Financial Performance - The net loss attributable to MSP Recovery, Inc. for the three months ended March 31, 2025, was $121.6 million, compared to a loss of $18.9 million in the same period last year, representing a 544% increase[300]. - For the three months ended March 31, 2025, claims recovery income decreased by $5.2 million to $0.8 million, an 86% decline compared to the same period in 2024, primarily due to decreased settlements[300]. - Total revenue for the same period was $837,000, down from $6.0 million, reflecting an 86% decrease[300]. - Operating expenses decreased by $8.4 million to $127.8 million, a 6% reduction compared to the prior year[300]. - Interest expense increased by $20.8 million to $118.8 million, a 21% increase year-over-year, driven by various financing obligations[306]. - The company had unrestricted cash of $9.1 million as of March 31, 2025, with an accumulated deficit of $567.7 million[312]. - The company used approximately $7.2 million of cash in operations during the three months ended March 31, 2025[312]. - The company has substantial doubt about its ability to continue as a going concern unless additional funds are raised through debt or equity offerings[316]. Market Potential - The total potentially serviceable market for the company is estimated to exceed $161.5 billion annually, with Medicare expenditures in 2023 at approximately $1,029.8 billion for about 68.0 million enrollees and Medicaid expenditures at approximately $871.7 billion for about 88.5 million enrollees[227]. - The Centers for Medicare & Medicaid Services projects health spending to grow at an average rate of 5.6% annually from 2023 to 2032, which may increase the complexity and number of Claims available[228]. - Approximately 90.2% of expected recoveries arise from Claims under the Medicare Secondary Payer Act, indicating significant dependence on external legislative factors[229]. Recovery Strategies and Platforms - The company has developed the Chase to Pay platform, which aims to improve payment accuracy by identifying the proper primary insurer at or near the point of care, potentially reducing wrongful payments[237]. - The clearinghouse platform, created in collaboration with Palantir, aims to resolve outstanding liens and improve compliance with federal laws regarding primary payer obligations[240]. - The clearinghouse platform utilizes advanced AI, NLP, and ML technologies to enhance data connectivity and operational efficiency in claims management[242]. - The company’s proprietary data analytics platforms are designed to identify waste, fraud, and abuse in healthcare claims, providing a competitive edge in the market[222]. - The company’s business model includes receiving irrevocable assignments of health Claims recovery rights, allowing it to pursue recoveries that competitors may not be able to[223]. - The Company aims to implement new strategies to secure additional Assignors, which is vital for expanding its claims recovery efforts[268]. Funding and Financial Obligations - A restructuring plan was agreed upon to reduce costs and convert approximately $144.9 million of debt into equity, providing a 43% equity interest to Virage[249][261]. - The Company expects to receive up to $25 million in working capital funding for a New Servicer, with a line of credit extended in tranches starting September 2025[253]. - The anticipated sources of funding beyond June 2025 include a $25 million collateral pledge by MSP Principals and proceeds from claims recoveries[256]. - The Company has committed to raise $25 million for operational funding over two years, subject to milestones[257]. - The Company entered into a standby equity purchase agreement (Yorkville SEPA) with Yorkville to purchase up to $250.0 million in shares of Class A Common Stock[329]. - The Company entered into a Yorkville SEPA for issuing up to $15.0 million in Convertible Notes, with maturity extended to November 30, 2026[324]. - The Company sold 700,000 shares of Class A Common Stock to Yorkville at prices between $1.33 and $2.51 per share, using proceeds to reduce amounts owed and fund operations[344]. - The Company expects proceeds from sales to Yorkville to be used for working capital and general corporate purposes[342]. Claims Management and Recovery - As of March 31, 2025, the Company has a Paid Amount of $380.5 billion and a Paid Value of Potentially Recoverable Claims of $87.8 billion[280]. - The Billed Value of Potentially Recoverable Claims stands at $375.4 billion, indicating a strong potential for future recoveries[280]. - Approximately 86.8% of identified claims are currently in the recovery process, suggesting effective management of the claims portfolio[271]. - The Recovery Multiple is currently at 0.08, indicating that the Company is pursuing amounts in excess of the Paid Amount for recoveries[280]. - The Claims recovery income is recognized upon reaching a binding settlement or resolution of legal proceedings, emphasizing the importance of legal outcomes[282]. - Costs of recoveries include contingent payments to Assignors and other directly attributable costs related to claims processing activities[287]. Liquidity and Cash Flow - The Company anticipates liquidity sources for 2025 to include up to $9.85 million in bridge loan funding and a proposed reorganization term sheet totaling $4.75 million and $2.0 million for legal and administrative expenses[313]. - The Working Capital Credit Facility allows for funding of up to $80 million, with $20.5 million disbursed under Term Loan A and $9.0 million under Term Loan B during fiscal year 2023[317][321]. - The minimum required payments on agreements as of March 31, 2025, totaled $845.7 million, with maturity ranging from the date of claims recoveries to 2031[356]. - The company is expected to repay obligations from cash flows generated by claim recovery income[355]. - The company has $1,179.7 million of guaranty obligations as of March 31, 2025, with various amendments extending payment dates and adjusting operating reserves[357]. Operational Developments - The EHR Platform went live in Q2 2024, but revenue generated from it has not been significant[244]. - Other revenue from the new electronic health records platform was not significant for the three months ended March 31, 2025[286]. - The Company assessed its ability to continue as a going concern, indicating potential financial challenges[245]. - There have been no material changes in critical accounting policies and estimates during the three months ended March 31, 2025[359]. - The company is classified as a smaller reporting company and is not required to provide certain market risk disclosures[360].
MSP Recovery(LIFW) - 2025 Q1 - Quarterly Report