Claritev Corporation ($CTEV)

Everyone, thanks for joining. We have with us Todd Friedman, Vice President of Investor Relations; and Doug Garis, Chief Financial Officer of Claritev. First and foremost, I just want to thank you guys for joining us.

But more importantly, and I know we were just talking, but I thought it would be helpful. You've been with the company nearly 2 years now, Travis has been on 2 years. Puts and takes, your thoughts, puts and takes before we kind of get into some of the discussions around verticals and opportunities and so forth.

Yes, great. Thanks for the question and a great conference this week. When I think about the puts and takes, the significant opportunity we have to positively impact health care with 3,000 dedicated associates was an extremely pleasant surprise coming in, especially having worked at kind of larger organizations most recently. We have an incredible base of people who are dedicated with clarity, alignment, focus and purpose and man alive, we set a foundation year in '24. We build 2025 the turn and expectations now have reached a fever pitch. And so the management team, our team is executing our associates are dedicated to the mission, but it's just that we keep telling our team, it just gets harder. And so it's on a day-to-day basis, it's been a grind, but that's what we signed up to do and we're having a great time.

And to that end, maybe in summary, taking a step back, can you talk about the durability of the core business? And you've talked about how you stabilized the top 10 clients. One client, which we've talked about, I think you said organically up 10% or 11%. Can you talk about that just as in from a core competency perspective.

Yes. I think maybe one of the more underappreciated aspects of coming into the organization was how sticky our core business is. When we refinanced the company, it was without fully understanding but kind of betting on the future of being able to sell into an already mature and penetrated customer base. And so when I think about the opportunity for us to continue to grow the business, we say Claritev, all of our business is our growth business. Our core business is a growth business. When we look at Q1, our claims intelligence business, our largest core business was up 8.4% year-over-year. And so we like the prospects of each of our lines of business, our service lines between claims intelligence. We think the out-of-network market is stable on a dollar perspective. Our network business is our crown jewel, and it's a very strategic asset that we're going to more aggressively pursue the TPA space with. And then finally, our payment and revenue integrity, I think, from a medium- to long-term perspective, we see significant compounding growth in products like our claims advanced code editing where we're catching on a prepayment basis issues on claims on a second pass. And so all 3 of those businesses are core to what we do and the medium- to long-term prospects for those businesses are good too.

Okay. Great. And more -- in your Investor Day, you shared about big 2030 Vision and so forth. Can you -- maybe I'm putting two thoughts together here. But at the end of the day, can you talk about some of those verticals that have emerged and then tie it to how you're thinking about that as we roll out pushing towards 2030 and generating cash flow .

That's a great question. So I think the main thing will be the main thing. So the payer and TPA space is the majority of our revenue, and PSAV is 85-ish-percent of our business. We expect it to be approximately 2/3 of our business in those markets are where we're actually winning white space and even net new logos. And so the core business affects to the payer and TPA space. We like the prospects and the opportunities. When you think about providers, we recently signed a top 3 health system. The provider opportunity is not just a U.S. opportunity. It's a global opportunity. And so we're looking at ways to get more sticky with new market verticals. We started with a couple of pilot clients. So we have two large clients, one in the UAE and then one in the U.S., and it's a perfect ventricle for us to learn and build additional case studies to more broadly serve the provider markets. We would expect meaningful revenue contribution as those mature. And then finally, when we think about the public sector, our core products fit very well state, local and federal agency bids like the World Trade Center business that we won. We expect, again, these to augment and help us elevate our growth story in the medium to long term, where we're managing against ultimately our Rule of 70 financial algorithm through the 2030 time frame.

Okay. And as far as the goals you had laid out revenue goals kind of the $1.1 billion in '28 and $1.3 billion guide by '30.

Yes. So at least $1.1 billion of revenue through 2028 that $675 million of EBITDA and then at least $1.3 billion on at least $800 million of EBITDA by 2030. The important thing to note is our business gets a little bit more growth in scale, it starts to spin out free cash flow. And so the investments that we purposely made over the last year and change that we'll continue to make in our technology modernization efforts, we think make our business much more capital efficient over time. And when you look at kind of the midpoint '28, it's kind of like a mid-single-digit levered free cash flow yield. When we get to 2030, we're spinning out a couple of hundred million dollars a year of levered free cash flow, and it's a mid-teen free cash flow yield, which is a very attractive business.

Okay. Okay. Great. And to that end, can you speak to just the ACV? And obviously, you had some pretty -- I would argue maybe aggressive goals this year, but track seem to be tracking well against those goals.

Our CEO has set a very aggressive target for our sales team and our team delivered in Q1. So when I look at our Q4 exiting 2025, we had a $23.1 million bookings quarter. It was our largest bookings quarter we turned around and delivered $44.1 million bookings. The important thing to highlight is that the mix of what is organic, so what we're selling into the current installed base versus what's net new is about a 70-30 mix. And when you look at the last 5 or 6 quarters, we've added 36 net new logos. And so the market is mature, yes, our ability to penetrate these markets and build substantial funnel and pipeline coverage is something that as we're talking to both new and existing investors, we think the message on ACV bookings and the conversion of revenue against our financial algorithm is something we'll continue to provide additional color as we go forward.

And you're saying that transition is 6 to 12 months?

About 6 to 12 months depending on the type of booking correct.

And within those opportunities, how much does the public market, the World Trade Center contract, how much of an opportunity is that kind of a one-off. Because that's clearly the unique vertical from what we've seen.

Yes. So that deal was in partnership with GDIT. They were the prime on the bid from the CDC and that business alone was about a $5 million ACV booking for us. And so we are the primary network for World Trade Center first responders and survivors. I think it's about 130,000 or 140,000 members. That business was sold as a PEPM business. And that is our core business. That is our primary network. Our network business is about a $200 million business. And as state, local and federal opportunities come up, whether they're in claims intelligence, whether they're in our network or payment revenue integrity or in some of our new technology domains, you have to kind of build a funnel, plant a flag and start to show progress. And I think Q1 was meaningful progress in both the provider space and public sector. We expect to continue to chase sizable opportunities like that in the future.

How would you weigh those? So is the provider opportunity better opportunity in the public opportunity? Is that a fair price? .

Yes. I think it's probably early to tell. So as we're kind of finalizing our provider strategy, which we'll share it at some point in the future, the public sector opportunities from my past life, if you won one big deal and it was like a multibillion-dollar deal. And so I think in large, I wouldn't be surprised if they were ratable I think, longer term, a stable recurring revenue provider business is a really great space for us to be in because we're trying to embed to be a critical piece of technology infrastructure within the health care ecosystem, which is an important role that we play today, and we're looking to continue to expand.

And to that end, can you speak to your pipeline? I know you talked about a little bit earlier today about the pipelines. And I'm curious how having followed the company for quite some time. There was -- obviously, it was a core organic business, but the kind of the vertical element of this, the growth opportunity here is unique to the story, quite frankly. And I'm wondering how you position yourself from a sales infrastructure and how you're -- what you're seeing relative to what your original expectations? .

Yes. So that's a great question. So over the last 18 months, we've hired a new Chief Growth Officer. I think we hired her a few months after I joined Tiffani Misencik, she's built an incredible segment leadership team. So when you look at our payer TPA our provider, our public sector and then we have an international leader as well, we have end-to-end client management from new logo acquisition all the way through client success. And that kind of vertical alignment was new to the Claritev story. And when you kind of take a step back, we've been trying to simplify the way we talk about the business. When we roll out a bed every year, our gross revenue retention is 93% to 95%. Having a technology backbone, that is a really good, sticky business. I think for us on the pipeline, the organic opportunities, we've created almost 2.5 to 3x as much funnel. So when you look at our coverage now, we put a $100 million bookings target out there, $80 million to $100 million. I know that I know I can acquire that funnel because I have a few hundred million dollars of pipeline. You win 25% to 40% of your deals and the math actually becomes pretty easy over time.

And to that end, how does -- another question I guess, can you speak to like AI, I mean, kind of jump around a little. AI is always the question in the landscape of the discussion. How does -- can you speak to your value proposition? What your relationship with your clients, what -- I guess, does that landscape, does it create -- is it a concern about penetration of AI? And does that -- does your client relation your value proposition able to offset that.

Yes. That's great question. And it evolves every day, but I think we covered this a little bit at Investor Day. And what we would say is it starts with trust. We have deep client relationships over multiple decades, and we have a near perfect say-do ratio. We have large customers who trust us, and we've embedded these relationships over the course of multiple decades. Two is we have data rights and data access to large organizations that is a high hurdle when you're dealing with confidential and private information with PHI and PII. You can't just go into a large organization and get access to all their data. And so that's kind of point number two. And then point number 3 is we are embedded inside of the workflows with highly customizable applications and that when you put those three things together, our customers trust us, we have data rights and we're embedded inside of workflows with massive customizations. The value proposition, we think, is an offensive opportunity from because, as for instance, we generated 53% of our code to make our products work better using AI in Q1. And so we're thinking about AI in terms of practical use cases, how do we better serve our clients and when you think about the amount of unlevered free cash flow, we deliver, it allows us to invest in those things that are going to meaningfully drive positive revenue positive client retention or in some cases, help us take cost out of the business.

And to that end, what are you hearing from? What are your clients saying to you like what they -- in terms of how they want to facilitate that transition.

Yes. I would point to a product like our NSA product, right? We are the market leader, we think in NSA. We are looking at automating the NSA process further to make it a much better experience for our clients through a service cloud through real-time insights and analytics. And of course, by continuing to enjoy a pretty substantial win rate versus our competition. And so I think the proof is when we do business reviews with our large clients, we'll bring our Chief AI Officer, we'll bring software engineers, we'll bring our technology organization. We'll even bring members of the leadership team, and we'll very clearly explain what the strategy is and how it benefits our clients and I think NSA is a fantastic example for us.

And the clients will come to you and be looking for a solution around NSA if that's part of your you bring that value proposition.

Yes, absolutely. And I think the big psychological change for us, maybe relating back to the puts and takes, we are a product and technology organization, and we have a published road map. So now I can go on a quarterly basis, I can go to my customers and say, "Hey, do you know in Q3 of '26, I'm releasing this thing for NSA and we should be planning for it". So when you think about activating a sales motion, building a funnel and then connecting to that product technology and innovation investment, it's a much better and much more organic conversation with our client because they trust us, and we have dedicated relationships and sales reps devoted to them.

Thank you Doug. Thank you for joining us.