cost inflation.

As shown on the adjusted EBITDA Bridge on page 12 of the supplemental deck, we expect to continue delivering best in class adjusted EBITDA margins in 2023, albeit lower than those in prior years.

This largely reflects the combination of our lower revenue run rate and a lean relatively fixed expense base and is captured in the Q4 'twenty two exit rate of our adjusted EBITDA margin.

Bridging from Q4, 'twenty, two or 'twenty two 'twenty three margin guidance, we expect about 100 basis points of total margin contraction.

Within that annual amount, we anticipate 50 basis points of investments to support our new growth plan 100 basis points of margin pressure from structural cost increases and a 100 basis points of platform investments, including additional NSA related costs, we are absorbing too.

A substantial increase in <unk> volumes.

These additional costs are expected to be offset by 150 basis points of cost reductions we have already identified.

These reductions are in flight as we follow through on it with the action plan that we laid out on our third quarter earnings call.

Returning to page 10, our revenue and cost expectations apply forecast of $600 million to $650 million adjusted EBITDA in 'twenty three.

Page 10 also shows other guidance items related to our P&L and cash flow to help you gauge free cash flow generation for 2023.

We expect interest expense of $325 million to $340 million in 2023 up from about $300 million in 2022.

Driven by higher floating rates associated with our term loan b we.

We are forecasting capex of $100 million to $115 million in 2023 up from about $90 million in 'twenty two as we deepen our investment in our platform and new products identified by our growth plan.

We expect depreciation of $70 million to $75 million and a tax rate between 25 and 28%.

Finally, we anticipate operating cash flow to be between 175 and $215 million in 2023 versus $372 million for full year 'twenty, two driven primarily by lower adjusted EBITDA higher interest expense and capital expenditures and a one time shareholder litigation settlement of $24 million.

As outlined on page 13 of the supplemental deck and the press release. This morning for Q1, 'twenty three we anticipate revenues of $225 million to $240 million and adjusted EBITDA of $145 million to $160 million.

These projections are flat to $15 million lower versus Q4, 'twenty, two assuming a stable volume environment and the impact of our two contract renewals.

Full impact of the contract renewals will have flowed through our results starting in the second quarter of 2023.

Therefore, we expect our first two quarters will be similar while we expect third and fourth quarters of 'twenty three to be higher as we realized new business growth and some early gains from the growth initiatives, we plan to launch this year.

Turning to capital allocation, we maintained significant flexibility to pursue our growth initiatives and opportunistically deploy our capital.

As we've indicated in the past our highest priority is investing in the business, both organically and through M&A to drive growth and long term value.

Our guidance implies that we plan to make roughly 20% to $30 million of incremental investment through the P&L and capital expenditures to support the core platform and fund our new growth initiatives. We think these investments have an attractive return on investment and encompass a series of modest investments rather than larger bets.

On the M&A front, we continue to target small to mid size acquisitions comparable in size to the HST and discovery health partners transactions, we've done in the past that allow us to expand and diversify our products and service lines.

And you heard they will say that we are particularly focused on launching a new data analytics service line in 'twenty, three and M&A could be a useful tool to accelerate that progress.

Also high on our list of capital priorities is reducing our debt.

As noted we repurchased $136 million of face value of our 575 senior notes during the fourth quarter with approximately 100 million cash from our balance sheet.

Even as we use our capital to fund our planned organic and inorganic investments, we expect to have flexibility to use additional balance sheet and free cash flow to continue reducing our debt over the next few years.

Of note, we have no maturities on our funded debt until Q4 2027.

Finally share buybacks, we've been consistent that this is not our highest priority or our largest allocation of capital.

However, we are reinstating, our authorization, which expired December 'twenty, two and the amount of $100 million through December 2023.

We believe our shares are undervalued.

In repurchasing our stock could be an attractive component of our overall strategy in.

In fact, we believe the prices of all of our security seem dislocated from the fundamentals of our business as we know it.

And we will continue to be opportunistic regarding the purchase of our securities.

That brings me to the end of my comments I'll turn it back over to Dale.

Jim Thank you.

Before I open up to Q&A I want to say, how extremely proud I am of our team at multiplex.

Despite the difficulties posed by our extinct by the external environment are over 2500 employees have risen to this moment by embracing the challenges and adjusting to change.

They're super energized by our growth plan and continue to be dedicated to our mission to deliver affordability.

<unk> C and fairness to the U S health care system.

Our growth plan sets sets forth concrete objectives to execute against and that is largely because of our employees unique talent knowledge and expertise that I am confident we will achieve these objectives and that I continue to believe multi plans best days lie in.

The years ahead.

Operator would you kindly open the call to up for Q&A. Please.

Thank you, ladies and gentlemen, if you would like to ask a question.

Press Star followed by one telephone keypad now.

Turning to ask any question.

Our focus on mute locally.

We have our first question comes from Joshua Raskin from Nephron Research LLC Joshua Your line is now open.

Hey, Good morning. This is actually Marc <unk> on for Josh I. Appreciate you taking the question just had a couple of quick ones on our end.

First I was wondering if you could give us a sense of what percent of your revenues are already contracted for 2023.

So you mentioned that there were more planned client renewals through for this year.

Of those renewals among top 10 customers and is there any additional detail you can provide to help frame your exposure there. Thanks.

Thanks, that's a really good question and.

I guess.

I'll frame it up.

As you know.

We are always reluctant to discuss contracts in specific but as you listen to our commentary I think you can.

Surmise, a couple of things and here's what we told you just now.

We have now renewed two multi year contracts with our larger customers.

We expect to renew with another larger customer in the first half of 2023.

The total expected impact of all of these renewals and 23 is included in our 2023 revenue guidance and that's about 8% headwind that we talked about.

So what we've done is we've given you the impact in totality.

<unk> gives us a lot of visibility for the next few years and it gives us the confidence to reinvest in the business and support our customers.

We've sharpened our competitive position as a result of this and we think we've removed the overhang and I guess in aggregate. We can tell you that we've just this will represent.

Sent over 50% of our revenues getting resigned.

Great. Thanks.

That's very helpful.

Then just one more quick one it looks like Youre, incorporating a softer volume outlook in your 2023 guidance.

Is there any specific reason for that or is that.

Just more of a general conservatism in forecasting the year.

No we're actually maybe give you a little context here.

Forecasting a stable volume environment as we exited the year Youll see revenues come down a little bit because thats the impact.

The impact of these contract renewals in 2023, so when if you could go to our share of potential savings and think about a stable volume environment and kind of take our guidance and run it through the <unk>.

Right and things like that Youll see the take rate come down a little bit.

We do not think that its a major move but it does reflect the new pricing.

But just to be clear. This is this is price impact versus volume impact in our first quarter guidance.

Alright, great. Thank you.

Thank you.

With our next question comes from Steven Valiquette from Barclays. Steven Your line is now open.

Thanks, Greg good morning.

So with all the moving parts on.

Slide 11 around the revenue bridge for 'twenty three just curious if there's any more color you can provide just on the outlook by segment and when you think about the network based services analytics based solutions payment integrity.

Is there any.

One of the three I guess.

Which ones are going maybe declined the most year over year or is it pretty evenly spread just trying to get a better sense for.

Frame in the 'twenty three outlook for revenue.

Across segments.

Yes, I think I think it's let's let's start with maybe the easier one first I think we don't expect that.

We think payment integrity. There. So if there is some degradation at the second half of last year, and we think thats kind of washed through I think there is always a little bit of interplay between network and analytics not because network is poorly performing its just theyre substitution in between the two as the claims flow through our client environments I would.

Say that.

We will continue to see a little bit of substitution in the in the network side, but largely the the analytics is going to drive drive the performance.

Got it okay. Thanks.

Thank you.

Our next question comes from Daniel <unk> from Citigroup, Daniel Your line is now open.

Yes, thanks for taking the question here.

Go back to the question around utilization and trying to square a couple of comments that you made so.

<unk> was the strongest quarter from a utilization standpoint that you've seen.

May 2022.

Guidance isn't really assuming any meaningful uptick in utilization why shouldn't we expect the utilization recovery in 2023.

If December was so strong.

Daniel It's a great question and.

And as I love to be able to tell you exactly pinpoint exactly when that utilization will come will come back.

But but as we said December is December was the strongest month for us.

Since may of 2022, and really October was the lowest point right. So that was the Nader you always have to remember that we have that claim lag of about about four to eight weeks.

Built into our volume.

Going forward in 'twenty and 2023, we've really been conservative right we took.

We anticipated that our run rate would be flattish and that there's only a very modest uptick in recovery.

Got it okay.

I think what Youre hearing from US is this is the utilization environment you can look at some leading indicators and feel a little bit.

Bit better about it but we're a little as you know from last year were idiosyncratic and we're just not ready to call call a massive turn and get ahead of ourselves on the utilization front. So I think as Dale mentioned, we're being conservative I think we've got maybe.

2% over the course of year increase off of relatively.

Of low base right. So we're not even getting close to where we were in Q1 or Q2 of last year at all.

Kind of I think youre kind of saying somber utilization environment until we see different <unk>.

Data points.

Okay that makes sense.

And then appreciate more of the.

Color that you've disclosed in your presentation around ppm and percent of savings.

It's a great thing and.

Revenue.

Wanted to.

And digging a little deeper into some of the dynamics there you've seen a nice increase in saving.

Potential savings from the PETN model recently, but revenue yields from that savings is compressing a little bit I'm. Just curious if you can describe what's going on there and a little more detail.

Savings rate savings growing and TTM and revenue decline.

Yes. So this is the good news the good news bad news of HST. The good news is it's a really sticky business that.

That is on a per employee per month basis and.

And if they do better and generate more savings with their with their spec.

Special brand of reference based pricing that they employ.

Savings will go up and this is one of the reasons why we broke it out because.

We're compensated on a on a much stickier basis on a per member per month, and Thats, what youre seeing in the ppm is HFC generating more savings for their clients and that makes us stickier and it makes us more valuable.

Okay makes sense. Thank you.

Thank you.

As a reminder, ladies and gentlemen, if you would like to ask a question. Please press star followed by one client has on key patent now.

We have our next question comes from Rishi Parekh from Jpmorgan Chase. Your line is now open.

Good morning, and thanks for taking my questions I have two questions. One on the utilization or are there any specific specialties that might be driving that utilization pressure that you saw either in Q4, and then what you expect to see in 2023 and then my second question.

As it relates to the contracts did the second renewal go into effect on Jan one meaning is that 8% impact that you're expecting for this year is that an annualized impact.

With that I think you also said that you expect to re sign a third major customer.

That contract.

Also that contract expectation also included in that 8%. Thank you.

Yes.

Good good to hear your voice ratio.

With albeit with a new Jersey and.

Just to answer your contract question.

The second contract that we alluded to was signed in the fourth quarter. The rates go into effect at the beginning of the year.

The additional customer will be as we said will be signed in the first half. So what we've done is amalgamated the entirety of all all of those into one one adjustment that reflects the entire entirety of the year and I think it is.

It's a good basis.

For you to understand.

The impact of all of that in totality.

It is all of that appreciate all of that all of the expected impact of our renewals with these larger customers is baked into its already included in our revenue guidance that we gave to you.

Utilization.

The utilization.

You asked a question about the softness in utilization as I've said, we look we're predicting only a modest uptick in recovery.

Jim said you can you can look at the leading indicators and start to see some positive trends in utilization.

We've had we've seen considerable softness in in the second half of last year round around what I'll call non emergent procedures. So it's it's ambulatory surgery orthopedics at surgery, It's PT Ot it has a lot of the Cairo.

<unk> muscular skeletal procedures.

That's where we see that's where we've seen a saw a drop off in procedures and treatment that was done and again, it's mostly in that non emergent area. Our edr in what we call our surprise bill procedures is tracking to expectations.

It's right in line with where we expect it to be it's been very steady and.

And it's exactly where we where we thought it would be.

Thank you.

Thank you Rishi.

We have no further questions from the line.

Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your line.

Yeah.

Yes.

Okay.

Yeah.