MultiPlan (MPLN) - 2023 Q4 - Annual Report

Part I Item 1. Business MultiPlan offers data analytics and technology solutions for U.S. healthcare payors, specializing in cost management and payment integrity - MultiPlan provides data analytics and technology solutions to the U.S. healthcare industry, focusing on cost management, payment integrity, and data science for healthcare payors[25] - The company's growth strategy involves transforming into a product-centric organization, enhancing core services, expanding its Value-Driven Health Plans (VDHP) platform, and developing its Data & Decision Science services to monetize in-network claims and penetrate government markets[40] Total Addressable Market (TAM) by Service Area | Service Area | Estimated TAM | | :--- | :--- | | Out-of-Network Cost Management & Payment Integrity | $6 - $8 billion | | In-Network Payment & Revenue Integrity | $4 - $5 billion | | Payor Risk Analytics | $6 billion | | Healthcare B2B Payments | $10 billion | | Network Transparency & Analytic Services | $1 - $2 billion | Customer Revenue Concentration (FY2021-2023) | Year | Customer 1 | Customer 2 | Customer 3 | | :--- | :--- | :--- | :--- | | 2023 | 25% | 22% | 8% | | 2022 | 32% | 20% | 10% | | 2021 | 34% | 19% | 10% | Item 1A. Risk Factors The company faces significant risks including customer dependency, execution challenges, intense competition, technological and cybersecurity threats, regulatory changes, substantial indebtedness, and stock price volatility - The company is highly dependent on a core group of customers, with its three largest customers accounting for 25%, 22%, and 8% of revenues in 2023. The loss or reduced business from any of these customers could materially impact financial results[135] - The business is subject to extensive and evolving federal and state healthcare regulations, including HIPAA, the No Surprises Act, and mental health parity laws. Changes in these laws or failure to comply could adversely affect operations and lead to penalties[220][222] - The company's substantial level of indebtedness ($4.6 billion as of Dec 31, 2023) and associated debt covenants may limit operational flexibility, restrict the ability to raise additional capital, and require a significant portion of cash flow for debt service[246][247] - Cybersecurity incidents, including data breaches of protected health information, pose a significant risk. A breach could lead to liability, regulatory fines, reputational damage, and loss of customers[184][185] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[282] Item 1C. Cybersecurity MultiPlan maintains a comprehensive cybersecurity program, overseen by the Board's Risk Committee, with no material incidents reported to date - Cybersecurity risk is a key area within the company's Enterprise Risk Management (ERM) program, with oversight provided by the Board's Risk Committee[284] - The company's cybersecurity controls are aligned with SOC 1, SOC 2, and HITRUST frameworks, and maturity is measured against the NIST Cybersecurity Framework (CSF)[290] - The Board's Risk Committee is chaired by Richard A. Clarke, an internationally recognized cybersecurity expert, and receives cybersecurity briefings from the CISO at least quarterly[295][296] - To date, the company has not experienced a cybersecurity threat or incident that has materially affected its business strategies, results of operations, or financial condition[292] Item 2. Properties The company leases all its properties, including its New York headquarters and co-located data centers in Texas and Illinois - All company properties are leased, with the corporate headquarters located in New York, New York[303] - The primary data center is located in Texas, and the redundant data center is in Illinois, both hosted by third-party providers[303] Item 3. Legal Proceedings The company resolved significant litigation in 2023, including a $33.75 million settlement for stockholder litigation and a $300,000 payment for a class action - The 'In Re MultiPlan Corp. Stockholders Litigation' was fully resolved in 2023 via a settlement agreement where the company and its insurers paid $33.75 million[305][308][309] - A separate class action, 'Sarkar v. White', concerning annual meeting record dates was voluntarily dismissed and resolved with the company agreeing to pay $300,000 in attorneys' fees to the plaintiff's counsel[311][313] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[314] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities MultiPlan's Class A common stock trades on the NYSE, with no cash dividends paid, and a $100 million share repurchase program initiated in 2023 - The company's Class A common stock trades on the NYSE under the symbol 'MPLN'. The Public Warrants trade over the counter under 'MPLNW'[314] - The company has not paid any cash dividends on its Class A common stock to date and does not plan to in the foreseeable future[316] - A $100 million share repurchase program was approved in February 2023 and extended through December 31, 2024. As of December 31, 2023, the company had repurchased $15.2 million in shares, leaving $84.8 million authorized[319] Item 6. [Reserved] This item is reserved Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2023, MultiPlan reported a 10.9% revenue decrease to $961.5 million, a net loss of $91.7 million (improved from 2022), and Adjusted EBITDA of $618.0 million Key Financial Results (2023 vs. 2022) (in millions) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $961.5 | $1,079.7 | (10.9)% | | Operating Income (Loss) | $162.0 | $(362.7) | 144.7% | | Net Loss | $(91.7) | $(572.9) | 84.0% | | Adjusted EBITDA | $618.0 | $768.7 | (19.6)% | Revenue by Service Line (2023 vs. 2022) (in millions) | Service Line | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Network-Based Services | $223.4 | $245.3 | (8.9)% | | Analytics-Based Services | $625.8 | $713.7 | (12.3)% | | Payment and Revenue Integrity | $112.4 | $120.7 | (6.9)% | - The decrease in 2023 revenues was primarily driven by contractual rate changes with customers in Analytics-Based Services ($99.9 million decrease) and Network-Based Services ($24.8 million decrease)[375][376] - The significant improvement in net loss for 2023 compared to 2022 is mainly attributable to the absence of the $662.2 million goodwill and intangible asset impairment charge that was recorded in 2022[373] - In 2023, the company repurchased and cancelled $184.0 million of its 5.750% Notes and $25.0 million of its Senior Convertible PIK Notes, resulting in a total gain on debt extinguishment of $54.0 million[368][389] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on variable-rate debt, mitigated by $800 million in interest rate swap agreements - The company's main market risk is from interest rate changes on its variable-rate senior secured credit facilities[450][453] - In 2023, the company entered into three interest rate swap agreements with a total notional value of $800 million to mitigate interest rate volatility[454] - A 100-basis point (1%) increase or decrease in variable interest rates on the unhedged portion of Term Loan B would result in a $5.0 million increase or decrease in annual interest expense[453] Item 8. Financial Statements and Supplementary Data PricewaterhouseCoopers LLP issued an unqualified opinion on the financial statements, highlighting critical audit matters related to revenue estimation and goodwill impairment - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2023[459] - Critical Audit Matters highlighted by the auditor include the estimation of variable consideration for Percentage of Savings (PSAV) revenue and the annual goodwill impairment assessment[465][466][469] Consolidated Balance Sheet Summary (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $193,593 | $446,737 | | Total Assets | $6,964,687 | $7,371,104 | | Total Current Liabilities | $166,739 | $175,844 | | Long-Term Debt | $4,532,733 | $4,741,856 | | Total Liabilities | $5,255,563 | $5,580,562 | | Total Shareholders' Equity | $1,709,124 | $1,790,542 | Consolidated Income Statement Summary (in thousands) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Total Revenues | $961,524 | $1,079,716 | $1,117,602 | | Operating Income (Loss) | $161,982 | $(362,732) | $386,120 | | Net (Loss) Income | $(91,697) | $(572,912) | $102,080 | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures This item is not applicable - Not applicable[706] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes in Q4 2023 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[708] - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[711] - No changes in internal control over financial reporting occurred during the fourth quarter of 2023 that have materially affected, or are reasonably likely to materially affect, these controls[712] Item 9B. Other Information The company reported no Rule 10b5-1 trading plan adoptions or terminations in Q4 2023 and announced a CEO transition effective March 1, 2024 - On March 1, 2024, Travis Dalton will become the Company's President and Chief Executive Officer, succeeding Dale White[713][715] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[714] Part III Item 10. Directors, Executive Officers and Corporate Governance This section details executive officers and directors, notes the upcoming CEO transition, and incorporates further information by reference from the 2024 Proxy Statement - The company announced a CEO succession plan where Travis Dalton will succeed Dale White as President and CEO, effective March 1, 2024. Dale White will become Executive Chair of the Board[715][716] - Detailed information for this item is incorporated by reference from the forthcoming 2024 Proxy Statement[718] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[719] Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[720] Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[721] Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's 2024 Proxy Statement - Information is incorporated by reference from the 2024 Proxy Statement[722] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists exhibits filed with or incorporated by reference into the Form 10-K, including governance documents and certifications Item 16. Form 10-K Summary The company has not provided a summary for its Form 10-K - None[727]