Q3 2024 MultiPlan Corp Earnings Call
Hello and welcome to the MultiPand Corporation third quarter 2021 earnings call. My name is Harry and I will be your operator today. All lines are currently in a distance and only mode and there will be an opportunity for Q&A after management prepared remarks. If you would like to enter the Q-for questions, please start star forward by one on your telephone keypad.
I would now like to hand a conference over to Shawna Gasik, APP of Investor Relations. Thank you, please go ahead.
Shawna Gasik: Thank you Harry, good morning and welcome to Multi-Findster's Quarter to 724 earnings call.
Shawna Gasik: Joining me today is Travis Dalton, Chief Executive Officer and Doug Garrett, Chief Financial Officer. Gary Hoh.
Chief's operating officer will be available for the Q&A session.
The Call of the In-Webcast is the Access through the Investor Relations section of website at multiplanned.com. During our call, we will refer to the supplemental slide deck that is available on the Investor Relations course of our website along with the third quarter, 2024 remains the press of release issued earlier this morning.
Shawna Gasik: Before we begin a couple reminders, our remarks and responses to questions include forward-looking statements.
Shawna Gasik: These forward-looking statements represent management of these and expectations only as of the date of this call. Actually results may differ materially from these forward-looking statements due to a number of risks.
Shawna Gasik: If somebody else's risk can be found under the second page of the supplemental slide deck, any more complete description on our annual report on Form 10K and other documents we file ShADSCC.
Shawna Gasik: We will also be referring to several non-gap measures, which we believe provided investors with a more complete understanding of multi-sands underlining operating models.
Shawna Gasik: and explanation of these non-gap measures and reconciliation to their comparable cap measures can be found in the earnings press released in in the supplemental slide there.
Shawna Gasik: with that. I would now like to turn the call over toward the executive officer, Travis Dalton. Travis.
Shawna Gasik: and good morning to all of you on the call. Thank you for your time on the important election day in the US. Voting is one of the most cherished rights we enjoy as Americans, so I hope everyone gets out to the polls to cast the votes today before they close. Good luck.
Shawna Gasik: Today I'd like to report out on the state of multi-plan, through the search order of the year and provide a brief update on our multi-year transformation journey to becoming a world class, data insights and technology company.
Shawna Gasik: The latter incorporates changes we are seeing in the healthcare industry and the unique position that multi-plane is built over decades The health-art clients drive value through networks, increased transparency and reduce costs by using our products
Shawna Gasik: As you can see from our earnings release this morning, our third quarter results were within our guidance range for both revenues and adjusted EBITDA.
Shawna Gasik: During the quarter we executed on some keywins with four new client logos and 165 closed opportunities.
Shawna Gasik: While reaching 6.4 billion in identified potential savings, a record quarterly achievement for multi-land. We continue to make progress with our core products that data products, new market such as provider, and deep in client engagement with our payment and revenue and the new product.
Shawna Gasik: Finally, we continue to manage the discipline to ensure proper allocation of capital and management of operating expenses against our outlooks.
Shawna Gasik: A paramount importance to us is continuing to add value to our long-time relationships, driving new market penetration and using technology to automate.
Shawna Gasik: and a couple of examples include.
Shawna Gasik: First, we forward to a stronger relationship with Sanford Health Plan, the value clients has 2017.
Shawna Gasik: For Sanford, we are implementing itemized bill-reviewed pre-spring, which will increase the claimant's bollium.
Shawna Gasik: We analyze. Stanford is also the first partner to sign up for IVR and the N automation initiative for 2025. It serves as an improvement project that will systematically identify cases and accelerate results to our clients.
Shawna Gasik: and Tech-Eyes. We solidify a strategic alliance partnership with the National World Health Association.
Shawna Gasik: Renery today we identified four pilots like to initiate our product.
Shawna Gasik: With a focus on the new car.
Shawna Gasik: and Greater Access to Care and Greater Price Transparency.
Shawna Gasik: The important relationship is progressing quickly and we see a great opportunity to extend multi-plan horizontally into this market. We are committed to access and care viability in rural America.
Shawna Gasik: Third, as a technology company, we continue to drive internal automation using advanced tools technology.
Shawna Gasik: We have been investing in our NSA products and reducing friction and lag times drive back to performance and keeping back-slog load. This benefits our clients but also creates operating leverage and cost benefits for us and best capital to other growth areas.
Shawna Gasik: Additionally, we have refocused the data and decision science group under a general manager structure to ensure maximum value. We are very excited to see the positive momentum from some initial wins as we develop a targeted approach for our go to market plan to these high value products.
Shawna Gasik: Ben Insides was drive transparency and affordable in healthcare by using analytics and insights to optimize employer benefit plans.
Shawna Gasik: As a broad, addressable market, covering employers, providers and consultants, and we're seeing positive market response to this product.
Shawna Gasik: To demonstrate the fundamental value of NSI. We applied the analytic tool set for our home company with imperial and positive results, both reducing costs and improving benefit design for our employees.
Shawna Gasik: Hard ROI-based capabilities aren't always easy to discern and help care. This is one example of where we can bring that kind of immediate benefit to our clients. We'd expect to be sharing more notable sales for this product we'll be on our next call.
Shawna Gasik: Finally, our ongoing focus on cost efficiency is generating bottom line savings that Doug will detail in his update.
Shawna Gasik: but we need to and will do more.
Shawna Gasik: The core elements of today's multi-plan that I laid out on our last call still ring true and enable our transformational path.
Shawna Gasik: We have great clients, core products that bring real client and enterprise value, good cash flow, and strong talent.
Shawna Gasik: Our stable business base and new product capabilities also provide a solid financial foundation.
Shawna Gasik: upon which we are seeking to holistically extend our capital structure and which will further position multi-plans to drive profitable growth going forward. We continue to make progress across all aspects of the business as we build towards our long-term vision for the company.
Shawna Gasik: We firmly believe that our healthcare expertise, our agility as an organization to embrace more rigorous and disciplined processes,
Shawna Gasik: Our strong foundations built on decades of data and technology assets and most importantly our integrity as a market leader will sustain multi-plan strategic advantage over time and bring tremendous value across the healthcare continuum.
Shawna Gasik: For our longtime clients, I say thank you. Also, rest assured, we will continue to enhance and innovate our existing product set.
Shawna Gasik: Our transformation is meant to increase discipline and apply a more rigorous process around organic product development to not only address our client's current challenges and opportunities, but also the ones to come.
Shawna Gasik: This, along with lateral product expansion, strategic product bundles, and value-focused pricing plans, will provide a natural expansion of our total addressable market potential.
Shawna Gasik: Bye.
Shawna Gasik: After the progress of the transformation itself, we continue to organize around the operating principles of clarity of purpose, alignment of resources, and focus on accountability.
Speaker Change: I believe more and more that healthcare is at an inflection point, with affordability as a key lever that only technology can address.
Speaker Change: The last decade was focused on digitization of data and interoperability. The future will be focused not just on data, but on actionable insights that increase transparency, reduce costs, and improve quality.
Speaker Change: The challenges are many. Health care consumers are demanding more than ever around data at their fingertips, transparency and less opaque pricing, higher quality, better tools, and automation.
Shawna Gasik: The operators in healthcare are facing increased regulation, medical cost inflation, employer plan cost increases, skilled labor shortages, provider risk, M&A consolidation, and a divergence of payment rates between rural and urban providers.
Shawna Gasik: These are but a few examples.
Shawna Gasik: Against that landscape, the technology partners that can bring real insights and answers to one or more of these challenges will emerge the winners.
Shawna Gasik: We believe we have uniquely positioned ourselves over time. That's where our clarity of purpose lies. We uphold our unique position to combine data and technology with actionable insights to positively impact transparency, cost, and quality.
Shawna Gasik: In order to realize our clarity of purpose, we have created a devoted team and set of fully aligned resources. The biggest resource we have is our talent.
Shawna Gasik: We are focused on our cultural change management to instill a mindset of urgency, focused on sustainable growth with reinforced emphasis on the rigor and discipline in our processes.
Shawna Gasik: Each of our associates knows our mantra when it comes to serving clients.
Shawna Gasik: They are at the center of everything we do. We listen, we serve, and we problem-solve. Selling is problem-solving. Thus, we all sell and that's how we will deliver value-driven growth.
Shawna Gasik: I continue to be impressed by the level of talent we have inside the company.
Shawna Gasik: but also those that we have been able to attract.
Shawna Gasik: I think they all see the potential here.
Shawna Gasik: At this point, our senior management team has been solidified, with the recent addition of Doug Garris as our CFO, Tiffany Misenchik joining as our Chief Growth Officer,
Shawna Gasik: and longtime leader Shawn Crandall with new responsibilities as the GM of our Data and Decision Science business. I am very confident in our team, the diverse set of skills and experiences it represents, and our ability to lead multi-plan forward.
Shawna Gasik: We also stand ready with robust legal, corporate, and government affairs teams aligned to protect, defend, and educate. Along with the promotion of our general counsel, we've added leaders to all of these teams to work alongside our marketing, communications,
Shawna Gasik: and lobbying teams to protect and vigorously defend our company and be an effective thought leader on regulatory and policy matters. We want to have a voice and contribute. I will touch on these endeavors later on.
Shawna Gasik: Along with upgrading our human resources, we are also embarking on a transformation of our technology infrastructure.
Shawna Gasik: to not only embrace the recent leaps such as AI, but more importantly, to make our data and analytics capabilities more scalable and expandable to meet the product and solution needs of the market in the future.
Shawna Gasik: This will position us well in the decade of actionable insights. Doug will share some of these upgrades in his comments.
Shawna Gasik: Thank you.
Speaker Change: I have said many times that you are what your record says you are. I am confident that we are taking the right steps to improve. Our focus is on how our results over the next couple of years will stack up against the transformation model that we have built.
Shawna Gasik: This model is made up of KPIs that signal our progress towards sustainable growth. These KPIs will focus on driving value in the core, aggressively competing to win in existing and new markets,
Shawna Gasik: operational excellence, talent acquisition, and innovation across our products and technology.
Shawna Gasik: Thank you.
Shawna Gasik: As I mentioned in our last call, we launched a comprehensive evaluation of the company and financial potential forward.
Shawna Gasik: Out of that effort, we have created a fundamental business framework for our transformational journey called Vision 2030, which is a strategic, financial, and operational execution roadmap meant to drive our strategic KPIs.
Shawna Gasik: This will allow us to align the resources, capital, and goals of the company. It is the foundation for clarity, alignment, and focus in multi-plan going forward. This process is being led by Jerry Hogg, our Chief Operating Officer, and includes
Shawna Gasik: preserving and expanding the three core businesses, network, analytics, and payment and revenue integrity.
Shawna Gasik: Achieving the full revenue and value potential of the existing white space and market potential enabled through products from our HST acquisition.
Shawna Gasik: and diversifying the business by accelerating new revenue growth and product innovation across the data and decision sciences portfolio, like Ben Insights and RISC models.
Shawna Gasik: Clearly defining our products and the financial plan associated with each will allow us to organize our go-to-market teams and add needed sales talent with proper incentives to spur our growth forward.
Shawna Gasik: As I prepare to turn the call over to Doug, let me provide a quick update on our corporate and government affairs. The Verity decision in August was certainly an encouraging development in our ongoing vigorous defense of similar legal claims against us.
Shawna Gasik: We believe these legal claims against us are without merit, and we will continue to focus on our service and product delivery. We operate in a highly competitive environment, drive costs out of healthcare, reduce balance bills, and support the regulatory goals around transparency.
Shawna Gasik: In addition, we will continue to engage openly and collaboratively with lawmakers on Capitol Hill to educate them on our services and the positive impact we make on the healthcare system by reducing costs and increasing transparency, no matter the outcome of the election.
Shawna Gasik: You'll hear more about this as we continue to make progress.
Shawna Gasik: Multiplan was built on sustainable core values of character and integrity, great client relationships, and decades of service. This forms our foundation.
Shawna Gasik: But make no mistake, we will be rapidly impacting change for the future. The evolution of our leadership team, modernized platform, and how we go to market as a data insights and technology leader in healthcare
Shawna Gasik: expands and transforms our brand vision. There will be more news to come soon on this new brand emergence.
Shawna Gasik: I wanted to reiterate that our third quarter was what we expected, albeit on the lower end. We expect fourth quarter to run similarly, and hence, have provided updated guidance ranges to reflect this expectation.
Shawna Gasik: We are working to refine our processes with rigor and discipline as we enact the Vision 2030 plan in our new fiscal year. While the business stabilization is expected to occur through the first half of 2025,
Shawna Gasik: We now have more visibility into its eventual outcome and impact on financial results.
Shawna Gasik: We will be presenting our updated 2025 outlook on our year-end earnings call scheduled for late February. With that, let me turn it over to Doug.
Doug Garrett: Thank you, Travis, and good morning, everyone. I'm delighted to be a part of the MultiPlan family and look forward to meeting and working closely with the investor community now that I've had the chance to fully onboard. Before reviewing third quarter results, I'm going to start off by sharing a few observations today, which ironically is my three-month anniversary.
Doug Garrett: and the multi-plan team here is not only comparable, but exemplary. We have a good balance of talent, passion, industry knowledge, deep technology and operational expertise, and importantly, grit. Everyone here shows up engaged and willing to do the work required to enrich our culture and serve our clients.
Doug Garrett: This is demonstrated by our recent inclusion as a great place to work for the third consecutive year and an elite net promoter score that we've earned from our clients.
Doug Garrett: Second, our core business is strong and durable. Outside of the decline of one specific client and a non-repeating positive impact from COVID related volumes, our core business has consistently grown since we went public.
Doug Garrett: Our products as an analytics network services, payment and revenue integrity, continue to yield significant value for our clients, as evidenced by the continued strength of the identified potential savings we deliver.
Doug Garrett: We are an indispensable partner for our 700-plus clients, and the value we uncover lowers the overall cost to deliver healthcare to patients.
Doug Garrett: Third, I wanted to share some of the progress we are making against our strategy. We have completed an assessment of our cost structure, and our initial findings suggest we can deliver efficiencies in the order of magnitude to roughly 10 to 20 percent of our cost base over the next several years as part of our Vision 2030 plan.
Shawna Gasik: The areas of focus to address and improve our cost position will be as follows.
Shawna Gasik: We plan to modernize our data and technology platforms. We are embarking on a multi-pronged approach to modernize our data foundry, to build cloud-native products, and to deploy a modern cloud-based ERP system, which is expected to go live in the first half of 2025.
Shawna Gasik: Next, we have streamlined our business structure. We recently instituted a general manager model with direct P&L accountability and we added a chief growth officer and organized our go-to-market segments to fuel growth across our sales channels.
Shawna Gasik: We also plan to reduce our physical facility footprint by roughly 60% to create centers of excellence in flagship locations focused on operations, products, technology, data science, and client success.
Shawna Gasik: We have also implemented robust efficiency programs that have already begun to yield tangible results. Travis briefly mentioned a great example that I can share on our benefit spend.
Shawna Gasik: As part of our annual planning process, we ran our own products and insights from our data and decision science business against our current benefits plan design.
Shawna Gasik: and we captured nearly $4 million of hard savings, both reducing our benefit spend by 15% annually, and we were able to lower our per-employee cost of benefits while improving the quality of the benefits plan designed for our associates.
Speaker Change: As a CFO and a frequent buyer of enterprise technology solutions, delivering real cash savings without reducing quality is frankly incredible.
Shawna Gasik: We have many additional areas of opportunity that I plan to share more formally when appropriate. But rest assured, we have a team that is laser-focused on scoring points in this arena.
Shawna Gasik: Finally, building upon our strong foundation and the new leadership team we've assembled, MultiPlan now has the ingredients required to launch our multi-year strategy.
Shawna Gasik: This is why we are opportunistically and actively talking with our lenders to extend our capital structure now to give us ample runway for realizing our Vision 2020-30 plan.
Shawna Gasik: Now, moving on to third quarter results. As shown on page 4 of the Supplemental Deck, Q3 revenues of approximately $230.5 million were down 5.1% from Q3 of 2023 and down 1.3% from prior quarter.
Shawna Gasik: Our revenues came in at the low end of the guidance range for the quarter, with strong claims volumes offset by a decline of one client. Excluding the impact of this client, revenue was up 1.4% from prior years.
Shawna Gasik: Turning to third quarter revenue by services line as shown by page 5 of the supplemental deck, network-based revenues declined 18.8% from the prior year quarter and were up 0.9% sequentially.
Shawna Gasik: Analytics-based revenue declined 0.4% from the prior year quarter, and we're down 1.4% sequentially. Our payment and revenue integrity revenues decreased 3.4% from prior year quarter, and we're down 4.4% sequentially.
Shawna Gasik: During the third quarter, we continue to experience solid growth or identified potential savings.
Shawna Gasik: As shown on page 7 of the supplemental deck, total third quarter bill charges decreased 1% sequentially to $44.7 billion and identified potential savings increased 3% sequentially to $6.4 billion.
Shawna Gasik: In our core commercial health plan segment, bill charges increased 3% sequentially and 11% versus the prior year quarter, and identified potential savings increased 3% sequentially and 10% versus the prior year quarter to $6 billion.
Shawna Gasik: Both were new quarterly records for MultiPlan.
Shawna Gasik: As shown in page 8 in our 4% Savings Revenue Model, identified potential savings increased approximately 0.8% sequentially and 5.5% year-over-year to $4.5 billion.
Shawna Gasik: With respect to the utilization environment, bill charges from both facilities and physicians were up sequentially and year over year, with particular strength in hospital inpatient and hospital outpatient on the facility side and in surgery on the physician side.
Shawna Gasik: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com.
Shawna Gasik: On balance, data from a few publicly-traded hospitals suggests the utilization of a robot environment remains healthy, which is slightly positive for forward volumes given our typical claims lag.
Shawna Gasik: The sequential increase in our volumes was more than offset in our revenues by a decline in revenue as a percent of identified savings or revenue yield.
Shawna Gasik: As shown on page 8 of the Supplemental Deck, our revenue yield declined about 15 basis points sequentially for the overall business, which includes both PSAVE and PETM revenue models.
Shawna Gasik: In our 4% of savings revenue model, which is approximately 90% of our revenue, our yields fell about 8 basis points in the quarter, which had a resulting impact of about $2 million on revenue.
Shawna Gasik: This was made up of approximately $1.7 million of volume-driven increase offset by approximately $3.7 of price and mix shifts for the quarter. Notably, none of the decline in our PSAVE revenue yield was attributed to any contract changes with our clients.
Shawna Gasik: Turning over to expenses. Third quarter adjusted economic expenses were $88.9 million, decreasing $1.7 million from prior year quarter and increasing $2 million sequentially.
Shawna Gasik: The decrease versus prior year was primarily due to increases in capitalized software development and was partially offset by increases in professional fees and personnel expenses related to year-over-year increases in compensation.
Shawna Gasik: For the sequential comparison, the $2 million increase in adjusted EBITDA expenses was primarily due to increases in access and bill review fees and legal fees, and a decrease in capitalized software development costs, which was primarily timing-related.
Shawna Gasik: Adjusted EBITDA was $141.6M in the quarter, down 7% from $152.3M in the prior year quarter, and down 3.4% from $146.7M in Q2 of 2024.
Shawna Gasik: Our Q3 adjusted EBITDA was slightly above the low end of our guidance range, and margin came in at 61.5%, down 130 basis points from the 62.8% in prior quarter, and down from 62.7% the same time prior year.
Shawna Gasik: We enjoy great operating leverage with our business and most of the margin compression we've experienced in our cost is due to lower revenues, but I will say the team is doing a great job managing costs because our cost base is actually down year over year in the quarter.
Shawna Gasik: Moving on to our Outlook, as shown on page 9 of the Supplemental Deck, we're tightening our full-year revenue guide to between $930 and $940 million versus our prior guide range of $935 to $955 million.
Shawna Gasik: This is reflective of a more reasonable run rate of our core business. We're also narrowing our adjusted EBITDA guide range to between $580 million and $590 million in lockstep with the revenue decline.
Shawna Gasik: We are confident that prudent cost management and the recent launch of our efficiencies program associated with our Vision 2030 plan will help us keep earning and margin power for the remainder of the year.
Shawna Gasik: As you are aware from the press release, we conducted an impairment test for the third quarter, which incorporates current market conditions.
Shawna Gasik: including share price, market discount rates, forecast revisions, and other various factors. Based on this test, the estimated share value or goodwill was less than carrying value. And accordingly, we took a $5.8 million adjustment to indefinite lived assets.
Shawna Gasik: and we reported a non-cash impairment charge of approximately $361.6 million to our GAAP earnings results.
Shawna Gasik: This brings the year-to-date total impairment charges of roughly $1.4 million to our GAAP earnings.
Shawna Gasik: Turning on the balance sheet and capital allocation, our net cash provided by operating activities was $72.8 million for the third quarter of 2024, while the free cash flow generated was $41.1 million.
Shawna Gasik: As a reminder, our cash flow generation tends to be higher in the first and third quarter of any year due to the timing of our debt, interest, and tax savings.
Shawna Gasik: As shown on page 12 of the supplemental deck, we ended the quarter with 86.6 million of unrestricted cash, and we did not buy any securities this quarter.
Shawna Gasik: Net of cash or total and operating debt leverage ratios were 7.6 and 5.5 times respectively.
Shawna Gasik: Our long-term capital priorities remain the same. Our highest priority and immediate focus remains on investing in the business to drive organic growth.
Shawna Gasik: and the assets we have in service. You should expect us to continue making critical investments to support our platform, including our core products and our HSP and data and decision science businesses.
Shawna Gasik: With the remaining cash flows, we will primarily focus on debt pay down and leverage reduction.
Shawna Gasik: Finally, as we previously announced, we're currently working with our lenders and their advisors to extend our capital structure.
Shawna Gasik: Our focus is simple, to opportunistically extend our maturities to provide ample time for the new leadership team to execute against our strategy and realize the transformation we discussed this morning. As a reminder, our first funded debt maturity is not until 2027, in October.
Shawna Gasik: We are having productive discussions, but while we are in active talks, we cannot discuss any details about the debt extension, and I ask that you kindly refrain from inquiring about this topic during our Q&A section.
Shawna Gasik: And with that, that brings me to the end of my prepared comments, and I'll turn it back over to Travis to finish them out.
Travis Dalton: Thanks Doug, appreciate it. As I said throughout, the company's path is clear and becoming clearer. We're taking the actions to transform multi-plan with a thoughtful focus on cost.
Shawna Gasik: for the capital structure to fit our growth aspirations.
Travis Dalton: with a new brand emergence to add an external identity to our internal progression, and with a clear 2025 corporate strategy to go out and win in the market. I look forward to sharing our progress with you in the coming months and quarters.
Shawna Gasik: Operator, would you kindly open the call for questions for Doug, Jerry, and myself? Thanks. Yes, of course. If you would like to ask a question, please dial star followed by one on your telephone keypad.
Speaker Change: If you change your mind and would like to exit the queue then please dial star followed by two and finally when preparing to ask your question please ensure that your phone is unmuted locally.
Shawna Gasik: Thank you. Bye. Bye.
Speaker Change: Hi, thanks and good morning. I guess a couple on my end, maybe just the first one sort of to start with, you know, the last three months or so guidance sort of moving towards the lower end. What would be incremental changes, I guess, relative to what you were seeing three months ago? It certainly doesn't seem like the volume environment.
Speaker Change: Are you speaking, hi Josh and good morning and pleased to meet you. Are you speaking specifically to our revenue?
Speaker Change: Revenue in that, you know, I know EBITDA kind of just, you know, flows with revenue. So, yeah, if you could talk a little bit about revenue. Why towards the lower end of the guidance?
Speaker Change: Yeah, so I think as we mentioned, our volume for the quarter is actually positive and our identified potential savings is certainly an encouraging sign. I think coming in and certainly having the chance to assess the business,
Speaker Change: We fell within our guide range, but we narrowed and tightened our guide range. I think primarily we're pretty well in order with the current run rate of the business.
Speaker Change: And I will say, we recently enacted some robust efficiency programs, so we feel pretty good about our ability to keep and maintain EBITDA margin and traction. I would say over the last three months, nothing has fundamentally changed.
Speaker Change: about the dynamics of the business. I think we're tightening our range for the year to coalesce with the run rate we're seeing in our business.
Speaker Change: Okay, that's helpful. And then.
Speaker Change: Last quarter, you talked specifically about a 3% headwind to revenues from a specific customer. So I guess, is that still the case, or is that customer running off faster this year than expected? And then, any other, you know, client headwinds that we should know about for next year, and maybe what percentage of your 2025 revenues are actually contracted at this point?
Speaker Change: Thank you. Thank you.
Speaker Change: Yes, to maybe answer the last question first, we're not going to give more substantive forward-looking guidance until our February update.
Speaker Change: but our one-time, our one strategic customer decision that we talked about in the last quarter.
Speaker Change: most certainly impacted the business in this quarter. And I think we said it was roughly 3%.
Speaker Change: for roughly $15 million a quarter of impact. And in the prepared remarks, if you strip out the roughly...
Speaker Change: 3% that we expect as a headwind, our revenues were actually up year over year.
Speaker Change: So, that certainly is the case that for the first half of 25, our discussion around the last quarter still remains true. We don't see an uptick or a downtick of the strategic client decision, but it certainly affects itself and our financials in Q3.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Okay, so no new client headwinds, nothing to call out at this time, and obviously we'll get the full details in February.
Speaker Change: We have our client advisory meeting this week.
Speaker Change: well over 100 clients.
Speaker Change: that we'll be with individually. I think in talking to them, we expect the affordability, cost containment, and other programs that we're actively involved with and drive real value to be more important to them than ever over time. So we're confident and, you know, the wind will be at our back, we think.
Speaker Change: over time and I also think we're at the right price to value ratio with those clients and we're well positioned to continue to do business with them going forward and so we're confident in our client environment and the value that we bring as we progress.
Speaker Change: Thank you very much.
Speaker Change: All right. Perfect. Thanks.
Speaker Change: Our next question today will be from the line of Daniel Grossleit with Citigroup. Please go ahead, your line is open.
Speaker Change: Bye.
Daniel Grossleit: Thanks for taking the question and congrats, Doug, on your first full quarter at Multiplant.
Daniel Grossleit: You know, we've now had 10 quarters in a row of tape rate degradation. Is this kind of the new normal where we'll see this continued mix shift which will lead to
Speaker Change: this take rate degradation and it's really up to the savings rate to do the heavy lifting or is 2020 for the nadir of take rates in 25 and beyond, we should start to see a little bit of take rate expansion.
Speaker Change: Thanks for watching. We'll see you next time.
Speaker Change: Hey, Daniel, good morning and good to meet you. So I'll take the first half of it in a prepared remarks
Speaker Change: We highlighted that if you look at our business, certainly over the last 12 quarters or so, if you exclude the one-client impact and one-time tailwind that we had from COVID-associated volumes, our core business I think would look a little bit different and in fact has grown pretty consistently.
Speaker Change: I think what you're seeing in the degradation of yield certainly is the impact of one client.
Speaker Change: Thank you for watching through and I think where you've seen us tighten our guidance range, certainly for the full year and the implied Q4 is, you know, I can't tell you, I can't tell you for certain that we're at an eighter, but it feels like nothing has changed with our client or contract base.
Speaker Change: and the run rate of our business feels very reasonable at this time, excluding any new go-to-market or sales activities that we're planning for 2025.
Speaker Change: Thank you.
Speaker Change: got it okay and some companies have commented on IV shortages leading to delays
Speaker Change: in Elective Procedures.
Speaker Change: mostly in the fourth quarter because it was due to Hurricane Helene.
Speaker Change: So, I'm curious if you're starting to see some of those delays in your business. You mentioned that utilization is strong, but I'm curious if some of those IV shortages are bleeding into your business and maybe what that portends for the first quarter of 2025 for you guys, given that lag that you guys always have.
Speaker Change: Yeah, so let me let me maybe start that so with respect to the specifics I don't think we've seen anything at this point that's disrupted the flow of our expected Q4, right? We're in the process of closing the month of October, but certainly I don't know if that would be substantive enough for us to come off our narrowed gag range
Speaker Change: But that goes without saying that we definitely are watching some of the seasonality of the business play through. Q4 is typically a stronger quarter for us.
Speaker Change: we think that there is, you know, there's no reason to inject that additional seasonality in our business at this time. But we haven't seen major disruptions to our business and our claims flow presently.
Speaker Change: are making. And I understand you're not guiding specifically to 25 now, but I wonder if you can just comment qualitatively on how you're thinking about 25 in terms of growth and your cost structure. And then more longer, you know, from a longer term perspective, has there been any change in how you're thinking about the business versus
Speaker Change: The Investor Day, I guess it was now more than a year and a half ago, where they kind of think that the core business can grow mid-single digits. And then with some of these other expansion opportunities, you can get that to the high single digits in terms of growth.
Speaker Change: Yeah, this is Travis. So, appreciate the question. Thanks for asking about our operating plan 2030.
Speaker Change: So, a couple things. Since I got here, we've been actively working on evaluations of business as I discussed.
Speaker Change: looking at, frankly, what are our core strengths and values and what are the things that maybe we should spend less time on. So
Speaker Change: The 2030 vision is really about...
Speaker Change: looking at what we do well and creating a path for some of our new products.
Speaker Change: We'll continue to make investments in analytics, networks, payment integrity. We're going to focus more sales resources on
Speaker Change: the HST product in the mid and down market as it relates to that capability. Then we're really going to actively look at expanding the business with data and decision science investments.
Speaker Change: and mapping clear go-to-market talent against that. So the whole point of this vision was to basically align the division, the operating mechanism, which I've talked about at great length
Speaker Change: inside the company in a clear plan to allocate capital and put sales resources against it. We think that that will yield sustainable growth for us.
Speaker Change: over time as we get as we go forward. So that was the that's been the kind of premise behind the 2030 and we're looking forward to discussing that in much greater detail with you guys. We continue to maintain our growth potential and prospects over time off of that planning process.
Speaker Change: Yeah, and then this is Doug. I might add, on the cost side, if you take a look at it, right, just...
Speaker Change: At a macro level, it seems that, you know, health care inflation and health care spend is a natural sale at our back. And I think we would have said that in a 23 Investor Day. I think where our new leadership team is really focused is bringing a much
Speaker Change: I would say bringing an order of magnitude inspection in the business.
Speaker Change: And that's where, certainly, I've partnered with Jerry, our Chief Operating Officer, and our executive leadership team to put in a very thoughtful program. And in my prepared remarks, I mentioned we think we can address
Speaker Change: between 10 to 20% of our cost base. And if you kind of parlay that and relate that to our capital allocation priorities, that gives us much greater flexibility against our clarity, alignment, and focus paradigm to invest in the things that will matter and drive the needle.
Speaker Change: And on that line, we talked about our data and tech modernization, right? We are making significant progress there and we'll be excited to share more details next year. And then we're just gonna run the business better, faster, and smarter. Having general managers and business segmentation with P&L accountability is a new muscle and something that we've actively put in place in the last 90 days.
Speaker Change: And then finally, as we think about operational efficiencies, it's not really a strategy, it's just a way to do business. And I think
Speaker Change: with the leadership team that we've assembled.
Speaker Change: Our next question today will be from the line of Jessica Tassan with Hypersandla. Please go ahead, your line is now open.
Jessica Tassan: Hi guys, thanks for taking the question. I was hoping you could remind us of just any, you know, major directional kind of differences in revenue yield by payer type, or let us know if that's a customer mix issue that you were referring to. And then just secondarily on the large customer, I was hoping you could just remind us the circumstances that led to the attrition that you're seeing year to date and just kind of why we should consider that anomaly as opposed to an ongoing risk. Thanks.
Speaker Change: I'm going to take the last one first. Yeah, yeah, so hi, thanks for the questions, Travis.
Speaker Change: Yeah, I think that we covered it pretty thoroughly last time as a reminder. We view that as a strategic decision by a single client that's embarking on
Speaker Change: frankly taking a lot of capabilities in there.
Speaker Change: And so, we were very clear last time that...
Speaker Change: We thought that was one client, not all of our clients. We continue to believe that in discussions with them. But we also continue to believe that the value we bring is very beneficial to our clients over time, and that we're clearly on strategy with them. So in no way, shape, or form are we seeing that as anything other than kind of a single client issue.
Speaker Change: both in terms of our new sales progression, which we're pleased with. We'll be able to quantify more clearly when we go into 25, but also in our existing client accounts and selling new products and innovation into our new clients.
Speaker Change: And so that's kind of what I would say about that. And to the extent that some of that happens more quickly, it does impact our quarter a little bit more than we may have thought, but we've been clear about our forecast on that. I'll also just say one other thing for the last question.
Speaker Change: One of the most important things on this entire topic is that
Speaker Change: We are able to drive organic product growth.
Speaker Change: And so we've been working really hard since I got here.
Speaker Change: making sure that we have product lifecycle capabilities and that we can continuously and quickly...
Speaker Change: drive new innovations like the IVR.
Speaker Change: example I gave for Stanford. That's, regardless of the landscape or strategy, when you bring value to clients and it's priced to value and they see it, they buy from you.
Speaker Change: And so my view is, our strategy is to make great stuff and make it at the right price point and to sell it aggressively. And I think our strategy is a winning one over time. But we have to demonstrate that value for clients to continue to buy from us, and that's what we intend to do.
Speaker Change: And then maybe, Jessica, hi, this is Doug. So maybe on the mix question, I would say we haven't done a particularly great job of explaining price, volume, and mix.
Speaker Change: And accordingly, I've actually refreshed the finance and accounting leadership team to bring in FQ&A leadership.
Speaker Change: commercial finance leadership and a new pricing leader. So I think you can expect in the future for us to have much better color around our disclosures and around our variance explanations on things like price volume and mix.
Speaker Change: But the mix and rate impact that we've seen, that's the degradation, is primarily due to negative mix, and again, is being accentuated by one large customer impact. And if you kind of strip that out,
Speaker Change: The mix in rate impact versus the volume impact is actually far more muted than it appears in our calculations for yield and the yield decline that we've seen consistently now for the last several quarters.
Speaker Change: Thank you.
Speaker Change: Okay, got it. I will do that. Thank you. And then my final question is just, can you all give us an update on the status of recently resolved and then pending litigation? Thanks.
Travis Dalton: Yeah, this is Travis, happy to.
Speaker Change: Cheers.
Speaker Change: Appreciate the questions. It's a good opportunity for me to get our messages out there, so I'm going to take that.
Speaker Change: We have a lot, you know, what we've been saying across not just the litigation, but the media and the Hill and otherwise is that, you know, long history of provider and payer service.
Speaker Change: What we do benefits employers and employees.
Speaker Change: I think that
Speaker Change: There's a lot of data on the high cost of certain areas, particularly the out-of-network.
Speaker Change: And we reduce costs, balance bills, and we increase transparency. So we're very supportive of the NSA, transparency, and a lot of the administrative and regulatory environment out there. We're not an insurer and we're in a highly competitive environment. So all that said...
Speaker Change: You know, we're vigorously defending ourselves. There's been the Verity case that I mentioned, but there's also been cases with similar fact patterns in other vertical industries that we think are, you know, we think are right and positive for us.
Speaker Change: We're going to play out the process, we've got the best legal defense that we think we could possibly have. They've been with us a long time and they're phenomenal. And we're in a highly regulated environment, so we're not surprised by this, it's part of doing business in healthcare.
Speaker Change: The cases, the direct and class action have been centralized into the Northern District.
Speaker Change: of Illinois and so we're actively working on that and we intend to file our motion to dismiss likely in the mid-January time frame and that's where we're at.
Speaker Change: Thank you so much. Bye.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: Bye.
Speaker Change: Our next question will be from the line of Madison Aron with JP Morgan. Please go ahead, your line is open.
Madison Aron: Hi, thanks for taking my question. I apologize for jumping around calls, but as you adjust for that one-time impact, or as you clarified or classified as one-time,
Madison Aron: to Revenue Yields.
Madison Aron: What's your comfort level in terms of the visibility around where the take rate is today? Do you think it's stabilizing? Do you think at least until the next round of contract negotiations? Or do you think that there's still some headwinds to this take rate net of these one-time issues?
Speaker Change: Yeah, I think we would reiterate, right, it's hard to say that, I think, to Daniel's point that there is a nadir of the yield, but I would say the run rate of our business right now, against our current contract base and customer set,
Madison Aron: is reasonable on existing business.
Madison Aron: So, you know, plus or minus a couple of basis points.
Madison Aron: you know, perhaps, but I think we need to keep in mind that yield.
Madison Aron: is a very good directional metric, but when you look at it, you know, things do happen from quarter to quarter, both the positive and the negative, one-time customer impacts, et cetera. But relative to a stabilization, I think it's fair to say that our yield, especially given the one client issue now is played through the first couple of quarters and will play through the first half of the year, I think it's fair to say that our yield is stabilized.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: See you next time. Bye. Bye.
Speaker Change: Okay, and then on Vision 2030, you know, just given some of the comments you made earlier about the new ERP system, the general manager model, how should we think about the investments behind Vision 2030? Is it going to be heavy in 2025-2026? And we'd love to better understand the breakup between what we should see from an expense standpoint and CapEx standpoint.
Madison Aron: The Mix.
Speaker Change: Yes, so we will most certainly provide a very detailed walk, including a very substantive and robust detail on both revenue, expenses, and capital for 2025, but I think
Speaker Change: my prepared remarks and reiterating that we can drive focus in our business and fund the things that we need to do. And that's why we're pretty confident that we can address 10 to 20 percent of our cost base.
Madison Aron: focusing on technology and data modernization, including ERP, which that investment has been going on.
Speaker Change: and will eventually yield savings for our business going forward. And then on the business segmentation and efficiencies front, you know, we mentioned in the prepared remarks that we ran our own product on ourselves and we delivered $4 million of savings.
Madison Aron: So just with further inspection in partnership with with our leadership team, we're driving very specific focus
Madison Aron: to optimize our cost structure and our capital structure to focus primarily on growing the business organically.
Madison Aron: And so I think addressing our cost base and being very circumspect on what we invest our money in means that there's not going to be a material change to our cost position.
Madison Aron: as we embark on our Vision 2030 mission and maintain, I think, very strong margins going forward.
Madison Aron: Yeah, and hey, this is Jerry, Jerry Hogg. So just to kind of dovetail on what Doug said, right, we...
Madison Aron: The investment that we stepped up from 23 to 24 in our data science team, our sales team, our marketing team, and so forth.
Madison Aron: You know, we're looking at those as sufficient to enable the Vision 2030 growth plan. We're looking to sharpen where we put the money, get a greater return on the operating investments as we continue to economize and drive efficiencies in the business.
Madison Aron: Drone, Drone,
Speaker Change: Thank you.
Speaker Change: Dr. J.
Speaker Change: As a reminder for any further questions please dial star followed by one on your telephone keypad now and our next question will be from the line of Joshua Kramer with Credit Sites. Please go ahead your line is open.
Joshua Kramer: Hi there, guys. Thank you so much for taking my question, and thank you for all the detail you've given on the call so far. My very brief question for you, and then I'll let someone else ask theirs, is about the antitrust lawsuit. Do you have any estimate or updates or run rate on what you're approximately spending on the antitrust lawsuit in professional fees, either each month, each quarter, or each year?
Madison Aron: Yeah, hi, hi Josh. Thanks for the question. This is Doug. So we're not going to, I don't think we would share that specifically, but I would say that the the current environment certainly has presented us with some one-time costs that hopefully as these issues resolve, will not repeat. But I don't, I don't think it would be appropriate to give an exact dollar value. I would say that as one-time costs come up,
Madison Aron: As a leadership team, we manage against the money we have to invest, but I wouldn't give you details and specifics on a dollar value, because certainly we've been able to manage any one-time costs within our core cost structure.
Speaker Change: Yeah, I would just add to that. That's a good point.
Speaker Change: Yeah, I'll just add one point to that because I think it's important. When I started, March 1st, we had a series of
Speaker Change: interesting events right so we've we've been actively adding to our corporate affairs function so across
Speaker Change: not just the legal team, but also across other corporate affairs areas around our communications team, how we message.
Speaker Change: making sure we're doing that robustly, our, you know, how we manage government affairs.
Speaker Change: and we've been able to do all of that inside the current wrapper of the company and our current projections and margin profile and otherwise forward.
Speaker Change: Thank you. Bye.
Madison Aron: For the call, we think we can continue to do that over time, and if that changes, we certainly would let you know, but we're very confident that we can continue to manage those areas appropriately, and we've already stepped it up to a certain degree as we go forward as a public company. We need to do that.
Speaker Change: Thank you.
Speaker Change: Thank you and with no further questions on the line this will conclude the Multiplan Corporation third quarter 2024 earnings call. Thank you to everyone who was able to join us today, you may now disconnect your lines.
Speaker Change: For more information visit www.FEMA.gov