MultiPlan (MPLN) - 2021 Q4 - Annual Report

Part I Business MultiPlan provides data analytics and technology-enabled solutions to the U.S. healthcare industry, focusing on medical cost reduction and payment accuracy for payors - MultiPlan's services are categorized into three main areas: Analytics-Based Services (data-driven pricing), Network-Based Services (PPO networks with over 1.2 million providers), and Payment and Revenue Integrity Services (pre- and post-payment accuracy)[29] - In 2021, the company's services identified approximately $21.7 billion in potential medical cost savings for its customers[26] - The company's growth strategy involves enhancing current products, extending its platform to in-network claims and government programs (partly through acquisitions like HST and Discovery Health Partners), and expanding into new business models for providers and consumers[47][49][50] - The company's IT platform is a key competitive advantage, processing nearly all claims via EDI or direct web service integration and having the capacity to increase processing volume threefold with current infrastructure[70][72] - The company became publicly traded on the NYSE under the ticker "MPLN" on October 8, 2020, following a reverse recapitalization with Churchill Capital Corp III[100][101] Risk Factors The company faces significant risks, primarily related to its business operations, high customer concentration, and the evolving healthcare regulatory landscape - The company is highly dependent on a small number of large customers. In 2021, the three largest customers accounted for approximately 34%, 19%, and 10% of total revenues, respectively[118] - Changes in the healthcare industry, particularly the enactment of laws like the No Surprises Act and other state-level regulations targeting "surprise" medical bills, could adversely affect the company's business strategy and operations[148][177] - The company's substantial level of indebtedness, totaling $4.97 billion as of December 31, 2021, poses risks by potentially limiting its ability to raise additional capital, fund operations, and react to economic or industry changes[195] - The company's Private Placement Warrants and unvested founder shares are accounted for as derivative liabilities, and changes in their fair value are reported in earnings, which may cause volatility in reported financial results and affect the stock price[218] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[223] Properties The company leases all its properties across 15 states, with corporate headquarters in New York, NY, and primary data centers in Texas and Illinois - All company properties are leased. The corporate headquarters is in New York, NY[223] - The primary data center is in Texas, and the redundant data center is in Illinois, both hosted by co-location service providers[223] Legal Proceedings The company is involved in various lawsuits and regulatory investigations, but does not expect a material adverse effect, and was dismissed from a significant merger-related lawsuit on January 3, 2022 - The company is a defendant in various lawsuits arising from the ordinary course of business but does not expect them to have a material adverse effect[224] - On January 3, 2022, the company was dismissed from the In Re MultiPlan Corp. Stockholders Litigation, a class action lawsuit related to the merger with Churchill Capital Corp III. The litigation will proceed against other defendants[225][226] Mine Safety Disclosures This item is not applicable to the company - Not applicable[227] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities MultiPlan's Class A common stock and Public Warrants are listed on the NYSE, with no cash dividends paid to date, and the company repurchased approximately $100 million of its stock by the end of 2021 under a $250 million program - The company's Class A common stock and Public Warrants trade on the NYSE under symbols "MPLN" and "MPLN.WS"[227] - The company has not paid any cash dividends on its Class A common stock to date[229] Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | :--- | | October 1 - 31, 2021 | 7,143,639 | $5.13 | 7,143,639 | $152,257 (in thousands) | | November 1 - 30, 2021 | 510,240 | $4.42 | 510,240 | $150,000 (in thousands) | | December 1 - 31, 2021 | — | — | — | $150,000 (in thousands) | | Total | 7,653,879 | $5.09 | 7,653,879 | $150,000 (in thousands) | Reserved This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2021, MultiPlan's revenues increased 19.2% to $1.12 billion, achieving $102.1 million net income and $838.3 million Adjusted EBITDA, driven by higher claim volumes, acquisitions, and a significant decrease in stock-based compensation expense Key Financial Results (2021 vs. 2020) | Metric | 2021 | 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,117.6 M | $937.8 M | 19.2% | | Operating Income (Loss) | $386.1 M | $(131.8) M | N/M | | Net Income (Loss) | $102.1 M | $(520.6) M | N/M | | Adjusted EBITDA | $838.3 M | $706.3 M | 18.7% | - The increase in 2021 revenue was driven by higher claims volumes, better savings rates as COVID-19 effects subsided, and revenues from the acquisitions of DHP ($44.4 million) and HST[292] - The significant swing from a net loss in 2020 to net income in 2021 was primarily due to a decrease in stock-based compensation expense. In 2020, the company recorded $405.8 million in stock-based compensation related to its reverse recapitalization, compared to $18.0 million in 2021 under its new incentive plan[291][288][290] - On February 26, 2021, the Company acquired Discovery Health Partners (DHP) to strengthen its payment and revenue integrity services[246] - On August 24, 2021, the company refinanced its debt, issuing $1.325 billion in new term loans and $1.05 billion in senior secured notes to repay its existing Term Loan G, extending maturities to 2028 and 2026[282][325] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate debt, with a 100-basis point (1%) change impacting annual interest expense by approximately $13.2 million, and it is monitoring the LIBOR transition - The company's main market risk is interest rate risk from its variable-rate senior secured credit facilities[364][367] - A 100-basis point (1%) increase or decrease in the variable interest rates under Term Loan B would result in a $13.2 million change in annual interest expense[367] - The company is exposed to risks from the planned discontinuation of LIBOR by mid-2023, which could unpredictably affect its interest payment obligations[370] Financial Statements and Supplementary Data The consolidated financial statements for 2021, 2020, and 2019 are presented with an unqualified auditor's opinion, highlighting $8.22 billion in total assets and $102.1 million net income for 2021 - 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, 2021[373][374] - The auditor identified two Critical Audit Matters: (1) the estimation of variable consideration for PSAV (Percentage of Savings) revenue, and (2) the valuation of Private Placement Warrants and Unvested Founder Shares[382][383][386] Consolidated Balance Sheet Summary | (in thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total current assets | $319,257 | $208,851 | | Goodwill | $4,363,070 | $4,257,336 | | Total assets | $8,220,407 | $8,283,578 | | Total current liabilities | $141,908 | $112,498 | | Long-term debt | $4,879,144 | $4,578,489 | | Total liabilities | $5,875,737 | $5,725,710 | | Total shareholders' equity | $2,344,670 | $2,557,868 | Consolidated Income Statement Summary | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenues | $1,117,602 | $937,763 | $982,901 | | Operating income (loss) | $386,120 | $(131,821) | $368,209 | | Net income (loss) | $102,080 | $(520,564) | $9,710 | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures This item is not applicable - Not applicable[624] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of December 31, 2021, having successfully remediated two previously identified material weaknesses related to accounting resources and formal policies - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were effective[626] - The company successfully remediated two previously identified material weaknesses related to (1) insufficient accounting resources and (2) a lack of formal accounting policies and controls for a public company[630][632] - Remediation actions included hiring a Chief Accounting Officer and VP of Internal Audit, strengthening the finance team, completing a formal risk assessment, and implementing new controls and standardized financial closing procedures[631][632] Other Information There is no other information to report - None[634] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable - N/A[634] Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the forthcoming 2022 Proxy Statement - Information is incorporated by reference from the forthcoming 2022 Proxy Statement[635] Executive Compensation Information for this item is incorporated by reference from the forthcoming 2022 Proxy Statement - Information is incorporated by reference from the forthcoming 2022 Proxy Statement[636] Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters Information for this item is incorporated by reference from the forthcoming 2022 Proxy Statement - Information is incorporated by reference from the forthcoming 2022 Proxy Statement[637] Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the forthcoming 2022 Proxy Statement - Information is incorporated by reference from the forthcoming 2022 Proxy Statement[638] Principal Accounting Fees and Services Information for this item is incorporated by reference from the forthcoming 2022 Proxy Statement - Information is incorporated by reference from the forthcoming 2022 Proxy Statement[639] Part IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including corporate governance documents, debt indentures, and required certifications - This section contains a list of all exhibits filed with the annual report, including governance documents, debt agreements, and executive compensation plans[640][641][642] Form 10-K Summary The company indicates there is no Form 10-K summary - None[645]