MultiPlan (US:MPLN)2024-08-02 11:28Part I. Financial Information The first part covers the company's financial statements, management's discussion and analysis, market risks, and internal controls Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2024, show a significant net loss, primarily driven by a substantial goodwill impairment charge Unaudited Condensed Consolidated Balance Sheets As of June 30, 2024, total assets were $5.74 billion, a decrease from $6.96 billion at December 31, 2023, mainly due to goodwill impairment Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $5,742,279 | $6,964,687 | | Goodwill | $2,758,951 | $3,829,002 | | Cash and cash equivalents | $48,767 | $71,547 | | Total Liabilities | $5,138,915 | $5,255,563 | | Long-term debt | $4,510,765 | $4,532,733 | | Total Shareholders' Equity | $603,364 | $1,709,124 | | Retained deficit | $(1,615,723) | $(499,307) | Unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss For the six months ended June 30, 2024, the company reported a net loss of $1.12 billion, primarily due to a $1.07 billion impairment loss Statement of Loss Highlights (Six Months Ended June 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | $467,984 | $474,585 | | Operating (loss) income | $(1,010,363) | $81,651 | | Loss on impairment of goodwill and intangible assets | $1,072,751 | $— | | Net loss | $(1,116,416) | $(36,161) | | Net loss per share – Diluted | $(1.73) | $(0.06) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $68.2 million for the six months ended June 30, 2024, with reduced cash usage in investing and financing activities Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $68,187 | $71,900 | | Net cash used in investing activities | $(55,989) | $(196,389) | | Net cash used in financing activities | $(34,523) | $(120,176) | | Net decrease in cash | $(22,325) | $(244,665) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail a $1.07 billion goodwill and intangible asset impairment charge, revenue disaggregation, debt structure, and ongoing antitrust litigation - The company recorded a goodwill impairment charge of $553.7 million for Q2 2024 and $516.4 million in Q1 2024, totaling $1.07 billion for the six months ended June 30, 2024, primarily due to lower projected cash flows, lower EBITDA multiples, and a higher discount rate464849 Revenue by Service Type (Six Months Ended June 30, in thousands) | Service Line | 2024 | 2023 | | :--- | :--- | :--- | | Network-Based Services | $91,878 | $114,343 | | Analytics-Based Services | $319,988 | $303,861 | | Payment and Revenue Integrity Services | $56,118 | $56,381 | | Total Revenues | $467,984 | $474,585 | - As of June 30, 2024, total long-term debt, net, was $4.51 billion, consisting of a Term Loan B, 5.50% Senior Secured Notes, 5.750% Notes, and Senior Convertible PIK Notes57 - The company is a defendant in numerous federal antitrust lawsuits alleging conspiracy with payors to suppress out-of-network reimbursements, with cases centralized in the Northern District of Illinois75 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes a 1.4% revenue decline to Network-Based Services issues, offset by Analytics-Based growth, and reports a massive operating loss due to goodwill impairment Results of Operations Revenues decreased 1.4% to $468.0 million for H1 2024, primarily due to a 19.6% decline in Network-Based Services, while a $1.07 billion goodwill impairment led to a significant operating loss - Network-Based Services revenues decreased by $22.5 million (19.6%) in H1 2024, with approximately $9 million from customer attrition and $13 million from service substitution and lower volumes, partly due to a cyberattack on a major claims clearinghouse120 - Analytics-Based Services revenues increased by $16.1 million (5.3%) in H1 2024, driven by higher medical savings on PSAV claims and an increase in PEPM/other revenues, which included $5.6 million from the BST acquisition121 - A loss on impairment of goodwill and intangible assets of $1.07 billion was recorded for the six months ended June 30, 2024, primarily due to lower projected cash flows, lower EBITDA multiples, and a higher discount rate128 Non-GAAP Financial Measures Adjusted EBITDA decreased to $293.5 million for H1 2024, and Adjusted EPS was $0.12, reflecting core business profitability excluding significant non-recurring items Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net loss | $(1,116,416) | $(36,161) | | EBITDA | $(788,211) | $324,898 | | Adjustments (incl. impairment, stock comp, etc.) | $1,081,671 | $(15,957) | | Adjusted EBITDA | $293,460 | $308,941 | Reconciliation of Net Loss to Adjusted EPS | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net loss | $(1,116,416) | $(36,161) | | Adjusted net income | $78,996 | $80,910 | | Adjusted EPS | $0.12 | $0.13 | Liquidity and Capital Resources As of June 30, 2024, the company had $59.2 million in cash and $442.1 million in revolver availability, deemed sufficient for the next twelve months - As of June 30, 2024, the company had cash and cash equivalents of $59.2 million (including restricted cash) and $442.1 million of availability under its revolving credit facility135 - The company was in compliance with all debt covenants as of June 30, 2024, with a consolidated first lien debt to consolidated EBITDA ratio of 3.82 to 1.00150 - During H1 2024, the company spent $10.4 million to repurchase its Class A common stock as part of its authorized $100 million repurchase program136 Quantitative and Qualitative Disclosures About Market Risk No material changes to market risks were reported as of June 30, 2024, with interest rate risk on floating-rate debt partially hedged - There were no material changes in the market risks described in the company's 2023 Annual Report as of June 30, 2024157 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2024, the principal executive and financial officers concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level159 - No changes occurred in the company's internal control over financial reporting during the second quarter of 2024 that materially affected, or are reasonably likely to materially affect, the controls160 Part II - Other Information The second part covers legal proceedings, risk factors, other information, and exhibits Legal Proceedings The company is involved in various lawsuits and regulatory investigations, but management does not expect a material adverse effect on financial condition - The company is involved in various lawsuits and investigations arising from the ordinary course of business but does not expect them to have a material adverse effect163 Risk Factors No material changes to risk factors were reported, with the company highlighting ongoing federal antitrust lawsuits alleging conspiracy to suppress out-of-network reimbursements - No material changes to risk factors were reported for the quarter, and the company reiterated the risk of operating in a litigious environment164165 - The company has been named in numerous federal antitrust lawsuits alleging it conspires with health insurance payors to suppress out-of-network reimbursements, which the company believes are without merit167 Other Information No officers or directors adopted or terminated any Rule 10b5-1 trading plans during the first six months of 2024 - No officers or directors adopted or terminated any Rule 10b5-1 trading plans during the first six months of 2024171 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data - The report includes standard exhibits such as CEO/CFO certifications and Inline XBRL data171