Q1 2024 MSP Recovery Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Life Wallet First Quarter 2024 Earnings Conference Call.

Good day, and thank you for standby.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Diana Diaz, Life Wallace Chief Communications Officer.

Welcome to the lifestyle at first quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: The speaker's presentation, there will be a question and answer session.

Speaker Change: A question. During this session you will need to press star one on your telephone.

Speaker Change: You will then hear an automated message advising your hand is phrased.

Speaker Change: Your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Diana Diaz like Wallace Chief Communications Officer.

Speaker Change: Please go ahead.

Diana Diaz: Good morning, everyone, and welcome to LifeWallet's first quarter 2024 earnings conference call. Before we begin, please note that the statements made during this presentation, which state the company's or management's intentions, beliefs, expectations, or predictions of the future, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, and actual results could differ materially. Additional information about factors that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings.

Good morning, everyone and welcome to life, while its first quarter 2024 earnings conference call.

Diana Diaz: This includes, but is not limited to, risk factors contained in our SEC filings and in the accompanying press release issued. A copy of these materials can be found in the Investor Relations section of our website at LifeWallet.com. Non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures is included at the end of the presentation slides and can also be found in the Investor Relations section of the company website. The speakers on today's call will be John H. Ruiz, Life Wallet's Founder and Chief Executive Officer, and Francisco Rivas Vasquez, Life Wallet's Chief Financial Officer. I'd like to turn the call over to John H. Ruiz.

Speaker Change: Four we begin please note that the statements made during this presentation, which state the companys or managements intentions beliefs expectations or predictions of the future are forward looking statements within the meaning of the private Securities Litigation Reform Act and actual results could differ in a material manner additional information.

Speaker Change: About factors that could cause results to differ from those in the forward looking statements is contained in the company's SEC filings. This includes but is not limited to risk factors contained in our SEC filings and in the accompanying press release issued a copy of these materials can be found in the Investor Relations section of <unk>.

Speaker Change: Our web site at life, while at Dot Com.

non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures is included at the end of the presentation slides and can also be found in the Investor Relations section of the company website.

Speaker Change: The speakers on today's call will be John H Ruiz life wall, its founder and Chief Executive Officer, and Francisco reversed task was life, while its chief financial Officer, I'd like to turn the call over to John H Ruiz.

Speaker Change: Good morning, everyone and thank you for joining US today, we will cover the company's most recent highlights and an overview of our financials for the first quarter of 'twenty 'twenty four.

John H. Ruiz: Good morning, everyone, and thank you for joining us. Today, we will cover the company's most recent highlights and an overview of our financials for the first quarter of 2024. Life Wallet continued to execute and advance its business, litigation, data analytics, and recovery strategies in the first quarter of 2024, experiencing the most successful quarter to date since becoming a publicly traded company as it relates to claims recovery by achieving two comprehensive settlements with multiple property and casualty insurers.

Speaker Change: Life wallet continued to execute and advance its business litigation data analytics and recovery strategies in the first quarter of 'twenty 'twenty four experiencing the most successful quarter to date since becoming a publicly traded company.

Speaker Change: As it relates to claims recovery income.

Speaker Change: By achieving two comprehensive settlements.

Speaker Change: With multiple property and casualty insurers.

John H. Ruiz: The first settlement announced in March resolved claims with 28 affiliated property and casualty insurers. In addition to settling existing claims, the settlements established a going-forward process to collaboratively and timely resolve future claims that are owed to life wallets. The settlement includes the Settling Insurers Agreement to provide 10 years of historical data, identifying all claims processed from January 2014 through the present, and data sharing of future claims extending out for one year, assisting LifeWallet in reconciling its current and future-assigned Medicare claims. The settlement also ensures implementation of LifeWallet's coordination of benefits clearinghouse solution, which I will detail shortly.

The first settlement announced in March resolved claims with 28 affiliated property and casualty insurers.

Speaker Change: In addition to settling existing claims the settlements established going forward process to collaboratively and timely resolve future claims that are owed to life wanted.

Speaker Change: The settlement includes the settling insurers agreement to provide 10 years of historical data.

Speaker Change: Then to find all claims processed from January 2014 through the present.

Speaker Change: And data sharing of future claims extending out for one year.

Speaker Change: In life wallet and reconciling its current and future assigned Medicare claims.

Speaker Change: The settling insurers implementation of life, one it's coordination of benefits clearinghouse solution, which I will detail shortly.

John H. Ruiz: A five-year agreement to resolve cooperatively or through binding mediation, relevant Medicare claim liens that LifeWallet owns today and in the future, the settling insurer's agreement that they are primary payers for any unreimbursed Medicare lien that LifeWellhead identifies from data sharing, and their agreement to assign all rights to collect against other third parties that either failed to pay liens or collected twice from Medicare funds and the settling insurers, and a confidential A second settlement followed with another group of affiliated property and casualty insurers; the settlement included an agreement to provide historical data for claimants and also assist LifeWallet in reconciling its relevant current and future-assigned Medicare claims. An assignment of all rights to collect additional sums from plaintiff's attorneys and medical providers.

Speaker Change: A five year agreement to resolve cooperatively.

Through binding mediation relevant Medicare claims liens that life wallet owns today and in the future.

Speaker Change: The settling insurers agreement that their primary pairs for any unreimbursed Medicare mean that life one identifies from data sharing.

Speaker Change: And their agreement to assign all rights to collect against other third parties that either failed to pay liens or collected twice for Medicare funds and the settling insurers.

Speaker Change: And a confidential cash payment to life wallet to settle existing historical claims.

Speaker Change: A second settlement followed with another group of affiliated property and casualty insurers.

Speaker Change: The settlement included.

Speaker Change: An agreement to provide historical data for claimants and all sorts of life wallet and reconciling its relevant current and future assigned Medicare claims.

Speaker Change: And assignment of all rights to collect additional sums from plaintiffs attorneys and medical providers.

John H. Ruiz: A 10-year agreement to resolve cooperatively or through binding mediation relevant Medicare claims that Life Wallet acquires in the future and non-Medicare claims that it owns today. And the Property and Casualty Insurers Agreement to assign all rights to collect against third parties that either failed to pay liens or collected twice from Medicare funds and the settling insurers. Through collaborative data sharing, these settlements provide the company with additional data that enhances its ability to identify the parties responsible for unreimbursed medical liens owned by life insurance companies.

Speaker Change: A 10 year agreement to resolve cooperatively or through binding mediation.

Speaker Change: Relevant Medicare claims that life wallet acquires in the future and non Medicare claims that it owns today.

Speaker Change: And the property and casualty insurers agreement to assign all rights to collect against third parties that either failed to pay liens or collected twice for Medicare funds and the settling insurers.

Speaker Change: Through collaborative data sharing these settlements provide the company with additional data that enhances its ability to identify the parties responsible for unreimbursed medical liens owned by life wanted.

John H. Ruiz: It also allows us to identify any recoverable claims for future business that pertain to relevant property and casualty insurers engaged in settlement. The company has implemented the terms of the March 2024 settlement by entering into a tri-party data collaboration agreement between LifeWallet, Palantir Technologies, and the 28 affiliated settling counterparties. The Collaboration Agreement allows for the sharing of data in order to reconcile potential Medicare liabilities. This Coordination of Benefits Clearinghouse Solution is being used to reconcile existing owned claims and is part of the company's initiative to maximize its Chase2Pay platform.

Speaker Change: It also allows us to identify any recoverable claims for future business that pertained to relevant property and casualty insurers engaged in settlements.

Speaker Change: The company has implemented the terms of the March 'twenty 'twenty four settlement by entering into a Tri Party data collaboration agreement between life wallet patented technologies in the 28 affiliated settling counterparties.

Speaker Change: That collaboration agreement allows for a sharing of data in order to reconcile potential Medicare liabilities.

Speaker Change: This coordination of benefits clearinghouse solution is being used to reconcile existing on claims and as part of the company's initiative to maximize its chase to pay platform.

John H. Ruiz: Beyond the March 2024 and April 2024 settlements, which included cash payments, Life Wallet's management team believes that additional value lies in the company's identification and collection of unreimbursed liens from other responsible parties. To date, the company has identified thousands of unreimbursed claims and initiated the collection process. Any additional revenue from these potential collections will be reflected in future filings. In addition, the company is also currently in settlement negotiations with numerous other PNC insurers to resolve pending litigation under the same or similar framework.

Speaker Change: Beyond the March 'twenty, 'twenty, four and April 'twenty, 'twenty, four settlements, which included cash payments.

Speaker Change: Life, while its management team believes that additional value lies in the company's identification and collection of unreimbursed means from other responsible parties.

Speaker Change: To date the company has identified thousands of unreimbursed claims and initiated the collections process.

Speaker Change: Any additional revenue from these potential collections will be reflected in future filings.

Speaker Change: In addition, the company is also currently in settlement negotiations with numerous other P&C insurers to resolve pending litigation under the same or similar framework.

John H. Ruiz: These settlements reflect our progress in advancing the company's core business model, and this same structure can be potentially used to enhance recoveries from other property and casualty insurers, the amount and timing of which are subject to the completion of litigation, negotiation of settlement, and the risk of delays associated with the litigation and settlement process. The company's goal is to build upon this foundation to create a potential revenue stream that is diversified and predictable. Now, I'd like to turn things over to Francisco Rivas Vazquez, Life Wallet's Chief Financial Officer.

These settlements reflect our progress in advancing the company's core business model and the same structure can be potentially used to enhance recoveries from other property and casualty insurers the amount and timing of which are subject to the completion of litigation negotiation of settlements and the risk of delays associated with the litigation and settlement.

Speaker Change: Process.

Speaker Change: The company's goal is to build upon the foundation to create a potential revenue stream that is diversified and predictable.

Speaker Change: Now I'd like to turn things over to Francisco reverse vascular life Wallets Chief Financial Officer.

Francisco Rivas Vasquez: Good morning, everyone. I'll be providing an overview of the company's first quarter 2024 financials, including a review of our March 31, 2024 balance sheet, followed by the income statement, the non-GAAP operating results for the quarter, and sources of liquidity. Our total assets consist mostly of our intangible assets of $3 billion as of March 31st, 2024. These assets are held at cost, not at fair value, and they are amortized over 8 years.

Speaker Change: Good morning, everyone I'll be providing an overview of the company first quarter 2024 financials, including a review of our March 31, 'twenty 'twenty four balance sheet.

Speaker Change: Followed by the income statement and non-GAAP operating results for the quarter and sources of liquidity.

Our total assets consists mostly of our intangible assets of 3 billion as of March 31st 2024.

Speaker Change: These assets are held at cost not at fair value and they're amortized over eight years.

Francisco Rivas Vasquez: Total assets decreased by $124 million since December 31st, 2023, primarily due to the amortization of the intangibles of $121 million and an additional amortization of prepaid assets of $3 million. However, other assets, such as cash, PP&E, and receivables, increased on a combined basis by 125,000 from December 31st, 2023.

Speaker Change: Total assets decreased by 124 million since December 31, 2023, primarily due to the amortization of intangibles of 121 million.

Speaker Change: And additional amortization of prepaid assets of $3 million.

Speaker Change: Other assets, such as cash PP&E and receivables increased on a combined basis by 125000 from December 31 2023.

Francisco Rivas Vasquez: The company currently has $1.8 billion in liabilities, of which $83 million are considered current liabilities. Within the current liabilities, 80% are either payable in stock or unaffiliated payable. This includes a warrant liability of $33 million primarily related to Viraj warrants. These are the scribes in our TANKU file.

Speaker Change: The company currently has $1 8 billion in liabilities of which 83 million are considered a current liability.

Within the current liabilities, 80% are either payable in stock or an affiliate of payable.

Speaker Change: This includes the warrant liability of three 3 million primarily related to begrudge warrants instead as described in our 10-Q filing.

Francisco Rivas Vasquez: For non-current liabilities, the majority are expected to be payable through claims recovery income. The guarantee obligation is related to the amounts due to Viraj for which the company extended the maturity date to September 30, 2025. As of March 31st, 2024, the claims financing and notes payable of $575 million matured on September 25 and after. Interest expense is primarily paid in kind.

For non current liabilities.

The majority are expected to be payable through teams recovery income.

Speaker Change: The guarantee obligation is related to the amounts due to the rash for which the company extended the maturity date to September 32025.

Speaker Change: As of March 31, 2024.

Speaker Change: Financing notes payable of 575 million mature on September 25 and up.

Speaker Change: Afterwards.

Speaker Change: Interest expense is primarily paid in kind.

Francisco Rivas Vasquez: The decrease since December 31st, 2023 was primarily driven to the settlement of interest payable to Viraj through the issuance of warrants. Please refer to notes 4 and 11 of our Thank You filing for additional information on the transaction with Verash and the warrant liability. Now, related to our income statement for the quarter ended March 31st, 2024, the company generated claims recovery income of $6 million, which is higher than the $3.5 million generated in Q1 2023.

Speaker Change: The decrease since December 31, 2023, less primarily driven to the settlement of interest payable to be rush to the issuance of warrants.

Speaker Change: Please refer to note four and 11 of our 10-Q filing for additional information on the transaction with rush and the warrant liability.

Speaker Change: Now related to our income statement for the quarter ended March 31 2024.

Speaker Change: The company generated claims recovery income of $6 million, which is higher than the $3 5 million generated in Q1 2023.

Francisco Rivas Vasquez: In total, the company reported an operating loss of $130 million. 93% of the loss is driven by non-cash items, which consists mostly of claims amortization expense of $121 million. Other operating costs, excluding claims amortization expense, were $15 million. When looking at the non-GAAP results... After adjusting for non-cash items, the company had an adjusted operating loss of $8.7 million versus a reported operating loss of $130 million. This primarily excludes the claim summarization expense of $121 million. On an adjusted net loss basis, the company generated an adjusted net loss of $8.5 million, which excludes non-cash items such as intangible amortization, interest expense, and deferred value on warrants and derivative liabilities.

Speaker Change: In total the company reported an operating loss of $130 million.

93% of the losses, driven by noncash items, which consists mostly of claims amortization expense of $121 million.

Speaker Change: Other operating costs, excluding teams amortization expense were $15 million.

Speaker Change: We're looking at the non-GAAP results.

Speaker Change: After adjusting for noncash items.

Speaker Change: The company had an adjusted operating loss of $8 7 million versus a reported operating loss of $130 million.

Speaker Change: This primarily excludes the claims amortization expense of $121 million.

Speaker Change: On an adjusted net loss basis, the company generated an adjusted net loss of $8 5 million, which excludes noncash items, such as intangible amortization interest expense and the fair value of warrant and derivative liabilities.

Francisco Rivas Vasquez: With regard to liquidity, the company extended the Viraj Nomura and York Recovery obligations to 2025. In addition, we entered into a working capital credit facility in 2023 for which we have the capacity to borrow an additional $14 million in funding. Furthermore, we entered into the Yorkville Standby Equity Purchase Agreement Facility to potentially assist in raising funds. Therefore, as our recovery efforts continue to progress, and given our expected funding from the Working Capital Credit Facility and potential access to the Yorker Facility, we anticipate that the company will have the liquidity to meet in-cash-based obligations over the next 12 months. We are confident in the company's future outlook and thank you all for joining us today. Thank you.

Speaker Change: With regards to liquidity the company extended the garage Nomura and York recall obligations through 2025.

Speaker Change: In addition, we enter into a working capital credit facility in 2023.

Speaker Change: For which we have capacity to borrow an additional $14 million of funding.

Speaker Change: Furthermore, we enter into the Yorkville standby equity purchase agreement facility to potentially assist in raising funds.

Speaker Change: Therefore, our recovery efforts continue to progress.

Speaker Change: And given our expected funding from their working capital credit facility.

Speaker Change: And potential access to a yoga facility.

Speaker Change: We anticipate that the company will have the liquidity to meet in cash base obligations over the next 12 months.

Speaker Change: We are confident in the company's future outlook and thank you all for joining us today.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Once again, that's Star 1-1 to ask a question at this time. And I'm currently showing no questions in the queue at this time. This does conclude today's conference. Thank you all for your participation, and you may now disconnect.

Speaker Change: Thank you as a reminder to ask a question. Please press star one wanting your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question. Please press star one again please.

Speaker Change: Please standby, we compile the Q&A roster.

Speaker Change: Once again Thats Star one wanted to ask a question at this time.

Speaker Change: And I'm currently showing no questions in the queue. At this time. This does conclude today's conference. Thank you all for your participation and you may now disconnect.

Speaker Change: Yeah.

Speaker Change: [music].