Financial Performance - The total Paid Amount for the year ended December 31, 2023, was $369.8 billion, a slight decrease from $374.8 billion in 2022[462]. - The Paid Value of Potentially Recoverable Claims for 2023 was $88.9 billion, compared to $89.6 billion in 2022[462]. - The Billed Value of Potentially Recoverable Claims was $373.5 billion in 2023, down from $377.8 billion in 2022[462]. - Claims recovery income increased by $2.3 million, or 48%, to $7.2 million for the year ended December 31, 2023, compared to $4.9 million in 2022, driven by increased settlements during the period[484]. - Claims recovery service income decreased by $18.0 million, or 97%, to $0.5 million for the year ended December 31, 2023, from $18.5 million in 2022, primarily due to a decrease in third-party service fees[485]. - Total operating expenses increased by $212.7 million, or 60%, to $567.6 million for the year ended December 31, 2023, compared to $354.9 million in 2022[484]. - The net loss attributable to MSP Recovery, Inc. was $56.3 million for the year ended December 31, 2023, compared to a net loss of $7.4 million in 2022, representing an increase of 660%[484]. - Adjusted net loss for the year ended December 31, 2023, was $73.3 million, compared to an adjusted net loss of $44.8 million in 2022[495]. Market Potential - The total potentially serviceable market for the company is estimated to exceed $150 billion annually, with Medicare expenditures in 2022 at approximately $944 billion and Medicaid expenditures at approximately $805 billion[410]. - The Centers for Medicare & Medicaid Services (CMS) projects health spending to grow at an average rate of 5.4% per year from 2022 to 2031, which may increase the complexity and number of claims available[411]. - Approximately 93.1% of expected recoveries arise from claims under the Medicare Secondary Payer Act, indicating a significant dependency on this legislation for future revenue generation[412]. Funding and Financial Obligations - The company received funding of $20.5 million under Term Loan A and increased the Term Loan B commitment from $18 million to $27.5 million, with $9.0 million received under Term Loan B as of December 31, 2023[426][427]. - The company has a Working Capital Credit Facility providing for funding of up to $80 million, with a Term Loan A commitment of up to $30 million and a Term Loan B commitment of up to $27.5 million[498][499]. - The company has a promissory note to the MSP Principals for $112.8 million, with an annual interest rate of 4%, maturing on the four-year anniversary of issuance[504]. - The company has $941.3 million of guaranty obligations, with payment dates extended to December 31, 2024, and September 30, 2025, for certain agreements[543]. - The maturity of commitments related to contractual obligations ranges from the date sufficient claims recoveries are received to cover required returns[542]. Stock and Equity Transactions - The Company executed a 1-for-25 reverse stock split effective October 12, 2023, adjusting all issued and outstanding shares proportionately[425]. - On July 7, 2023, the Company issued 7,960,001 shares of Class A Common Stock to Cano as payment for $61.7 million in deferred compensation[435]. - The Company entered into a purchase agreement with Yorkville to sell up to $250 million of Class A Common Stock[440]. - The Company issued Convertible Notes to Yorkville totaling $15.0 million, with net proceeds of approximately $14.23 million[441]. - The Company expects to utilize proceeds from sales of Class A Common Stock to Yorkville for working capital and general corporate purposes[523]. Legal and Regulatory Matters - The SEC initiated an investigation into the Company regarding its business combination transaction and financial results[446]. - The Company received a subpoena from the U.S. Attorney's Office related to a grand jury investigation concerning its proprietary algorithms and stock price drop[447]. - The company has not engaged in any off-balance sheet arrangements as defined by SEC and US GAAP as of December 31, 2023[540]. Operational Strategies - The "Chase to Pay" model aims to prevent wrongful payments by identifying the correct primary insurer at the point of care, potentially improving net recovery margins by reducing legal costs[417][418]. - The Company plans to implement new strategies to secure new Assignors, aiming to expand its Assignor base beyond the current over 160[452]. - The Recovery Multiple is expected to become more meaningful in the next 12 months as the Company begins to report actual increases in recoveries[460]. Cash Flow and Liquidity - As of December 31, 2023, the company had $11.6 million in cash and cash equivalents and an accumulated deficit of $85.6 million[496]. - For the year ended December 31, 2023, the company used approximately $40.0 million of cash in operations[496]. - Net cash used in operating activities decreased by $40.6 million to $40.0 million for the year ended December 31, 2023, compared to $80.6 million for the year ended December 31, 2022[534]. - Net cash provided by investing activities increased by $13.2 million to $7.6 million for the year ended December 31, 2023, compared to cash used in investing activities of $5.7 million for the year ended December 31, 2022[536]. - Net cash provided by financing activities decreased by $70.7 million to $29.0 million for the year ended December 31, 2023, compared to $99.7 million for the year ended December 31, 2022[538]. Claims and Recoveries - The company has a Claims portfolio with a Billed Amount of approximately $1,544 billion and a Paid Amount of approximately $370 billion, with $88.9 billion in Paid Value of Potentially Recoverable Claims as of December 31, 2023[450]. - The Penetration Status of Portfolio improved to 86.8% in 2023 from 85.8% in 2022, indicating an increase in recovery efforts[462]. - The Company recognizes Claims recovery income based on a gain contingency model, typically upon reaching a binding settlement or resolution of legal proceedings[464]. - The Company performed a recoverability analysis on definite-lived CCRA intangible assets, concluding that undiscounted net recoveries exceeded carrying amounts as of December 31, 2023, resulting in no impairment recognized[548]. - The company identified potential impairment indicators, including recurring operating losses, which were considered in the evaluation of definite-lived intangible assets[548].
MSP RECOVERY(LIFWZ) - 2023 Q4 - Annual Report