Financial Performance - The Company assessed its ability to continue as a going concern, indicating potential financial challenges [245]. - The net loss attributable to MSP Recovery, Inc. for the three months ended March 31, 2025, was $121.6 million, a 544% increase compared to the net loss of $18.9 million in the same period in 2024 [300]. - Total revenue for the same period was $837,000, down from $6.0 million, reflecting an 86% decrease [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]. - The Company has not generated substantial revenue from its Claims portfolio to date, which poses a risk to future profitability [267]. - The Company did not recognize any claims recovery service income during the three months ended March 31, 2025, indicating a focus on core recovery activities [285]. - Other revenue from the new electronic health records platform was not significant for the three months ended March 31, 2025, reflecting early-stage development [286]. - Adjusted net loss for the three months ended March 31, 2025, was $8.1 million, compared to an adjusted net loss of $8.9 million in the same period in 2024 [311]. Claims and Recovery - The company is entitled to a portion of recovery rights associated with approximately $1,592 billion in Billed Amount and approximately $380 billion in Paid Amount, which includes approximately $87.8 billion in Paid Value of Potentially Recoverable Claims as of March 31, 2025 [226]. - Approximately 90.2% of expected recoveries arise from Claims under the Medicare Secondary Payer Act, indicating significant dependence on external legislative factors [229]. - The Recovery Multiple is currently at 0.08, indicating that the Company is recovering amounts significantly below the Paid Amount [280]. - The Claims recovery income is recognized upon reaching a binding settlement or resolution of legal proceedings, emphasizing the contingent nature of revenue [282]. - The Company’s ability to collect on identified claims is critical for future profitability, with ongoing efforts to pursue double damages and statutory interest under the MSP Laws [269]. - Approximately 86.8% of identified claims are currently in the recovery process, suggesting effective management of the claims portfolio [271]. - The Billed Value of Potentially Recoverable Claims stands at $375.4 billion, indicating a strong potential for future recoveries [280]. - The company’s proprietary data analytics platforms are designed to identify waste, fraud, and abuse in healthcare claims, providing a competitive edge in recovery efforts [222]. Market and Growth 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% per year from 2023 to 2032, which may increase the complexity and number of Claims available [228]. - The company has expanded its Assignor base from 32 in 2015 to over 160, which is crucial for increasing future claims [268]. Technology and Innovation - 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 healthcare reimbursement processes [242]. Financial Management and Restructuring - The Company entered into a restructuring plan to reduce costs and convert approximately $144.9 million of debt into equity [249][261]. - A new subsidiary, New Servicer, will be established to control recovery efforts, funded by up to $25 million from an affiliate of Hazel [252][253]. - The Company expects annual cost reductions due to New Servicer operations, funded by the Funder [256]. - The maturity date for existing loans has been extended to November 30, 2026, with a principal amount of up to $235 million secured by equity interests in New Servicer [262]. - The Company anticipates additional bridge financing of up to $9.85 million, conditional on increased collateral pledges [255]. - 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]. - The Company has taken several actions to address liquidity concerns but concluded that management's plans were insufficient to alleviate substantial doubt about its ability to continue operations [316]. Cash Flow and Financing Activities - The Company reported a net cash decrease of $3.25 million for the three months ended March 31, 2025, with cash at the end of the period totaling $9.07 million [349]. - During the three months ended March 31, 2025, net cash used in operating activities increased by $5.0 million to $7.2 million compared to $2.1 million for the same period in 2024 [350]. - Net cash provided by financing activities increased to $4.1 million for the three months ended March 31, 2025, compared to $2.6 million for the same period in 2024, primarily due to $3.5 million from debt financing and $0.7 million from common stock issuance [352]. - The Company incurred $118.6 million in claims amortization expense during the three months ended March 31, 2025 [350]. - The Company expects proceeds from sales to Yorkville to be used for working capital and general corporate purposes [342]. Debt and Obligations - The present value of amounts owed under claims financing obligations and notes payable agreements was $704.2 million, with a weighted average interest rate of 15.3% [353]. - The minimum required payments on these agreements as of March 31, 2025, totaled $845.7 million, with maturity ranging from the date sufficient claims recoveries are received to cover the required return or by 2031 [356]. - 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]. - The operating reserve was adjusted from $70 million to $47.5 million, and subsequently changed to the company's budget plus 10% [357].
MSP RECOVERY(LIFWZ) - 2025 Q1 - Quarterly Report