Financial Performance - Claims recovery income increased by $3.1 million to $3.6 million for the three months ended September 30, 2024, driven by increased settlements during the period[267]. - Total revenue for the three months ended September 30, 2024, was $3.7 million, a $3.2 million increase compared to the same period in the prior year[267]. - Cost of revenue increased by $1.1 million to $1.7 million for the three months ended September 30, 2024, correlated with the increase in claims recovery income[268]. - General and administrative expenses decreased by $0.8 million to $5.3 million for the three months ended September 30, 2024, primarily due to reductions in marketing and promotions[270]. - Interest expense increased by $18.4 million to $106.7 million for the three months ended September 30, 2024, primarily due to new financing obligations[273]. - The net loss attributable to MSP Recovery, Inc. was $29.8 million for the three months ended September 30, 2024, compared to a net loss of $19.8 million in the prior year, reflecting a 51% increase in losses[267]. - Claims recovery income increased by $3.4 million to $9.9 million for the nine months ended September 30, 2024, representing a 52% increase compared to the prior year[277]. - Total revenue rose by $3.0 million to $10.0 million for the nine months ended September 30, 2024, reflecting a 43% increase year-over-year[277]. - Cost of revenue increased by $1.5 million to $3.5 million, a 75% increase, driven by assignor and law firm costs[279]. - General and administrative expenses decreased by $3.5 million to $17.1 million, a 17% decrease, mainly due to reduced marketing and promotions[281]. - The net loss attributable to MSP Recovery, Inc. was $73.9 million for the nine months ended September 30, 2024, compared to a loss of $32.9 million in the prior year, representing a 125% increase in losses[277]. Market and Recovery 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[212]. - Approximately 95.8% of expected recoveries arise from Claims under the Medicare Secondary Payer Act, indicating a significant reliance on this legislation for future revenue[214]. - The healthcare recovery model is expected to grow as healthcare spending increases at an average rate of 5.4% annually between 2022 and 2031, impacting the number of Claims available[213]. - The Recovery Multiple is a key metric, indicating the amount of generated Claims recovery income compared to the Paid Amount, with expectations for improvement in the next 12 months[244]. - The Penetration Status of Portfolio measures recovery efforts and estimated market share, with ongoing recovery processes expected to increase this percentage[245]. Compliance and Regulatory Matters - The Company is provided with a compliance cure period until December 4, 2024, to regain compliance with Nasdaq's Bid Price Requirement[231]. - A Reverse Stock Split at a ratio of 1:25 is expected to be effectuated by November 18, 2024, impacting the number of Class A and Class V Common Stock[231]. - The Company may pursue double damages and statutory interest under the MSP Act, which could enhance future recovery income[238]. Operational Strategies and Developments - The company has developed the MSP Recovery Clearinghouse to identify and resolve outstanding liens, addressing the issue of primary payers failing to report obligations, with some reporting rates as low as 2%[219]. - The "Chase to Pay" model aims to prevent wrongful payments by identifying the correct primary insurer at the point of care, potentially improving recovery margins and reducing legal costs[222]. - The company has not yet generated revenue from the "Chase to Pay" model but is working to increase the number of customers providing daily data outputs[224]. - The company provides Claims recovery services to assist other entities in identifying recoverable Claims, charging fees based on budgeted expenses rather than ownership of Claims[225]. - The company utilizes proprietary algorithms and data analytics to identify waste, fraud, and abuse in the healthcare reimbursement system, enhancing recovery opportunities[208]. - The company has established a unique position in the market by receiving irrevocable assignments of Claims, allowing for greater control over litigation and recovery processes compared to competitors[209]. - Approximately 86.8% of claims identified as potentially recoverable are already in the recovery process as of September 30, 2024[239]. - The Company plans to implement new strategies to secure new Assignors, aiming to expand from over 160 Assignors currently[236]. Financial Obligations and Liquidity - As of September 30, 2024, the company had unrestricted cash totaling $4.7 million and an accumulated deficit of $159.4 million[290]. - The company anticipates liquidity sources to include the Working Capital Credit Facility and Yorkville SEPA, with $8.75 million available under the Working Capital Credit Facility as of September 30, 2024[294]. - The change in fair value of warrant and derivative liabilities increased by $117.4 million to $121.6 million for the nine months ended September 30, 2024, compared to a gain of $4.4 million in the prior year[288]. - The Company extended the VRM Full Return payment due date to December 31, 2024, and does not currently have available liquidity to satisfy this obligation[298]. - The Company received $3.5 million of working capital for July and August 2024, and has a remaining capacity of $5.25 million under the Operational Collection Floor as of the filing date[300]. - The Company issued Convertible Notes to Yorkville with aggregate principal amounts of up to $15.0 million, with a maturity date extended to September 30, 2025[298]. - The Company amended the Nomura Note to increase the principal amount to approximately $30.0 million and extended the maturity date to September 30, 2025[311]. - The Company issued VRM Warrants, settling $31.4 million and $145.9 million of interest for the three and nine months ending September 30, 2024, respectively[307]. - The Company entered into a purchase agreement with Yorkville to sell up to $250.0 million of its Class A Common Stock, subject to certain conditions[313]. - The Operating Reserve was reduced from $70 million to $47.5 million on July 24, 2023, and further adjusted in the Second Virage MTA Amendment[305]. - The Company acquired recovery rights associated with New Claims for $2.0 million on August 30, 2024[299]. - The Company received a $4.95 million loan from the Law Firm for general operational funding, which is due 24 months from the last advance[303]. - The Company has the option to pay Virage in cash or through the issuance of Monthly Virage Warrants until obligations are fully paid[308]. - 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[317]. - The proceeds from the Yorkville SEPA will be allocated 50% to repay the Amended and Restated Nomura Promissory Note and 50% to repay amounts due under the Convertible Notes[318]. - The Fixed Conversion Prices for the Convertible Notes are set at $8.0225, $3.7136, and $1.5050 per share for the respective issuances[319]. - The Company sold 10,049,967 shares to Yorkville at prices between $0.15 and $0.84 per share during the three months ended September 30, 2024, generating proceeds used to reduce debt[328]. - The Company has a maximum value of $3.0 billion for potential future transactions under the Investment Capacity Agreement with Virage[334]. - The Company acquired a controlling interest in nine legal entities for $250.0 million, funded by a purchase money loan and proceeds from the sale of CCRAs[337]. - The Company has not exercised its rights under the Services Agreement with Prudent and does not anticipate doing so in the foreseeable future[330]. - The Yorkville SEPA will terminate upon the earlier of 36 months from the agreement date or when Yorkville has made payments equal to $250.0 million[323]. - The Company plans to use proceeds from sales to Yorkville for working capital and general corporate purposes[326]. Cash Flow and Working Capital - Net cash used in operating activities decreased by $13.7 million to $17.9 million for the nine months ended September 30, 2024, compared to $31.5 million for the same period in 2023[342]. - Net cash used in investing activities changed by $10.1 million to $2.4 million for the nine months ended September 30, 2024, compared to net cash provided of $7.8 million for the same period in 2023[343]. - Net cash provided by financing activities decreased to $13.3 million for the nine months ended September 30, 2024, compared to $15.4 million for the same period in 2023[344]. - As of September 30, 2024, the present value of amounts owed under claims financing obligations and notes payable was $638.3 million, including capitalized interest[345]. - The minimum required payments on agreements as of September 30, 2024, are $787.8 million, with maturities ranging from the date sufficient claims recoveries are received to 2031[346]. - As of September 30, 2024, the company has $1,077.1 million of guaranty obligations, with payment dates extended to December 31, 2024[347]. - The weighted average interest rate on obligations is 14.9%, with rates ranging from 0.0% to 20.0%[345]. - Cash at the end of the period was $4.746 million as of September 30, 2024, down from $6.659 million at the end of the same period in 2023[341]. - The company incurred $363.0 million of claims amortization expense and $203.4 million of paid-in-kind interest during the nine months ended September 30, 2024[342]. - Changes in working capital increased by $115.3 million during the nine months ended September 30, 2024[342].
MSP RECOVERY(LIFWZ) - 2024 Q3 - Quarterly Report