Recovery Rights and Claims - The company is entitled to a portion of recovery rights associated with approximately $1,545 billion in billed amounts and approximately $370 billion in paid amounts, with about $86.6 billion in paid value of potentially recoverable claims as of March 31, 2024[194]. - Approximately 95.6% of expected recoveries arise from claims under the Medicare Secondary Payer Act, indicating a significant dependency on this legislation for future revenue generation[197]. - The company reached a comprehensive settlement with 28 affiliated property and casualty insurers on March 1, 2024, which is included in claims recovery income for the three months ended March 31, 2024[209]. - A separate settlement with additional affiliated property and casualty insurers on April 18, 2024, includes a 10-year agreement to resolve relevant Medicare claims and a cash payment for settling existing historical claims[210]. - The company has developed a "Chase to Pay" model aimed at improving recovery processes by identifying the proper primary insurer at the point of care, which is expected to reduce legal costs and improve net recovery margins[201]. - The company has not yet generated substantial revenue from its recovery model but is working to increase the number of customers providing daily data outputs for its "Chase to Pay" model[205]. - The company utilizes proprietary algorithms and data analytics to identify waste, fraud, and abuse in the healthcare reimbursement system, enhancing its recovery capabilities[190]. - The company engages with assignors independently and is typically entitled to 100% of recoveries, with contractual obligations to pay 50% of net proceeds to the assignor[200]. - The company’s ability to pursue recoveries depends on ongoing access to data through data access rights granted by assignors, which is critical for generating recoveries[193]. - As of March 31, 2024, the company has a total Paid Amount of $370 billion, with a Paid Value of Potentially Recoverable Claims of $86.6 billion and a Billed Value of Potentially Recoverable Claims of $363.8 billion[225]. - Approximately 86.8% of claims identified as potentially recoverable are already in the recovery process, indicating strong progress in claims management[218]. - The potential Claims recovery income is heavily influenced by the number of Claims reviewed and pursued, which is driven by the volume of Claims received through assignment[214]. - The company recognizes Claims recovery income upon reaching a binding settlement or resolution of legal proceedings, emphasizing the importance of legal outcomes for revenue generation[227]. - The Recovery Multiple is a key performance indicator, with a value above 1x indicating the company's ability to recover amounts exceeding the Paid Amount[223]. - The company estimates that the application of a recent court ruling could reduce the Paid Value of Potentially Recoverable Claims by approximately $8.3 billion if applied universally[230]. - The Penetration Status of Portfolio, which measures recovery efforts against market share, is currently at 86.8%, reflecting the company's engagement in recovery processes[224]. - Claims recovery income increased by $2.5 million to $6.0 million for the three months ended March 31, 2024, representing a 72% increase compared to the same period in the prior year[245]. - Total claims recovery increased by $2.0 million to $6.0 million, a 50% increase year-over-year[245]. Financial Performance - Operating loss improved by $10.4 million to $(130.2) million, a 7% decrease compared to the same period in the prior year[245]. - Interest expense rose by $55.6 million to $98.0 million, a 131% increase year-over-year, primarily due to new financing obligations[252]. - General and administrative expenses decreased by $1.3 million to $5.6 million, a 19% decrease year-over-year, driven by reduced marketing and payroll expenses[249]. - Professional fees decreased by $5.3 million to $4.4 million, a 55% decrease year-over-year, primarily due to reduced consulting and management fees[250]. - Claims amortization expense increased by $7.5 million to $121.0 million, a 7% increase year-over-year, driven by increased amortization from acquired CCRAs[248]. - The company had unrestricted cash of $12.0 million as of March 31, 2024, with an accumulated deficit of $104.4 million[256]. - The company used approximately $2.1 million of cash in operations for the three months ended March 31, 2024[256]. - The change in fair value of warrant and derivative liabilities increased by $49.2 million to $51.5 million for the three months ended March 31, 2024[254]. - The Company reported a decrease in net cash used in operating activities by $7.8 million, totaling $2.1 million for the three months ended March 31, 2024, compared to $10.0 million for the same period in 2023[304]. - The Company has a cash balance of $11.973 million at the end of the period, down from $21.583 million at the end of the same period in 2023[303]. Financing Activities - As of March 31, 2024, the Company had received a total of $20.5 million under Term Loan A, which was terminated in 2023, and increased the Term Loan B commitment from $18 million to $27.5 million[260]. - During the three months ended March 31, 2024, the Company received $4.5 million under Term Loan B, with an additional availability of $14.0 million under the same loan[261]. - The Company entered into a Purchase Money Loan with Hazel for $250.0 million on March 29, 2023, to secure additional funding[262]. - The Company issued an unsecured promissory note to Nomura for approximately $30.0 million, with an interest rate of 16% per annum, and a maturity date extended to September 30, 2025[273][274]. - Under the Yorkville SEPA, the Company has the right to sell up to $250.0 million of its Class A Common Stock, with sales at the Company's discretion[276][277]. - The shares purchased under the Yorkville SEPA will be at a price equal to 98% of the VWAP on the date of delivery of the Advance Notice[278]. - The Company has issued VRM Warrants allowing Virage to purchase a total of 28,298,329 shares of Class A Common Stock, with an expiration date of January 1, 2026[269]. - The VRM Full Return payment due date has been extended to September 30, 2025, with 25% of net proceeds from the Yorkville SEPA allocated to pay down the VRM Full Return[270]. - The Operating Reserve was reduced from $70 million to $47.5 million as of July 24, 2023, and further adjusted in subsequent amendments[267][268]. - The Company received a $4.95 million loan from the Law Firm for operational funding, with a repayment period of 24 months from the last advance[265]. - The Company issued a total of $15.0 million in Convertible Notes to Yorkville, with net proceeds of $4.73 million, $4.75 million, and $4.75 million from three separate issuances[279][280][290]. - The Fixed Conversion Prices for the Convertible Notes are set at $8.0225, $3.7136, and $1.5050 per share for the notes issued on November 14, 2023, December 11, 2023, and April 8, 2024, respectively[281]. - The Company plans to use 50% of the proceeds from the Yorkville SEPA to repay amounts under the Nomura Promissory Note and the remaining 50% for Convertible Notes repayment[280]. Obligations and Liabilities - As of March 31, 2024, the present value of amounts owed under claims financing obligations and notes payable agreements was $584.3 million, with a weighted average interest rate of 14.8%[307]. - The minimum required payments on these agreements as of March 31, 2024, are $727.5 million, with maturities ranging from the date sufficient claims recoveries are received to 2031[308]. - The company has $984.4 million of guaranty obligations as of March 31, 2024, with various amendments affecting payment dates and operating reserves[309]. - The operating reserve was adjusted to $47.5 million, and subsequent amendments changed it to the company's budget plus 10%[309]. - The company is expected to repay obligations from cash flows generated by claim recovery income[307]. Accounting and Reporting - There have been no material changes to critical accounting policies and estimates during the three months ended March 31, 2024[311]. - The company is classified as a smaller reporting company and is not required to provide additional market risk disclosures[312].
MSP RECOVERY(LIFWZ) - 2024 Q1 - Quarterly Report