Claritev Corporation (CTEV) Earnings Call Transcript & Summary

Hi, thank you, everyone, for joining our next section. We have the MultiPlan team, and we have the whole team up here on stage. We have Jim Head, CFO. We have the brand-new CEO, [ Travis Dalton ], good to see you again [indiscernible]. And we also have Dale, Executive [indiscernible] now. No longer the CEO. So I do want to say that we also -- before we get started, Shawna has put a disclaimer to go through on the Investor Relations side. Shawna, take it away?

All right.Thank you. So just a quick reminder that our remarks and responses [indiscernible] screen. Actual results may differ materially from those stated or implied due to a number of risks, and a summary of these risks is shown on the screen, and a more complete description can be found in our report on Form 10-K and other documents we filed at the SEC. Any such forward-looking statements are as of today. And with that, I'd like to turn it back over to you.

Perfect. Thank you. [indiscernible] you got 10 days into the job.

I am.

Is this season better? Tell me about the path that led you here. I think a lot of folks may remember you from Cerner. What made you look at MultiPlan and say, this is the next seat.

Yes. So first of all, thank you for the welcome. I'm official because I'm a note taker, I have MultiPlan on my notebook. Yes. I was 21 years with Cerner. And so as part of a pretty good run there, and when I started, we were about [indiscernible] companies around $5.4 billion. So it's part of that growth front. At the end of that, the [indiscernible] I was running about 80% of the company. So that's sales technology, delivery and some other elements of the company. And then the last 2 years have been running Oracle Health, which was doing integration works into Oracle. So growth, scale, public company experience, [ productization ] of things in health care markets, those were all areas that I've been focused on, and I thought that they had some relevance as it relates to what I believe, and I'm trying to get everyone else to believe as are we, a MultiPlan story.

That convinced me, so it will convince them.

That's right. So why MultiPlan quickly is, I looked at and there's 3 ingredients here that I think are core to why you deal anywhere. Great clients, good team and [indiscernible] . And so those 3 things exist before you even look at any of the financial -- the financial elements or the actual business case. And so I just felt like, "Hey, we have those 3 things." We've got products coming to market that I think we can drive into our core market. We got adjacencies in the white space, which I think we can continue to drive. We have new segments that I believe we can open. And so from my view, I thought the things that I was -- had learned and developed actually had good relevance here as we seek to verticalize and enable the business.

And you steered very large ships before that are going through transition. Does this echo with that?

Yes. I mean my -- it's been a soul searching process for me. You go to Oracle and you find yourself inside of a big thing, and what is you want to do with your life. But to your point, for me, ultimately, it came down to building something and providing -- making an impact. And to me, this reminds me a lot of kind of where Cerner was at a point in our journey. And I think that this is the right size of the organization, where you have -- you've got enough capital to do some things, but it's not so big that you can't prove it in the strategy to be able to execute. So there's a little flexibility there. There's also, you put wood behind the arrow on the things that matter most. And I think that was really part of the decision criteria as well.

There, you saw a large organization, but then [indiscernible] what scale, right?

Yes, I did see that also. I'll say it, also got a good opportunity to see how to really take horizontal products and put them into vertical market segments. We expect the growth by doing that. And I really think that we can do that in both adjacencies but also in new segments there.

Initially, when there's a new CEO, there's a lot of questions about [ continuity ], but we've got Dale literally over your shoulder.

Literally.

What are you doing in Miami, Dale?

First of all, I'm doing the fun stuff, right? The torch has been passed 10 days ago.

Now you say, there were welcome drinks.

The torch has been officially passed, and I've assumed the role of Executive Chair. I'm Travis' wingman, and I get to do the fun stuff and focus on customers, deepen our customer penetration, provide that stability in those larger customer relationships. That's the good stuff.

Does that stuff, you got to deal with the road map from the Investor Day. Is that the same road map?

Yes, I'd say it is right now, for sure. So short term, our execution this year really needs to be in a thinking state as part of the Investor Day. But again, I do really believe that we can take what we're doing with Data & Decision Sciences, and particularly the BST acquisition PlanOptix. And we can take that platform and we can use it in provider health markets. I think that's a real opportunity, and you can build analytics off of that, which opens up new growth that hadn't probably previously been contemplated. And so that's going to be something that we look at that market analysis very carefully and the strategy that we're going to consider, for sure.

This isn't your first time doing an expansion, especially into an adjacency. What learnings have you had so far that you want to apply to this one as you go into [ a new ] market, which is sometimes be, as you know, [indiscernible].

Yes. I think a couple of things. One is spend a little more time on understanding the market potential before you go there. I think a question that doesn't get asked enough in the new market potential is, what would you pay for this? And so we're actually canvassing, particularly in the provider segment, potential buyers and what will their appetite be for buying behavior. And that should inform what we ultimately do. And so -- I don't know yet. Now, [ probably say ] just yet either. But we will put -- we ultimately will put market size on it. [indiscernible], all that good stuff, and we'll size the market. We'll go look at it. We'll put a [indiscernible] so we go for it. Yes, we believe it's there.

How are you going to be able to leverage your relationships in that industry? Is there a way to get a few anchor folks in order to help create this product?

Yes, for sure. For sure. I was [ 43 ] years in the North American health care market. So I got a few friends left. But I'd say, some few good ones. So we've made a few calls, and we'll make a few more, but I think we got a lot of benefit to drive more revenue but also service line optimization of analytics, which is, I think, a real value proposition for health care systems in the U.S.

Jim, I feel like you've been too quiet. I'm going to ask you about guidance. You're just sitting here, I'm asking them. You got a back half way to ramp.

Sequential growth expected, yes.

Help us [indiscernible] with that. You know that it's all [ important ] for investors right now, but [indiscernible].

Well, we -- I would say, 2023 was an example of that, where we saw sequential growth throughout the year. Our first quarter is usually the softest and our fourth quarter is usually the strongest. So you can put your whistles down, so to speak. But in fairness, we've got growth engines that are beginning to come across throughout the year. And our guidance, we talked about the core, which is in large part, you see a pretty good sense of where things are because your customers and all the planned sponsors [indiscernible] kind of set for the year and what you're waiting for is volumes to happen. So we've got a little bit of utilization increase and a little bit of inflation. So that will pick up throughout the year expected. But in the end, we've got new products that are coming across [ Entertainment Integrity ], our HST employer direct platform, and HST, which we are building throughout the year. So there is an aspect of build throughout the year, but it's not a giant go get, if you're wondering. And so to us, it feels a little bit similar to 2023 in that build.

Well, maybe let's touch on that. What sort of visibility do you have into that number? Like how much is the go-get? How much of it is this volume, something like that needs to happen?

Yes. In our core business, the other network, repricing, which is admittedly a very large piece of our puzzle, we have a pretty good amount of visibility at the beginning of the year. The variables are really kind of volume, volumes, which have been in 2022. And we saw some volatility, 2023, we saw some stability and actually increasing. Investors see some of the signals from the hospitals and things like that. So it feels like the environment is pretty stable going into 2024. And then we've got a little bit of inflation. So that -- it's not go-get, but it's just kind of naturally built into the system. In our HST business, we feel pretty good about the growth prospects there. And a lot of it is business that's been signed up for 1.1. They go to an employer, sign up the plan for the year, 1.1 is a big date, and then we continue selling even more throughout the year. So we started off with a fair amount of visibility on that. Payment integrity is pretty similar in that sense as well. And BST is going to build throughout the year in our estimation. And so the go-get is pretty modest in terms of our overall growth aspirations. And we put out a relatively narrow range, but I think it's -- we feel good that it's balanced and down the [indiscernible].

Why did you choose a much narrower range than normal?

I think we're trying to -- listen, the variability in our business is starting to narrow down. We wanted to show growth at the bottom end of the range and make investors feel comfortable that we're moving in the right direction. And so I don't know if there's a level of precision that's narrow or wide, it's going to necessarily end up. But we just felt that was a good expression of how we feel about our year.

Now, it all makes perfect sense if you have typical volume and things like that. So there's this company [indiscernible] health care. We've had some issues that have maybe impacted you talking about this.

Okay. Well, Dale, do you want to just talk maybe about the macro? I'll talk about the [indiscernible].

I think everyone is aware of the incident that, that change had. I think, it's on the 21st of February. They've provided regular updates as to the work effort they have underway to address the issue. The last update on March 7 said that they would be targeting the week of March 18 to bring their claims platform back online, right? And remember, change sits between payers and providers and claims go back and forth, right, information goes back and forth. So there's been a disruption to the claim submission process. From our perspective, we directly, we have very little -- we took all the actions we needed to take -- as soon as it happens, to protect our data and our systems, right? So that was priority one. We have very little direct exposure with change. There's a little bit of -- with one of the many companies, we have a connection point in the relationship, but it's immaterial to our revenues. And so from that perspective -- but they're a big player. They're a big player in The Clearing House space, and they're an important player in the exchange of information between payers and providers.

And I think as it pertains to what we're seeing, I guess, I'll make a couple of points. Number one, we are beginning to see an impact on the flows that are coming into our system. We lag a little bit, as you're all aware. But number two, it's primarily a timing issue, okay? The claims need to be repriced. Again, we're not a network company that reprices claims in the core of our business. Those claims need to be repriced. They're not going away. They're not just being submitted. And the planned sponsors want them to be repriced, okay? So they're not disappearing. Number three, it will probably impact the tail end of Q1 and maybe go into Q2. But it's too early to figure out what the magnitude of that is, okay? Last week, we said it was too early to tell. We're kind of, I would say, updating a little bit, but this is going to work its way through the system, okay? So it's a little bit like a timing issue of ripple through our volumes, and it should be done by the end of Q2. So when you look at the longer view, I don't think it changes anything. I think we're going to have some geography issues between Q1 and Q2.

And beyond just the volume geography issue, I have to imagine that comes on at a very, very high incremental margin.

Yes. Well, you know, we have a fixed cost to our platform, right? In a lot of ways, we have the people in this technology. And so the -- you're absolutely right. On the margin, there's not a lot of variable cost to change when you're processing claims to the platform. So it will be high-margin business [indiscernible].

When we think about the product road map, given this whole change incident, does it change the direction that you want to go in? Or does it change the prioritization of your product road map?

That's a good -- no. I think we're very confident with the growth plan we set in place. If you reset the clock, right? If you reset the clock and look back, we formed our growth plan in 2022. We executed on it in 2023, we're advancing it this year. What's important around that is last year's initiatives will be growth driver this year. So [indiscernible] in particular, you have Balance Bill Protection, which we launched last year, right, in the summer. And as we said on the call, we expect about $6 million in revenue, incremental revenue this year. We launched Balance Bill Protection in [indiscernible], which is our AI machine learning sort of dynamic process at the front end to generate the most savings on claims. We launched that in the fall. It's doing better than we expected. We said $6 million when we reported Q3, we expected that. Now it's running about $8 million to $10 million this year. We refreshed our IBR program and signed a handful of customers in the fall in Q3 and Q4. And that alone will be driving $5 million of revenue. But that's -- we're not standing still, right? There's a lot of work effort now. So those growth drivers are [indiscernible]. Those initiatives are contributing to our growth in 2024. Now the work we're doing in 2024 will be the growth drivers for 2025. And so there's a lot of work taking place this year around deepening the value of our core initiatives, implementing next generation of our core products, like Pro Pricer 2.0, micro networks, things like that. We're expanding our employer and the solution on the HST platform. So we're snapping more products and services on our HST platform, which you know [ HST ] is our direct-to-employer channel. So all of those things, all that work taking place this year will be foundational to our growth in 2025.

I'm hearing a lot of different folks that go on the stage, say that the whole change incident is also making it more important to have the duplicative data exchange [sets ].

Yes.

Would you ever want to go more of a clearing house direction or partner in that direction?

Maybe, I'll take this. And I'm going to synthesize what Travis and Dale had just said. When we talked about our -- at Investor Day last year, we talked about the value of our platform and what the adjacencies could be off a bit, and the benefit of having our new Data & Decision Science service line. That horizontal set of products that we could take to different markets, Medicare, Medicaid, [indiscernible] provider, okay? We've got -- and we felt like we had a fair amount of runway in terms of new product introductions, et cetera. So what we have is bandwidth constraint. And so we have to be pretty choosy about where we want to spend our incremental development dollars, where we want to spend their incremental calories. And so I think what you're hearing from us is, I think there's an opportunity for maybe someone else in that realm because these providers need more than one access point, they probably -- some of the bigger providers have multiple choices. But in the end, we're trying to stay focused on what's going to drive the most value for us and where we have the most distinctive advantage so.

[indiscernible]

Well, yes. But like, we feel like there's a good runway of stuff that we do really -- that we can do really well with our existing customer base.

We will go to that. Talk to me what the key drivers for your 2024? You have a lot of different growth opportunities, right? Yes, now new products that we may not be as familiar with. Talk me through it, and what are you excited about?

I think where we've shown a lot of excitement in terms of all -- in the core, we feel like there's still plenty to do. We've got penetration to new clients. I'm very excited personally about the revamp called Pro Pricer, that's our next-generation out-of-network repricing solution, to both optimize our savings, but it's also going to take [ cost ] side of our system over time because it's a more flexible switch, okay? So we've got some opportunities, and we're making investments right now. They're not massive moon shots, but they're very attractive investments that we continue to refresh the core of the business. And then as we talked about in our guidance for the year, but as you walk across some of these other areas of growth, revenue integrity, making some investments, we're starting to see returns from IBR and advance [indiscernible] and things like that, where we feel like our customers are really desirous of those types of solutions. HST has legs. HST is our direct to employer. We go to -- under the smaller end of the employee base, 1,000, 2,000 employees. And we have a reference-based pricing solution that we're wrapping more, more solutions around, including Balance Bill Protection. That is one of a really interesting driver to make that a pretty big business over time. And then Benefit Science, Travis talked about it. Benefit Sciences is that horizontal capability, and we are finding that there's just tons of products and solutions that we can develop internally and efficiently to go out to go to market. And so Travis is here for the very reason that he's bringing some skill sets and commercializing product life cycle management, et cetera, to the table. And that's stuff that we are going to marry with our intellectual capital in the business, [indiscernible] in platform assets to make some exciting bets. And so that's -- we feel good about where we're going. It takes time, it doesn't happen overnight.

I'd say our partnership with ECHO, right? We did a part -- we entered into a partnership with ECHO Health last summer. But it's the [indiscernible] payments business, right? We decided not to buy it, build it. We wanted to partner with it. It was a speed to market question for us. We're in the market that we've already sold 2 customers. The interest is strong. The demand is there and our pipeline is good. So we'll take that and bundle it into the products we have, it's -- we're super excited.

We're talking about pipeline then. I'd love to hear -- what are the big parts of your suite now of product that's really getting traction with customers? What's the biggest sticking point? Where could we see that now?

I think I'd echo what Jim said, right? I mean it's -- you focus on our core, right? So it's deepening the value of what we do in our core, right? Because that's our [indiscernible] right there. We focus on the core. And so it's making sure that, that we're doing everything we can to deepen the value, to bring more value to our customers. So look at Pro Pricer, look at Balance Bill Protection on the HST platform. Balance Bill Protection wasn't part of the HST platform last year, it is now. And so we're widening -- we're deepening and widening this growth of products that we're bringing to our customers. We're now -- we refreshed our payment integrity with IVR. We've partnered with ECHO. It's all of those things that, what are we super excited about, Balance Bill Protection, right? Pro Pricer next generation.

We can't name all of the products [indiscernible] .

Those 2. Those 2 are the key. Those 2, Balance Bill Protection, Pro Pricer, next-generation out-of-network, cost management.

Well, I guess, with that in mind, a lot of that into M&A, right? Where are you in your cash priorities? Could there be more of that? Could we be on stage next year with Dale talking about 2 new products?

Well, I think -- so let's talk about what we've been very consistent on. We're going to invest in the business. You're seeing that. The capital expenditures are putting -- taking some of our operating leverage that we gained because we have revenue growth and we investing it back in the business. But with what we've built over time, we have some -- we have some runway in some of these areas that we don't need to make acquisitions to create growth. I think that horizontal platform that we bought with BST is a product and solution engine. So in a lot of ways, it is more about executing on the assets we have. A couple of years ago, we were kind of a one-product company, and now we've actually opened the aperture quite a bit to new areas. We've got to execute on that first. We've told folks that acquisitions will be on the sidelines for the time being. But that's not too long. But in the end, we've got to focus on our debt retirement. So I think we can actually -- what we've built and what we bought, I think, we can have a pretty good runway organically for the near term.

So if I had to characterize your [ arch ] over the past few years, you came out, you were kind of a very deep one-product company. Like a deep [indiscernible]. Then you expanded a lot of your products over the past 1.5 years, 2 years. How do you see the next few years? Is it making sure it all fits?

I view it as there's enough room to cover here to actually thread the needle and run to the next few years. And that was attractive to me coming in. And so I looked at it and I'm like, "Wow, we have enough products now to annoy people by listing them all, right?" I'm probably going [indiscernible] 2 years ago. But now we do. So that's a good thing. So we have a set of products that again, we run better, sell better, work harder, more urgency, I think you can put [indiscernible] right there. Then you start to look at, "Okay, what becomes the timeline?" I'm serving the core. I'm moving into the employer market more aggressively. Then you come back with a new market segment, then you come back and say, "Hey, I have an interesting data science asset that I think I can configure as a platform to potentially monetize." Maybe, we'll see, but I view the arc as a 3-year arch of serve the core new market data. [indiscernible]

The strangers of scale. All right. That's all the time we have. Thank you, guys, so much for joining. I look forward to seeing the scale.

Thank you.

Thank you.

Thank you.