10-Q 1 mpln-20220630.htm 10-Q mpln-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2022
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to
Commission file number: 001-39228
mpln-20220630_g1.jpg
MULTIPLAN CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware84-3536151
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
115 Fifth Avenue
New York, NY 10003
(Address of principal executive offices)
(212) 780-2000
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol
Name of each exchange on which registered
Shares of Class A common stock, $0.0001 par value per shareMPLNNew York Stock Exchange
WarrantsMPLN.WSNew York Stock Exchange
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   x  No   o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   x  No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer
o
Non-accelerated filer
o
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  
As of August 1, 2022, 639,074,047 shares of Class A common stock, par value $0.0001 per share, were issued and outstanding.



TABLE OF CONTENTS

2


GLOSSARY

Unless otherwise stated in this Quarterly Report on Form 10-Q (this "Quarterly Report") or the context otherwise requires, references to:

"2021 Annual Report" are to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021;

"2020 Omnibus Incentive Plan" are to our 2020 Omnibus Incentive Plan, as it may be amended and/or restated from time to time;

"5.50% Senior Secured Notes" are to the $1,050,000,000 in aggregate principal amount of 5.50% Senior Secured Notes due 2028 issued by MPH;

"5.750% Notes" are to the $1,300,000,000 in aggregate principal amount of 5.750% Senior Notes due 2028 issued by MPH;

"7.125% Notes" are to the 7.125% Senior Notes due 2024 issued by MPH. All of the outstanding 7.125% Notes were redeemed on October 29, 2020;

"Abacus" are to Abacus Insights, Inc.;

"Adjusted EPS" are to adjusted earnings per share;

"ASU" are to Accounting Standard Update;

"Board" are to the board of directors of the Company;

"CARES Act" are to The Coronavirus Aid, Relief, and Economic Security Act;

"Cash Interest" are to interest paid in cash on the Senior Convertible PIK Notes;

"Churchill" are to Churchill Capital Corp III, a Delaware corporation, which changed its name to MultiPlan Corporation following the consummation of the Transactions;

"Churchill IPO" are to the initial public offering by Churchill which closed on February 19, 2020;

"Churchill's Class A common stock" are, prior to consummation of the Transactions, to Churchill's Class A common stock, par value $0.0001 per share and, following consummation of the Transactions, to our Class A common stock, par value $0.0001 per share;

"Class A common stock" are to MultiPlan's Class A common stock, par value $0.0001 per share;

"Closing" are to the consummation of the Mergers;

"Closing Date" are to October 8, 2020, the date on which the Transactions were consummated;

"Common PIPE Investment" are to the private placement pursuant to which Churchill entered into subscription agreements with certain investors whereby such investors subscribed for (a) 130,000,000 shares of Churchill's Class A common stock at a purchase price of $10.00 per share for an aggregate commitment of $1,300,000,000 and (b) warrants to purchase 6,500,000 shares of Churchill's Class A Common Stock (for each share of Churchill's Class A common stock subscribed, the investor received 1/20th of a warrant to purchase one share of Churchill's Class A common stock, with each whole warrant having a strike price of $12.50 per share and a maturity date of October 8, 2025). The Common PIPE Investment was subject to an original issue discount (which was paid in additional shares of Churchill's Class A common stock) of 1% for subscriptions of $250,000,000 or less and 2.5% for subscriptions of more than $250,000,000, which resulted in an additional 2,050,000 shares of Churchill's Class A common stock being issued. The Common PIPE Investment was consummated on the Closing Date;

"common stock" are, prior to the consummation of the Transactions, to Churchill's Class A common stock and Churchill's Class B common stock and, following consummation of the Transactions, to the Class A common stock;
3


"Company" are, prior to the consummation of the Transactions, to Churchill and, following consummation of the Transactions, to MultiPlan Corporation;

"Convertible PIPE Investment" are to the private placement pursuant to which the Company entered into subscription agreements with certain investors whereby such Convertible PIPE Investors agreed to buy $1,300,000,000 in aggregate principal amount of Senior Convertible PIK Notes. The Convertible PIPE Investment was consummated on the Closing Date;

"Convertible PIPE Investors" are to the investors participating in the Convertible PIPE Investment;

"COVID-19" are to the COVID-19 pandemic;

"DHP" are to Discovery Health Partners;

"Director RSUs" are to restricted stock units issued to the Company's Non-Employee Directors under the 2020 Omnibus Incentive Plan (other than those Non-Employee Directors who have elected to forego their right to director compensation);

"Employee RS" are to grants of restricted stock awarded to certain employees under the 2020 Omnibus Incentive Plan;

"Employee RSUs" are to grants of restricted stock units awarded to certain employees under the 2020 Omnibus Incentive Plan;

"Employee NQSOs" are to grants of non-qualified stock options awarded to certain employees under the 2020 Omnibus Incentive Plan;

"EPS" are to Earnings and Loss Per Share;

"Exchange Act" are to the Securities Exchange Act of 1934, as amended;

"FASB" are to the Financial Accounting Standards Board;

"First Merger Sub" are to Music Merger Sub I, Inc., a Delaware corporation and direct, wholly owned subsidiary of the Company;

"Fixed Value RSUs" are to restricted stock units granted based on a fixed monetary amount under the 2020 Omnibus Incentive Plan in accordance with the terms of the related side letter;

"founder shares" are to shares of Churchill's Class B common stock and Churchill's Class A common stock issued upon the automatic conversion thereof in connection with the Closing;

"GAAP" are to generally accepted accounting principles in United States of America;

"H&F" are to Hellman & Friedman Capital Partners VIII, L.P.;

"Holdings" are to Polaris Investment Holdings, L.P.;

"HST" are to HSTechnology Solutions, Inc.;

"Integration expenses" are costs associated with the integration of acquired companies into MultiPlan;

"KG" are to The Klein Group, LLC, an affiliate of Michael Klein and the Sponsor and an affiliate and wholly owned subsidiary of M. Klein and Company. KG (and not the Sponsor) was engaged by Churchill to act as Churchill's financial advisor in connection with the Transactions, and as a placement agent in connection with the PIPE Investment as more fully described herein;

"LIBOR" are to London Interbank Offered Rate;

"M. Klein and Company" are to M. Klein and Company, LLC, a Delaware limited liability company, and its affiliates;

4

"Merger Agreement" are to that certain Agreement and Plan of Merger, dated as of July 12, 2020, by and among Churchill, MultiPlan Parent, Holdings, First Merger Sub and Second Merger Sub, as the same has been or may be amended, modified, supplemented or waived from time to time;

"Mergers" are to, together, (a) the merger of First Merger Sub with and into MultiPlan Parent with MultiPlan Parent being the surviving company in the merger (the "First Merger") and (b) immediately following and as part of the same transaction as the First Merger, the merger of MultiPlan Parent with and into Second Merger Sub, with Second Merger Sub surviving the merger as a wholly owned subsidiary of Churchill (the "Second Merger");

"MPH" are to MPH Acquisition Holdings LLC;

"MultiPlan" are, prior to consummation of the Transactions, to MultiPlan Parent and its consolidated subsidiaries and, following consummation of the Transactions, to MultiPlan Corporation and its consolidated subsidiaries;

"MultiPlan Parent" are to Polaris Parent Corp., a Delaware corporation;

"Non-Employee Director" are to each member of our Board that is not an employee of the Company or any parent or subsidiary of the Company;

"Non-income taxes" includes personal property taxes, real estate taxes, sales and use taxes and franchise taxes which are included in cost of services and general and administrative expenses;

"Other expenses, net" represents miscellaneous income, miscellaneous expenses, gain or loss on disposal of assets, impairment of other assets, gain or loss on disposal of leases, tax penalties, and management fees;

"Payors" are our customers which include large national insurance companies, Blue Cross and Blue Shield plans, provider-sponsored and independent health plans, third party administrators, bill review companies, Taft-Hartley plans and other entities that pay medical bills related to the commercial healthcare, government, workers' compensation and auto medical markets

"PSAV" are to percentage of savings;

"PEPM" are to per-employee-per-month;

"PIK Interest" are to interest paid through an increase in the principal amount of the outstanding Senior Convertible PIK Notes or through the issuance of additional Senior Convertible PIK Notes;

"PIPE Investment" are to, collectively, the Common PIPE Investment and the Convertible PIPE Investment;

"PIPE Warrants" are to the warrants to purchase Churchill's Class A common stock issued in connection with the Common PIPE Investment, on terms identical to the terms of the Private Placement Warrants, other than the exercise period that started on November 7, 2020, the exercise price which is $12.50 per share and the redemption feature that exists for all holders of the PIPE warrants.

"Polaris" is Polaris Parent Corp., a Delaware corporation and direct, wholly owned subsidiary of Holdings and parent company to MultiPlan, Inc.;

"PPOs" are to Preferred Provider Organizations;

"Private Placement Warrants" are to warrants issued to the Sponsor in a private placement simultaneously with the closing of the Churchill IPO and the Working Capital Warrants whose terms are identical to the Private Placement Warrants;

"Public Warrants" are to the Company's warrants sold as part of the units in the Churchill IPO (whether they were purchased in the Churchill IPO or thereafter in the open market);

"Revolver B" are to the revolving credit facility in conjunction with Term Loan B and maturing on August 24, 2026;


"revolving credit facility" are to MPH's $450.0 million senior secured revolving credit facility;

"SEC" are to the United States Securities and Exchange Commission;
5


"Second Merger Sub" are to Music Merger Sub II, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of the Company;

"Senior Convertible PIK Notes" are the 6.00% / 7.00% Convertible Senior PIK Toggle Notes due 2027;

"Senior PIK Notes" are to the 8.500% / 9.250% Senior PIK Toggle Notes due 2022 issued by Polaris Intermediate Corp. on November 21, 2017. All of the outstanding Senior PIK Notes were redeemed on October 8, 2020;

"senior secured credit facilities" are to MPH's senior secured credit facilities which, before August 24, 2021, consist of (a) a $2,341.0 million term loan facility maturing on June 7, 2023 and (b) a $450.0 million revolving credit facility maturing on June 7, 2023, and as of and after August 24, 2021 consist of (a) a $1,325.0 million term loan facility maturing on September 1, 2028 and (b) a $450.0 million revolving credit facility maturing on August 24, 2026;

"Sponsor" are to Churchill Sponsor III, LLC, a Delaware limited liability company and an affiliate of M. Klein and Company in which certain of Churchill's directors and officers hold membership interests;

"Sponsor Note" are to the unsecured promissory note issued by the Company to the Sponsor in an aggregate principal amount of $1,500,000. The Sponsor converted the unpaid balance of the Sponsor Note into Working Capital Warrants in connection with the Closing;

"Subscription Agreements" are to, collectively, the (a) common stock subscription agreements entered into (i) by and between Churchill and the PIF and (ii) by and among Churchill, Holdings and MultiPlan Parent, on the one hand, and certain investment funds, on the other hand, in each case, dated as of July 12, 2020 and entered into in connection with the Common PIPE Investment and (b) subscription agreements, dated as of July 12, 2020, entered into in connection with the Convertible PIPE Investment;

"Term Loan B" are to a term loan payable borrowed on August 24, 2021 in the amount of $1,325.0 million with a group of lenders due and payable on September 1, 2028;

"Term Loan G" are to a term loan payable borrowed on June 7, 2016 in the amount of $3,500.0 million with a group of lenders and was repaid in full on August 24, 2021;

"Transactions" are to the Mergers, together with the other transactions contemplated by the Merger Agreement and the related agreements;

"Transaction-related expenses" represents transaction costs, including those related to the Transactions and the acquisitions of HST and DHP.

"Unvested Founder Shares" represents 12,404,080 of the Sponsor founder shares that were unvested as of October 8, 2020 in connection with the Merger Agreement and will re-vest at such time as, during the period starting on October 8, 2021 and ending on October 8, 2025, the closing price of our Class A common stock exceeds $12.50 per share for any forty (40) trading days in a sixty (60) consecutive day period. Such founder shares that do not re-vest on or before October 8, 2025 will be forfeited and cancelled.

"warrants" are to the Public Warrants, the Private Placement Warrants, the PIPE Warrants and the Working Capital Warrants;

"we," "our" or "us" are to MultiPlan and its consolidated subsidiaries; and

"Working Capital Warrants" are to the warrants to purchase Churchill's Class A common stock pursuant to the terms of the Sponsor Note, on terms identical to the terms of the Private Placement Warrants.

6

Part I. Financial Information
Item 1. Financial Statements
MULTIPLAN CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
June 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$354,310 $185,328 
Restricted cash2,777 3,051 
Trade accounts receivable, net94,005 99,905 
Prepaid expenses17,078 24,910 
Prepaid taxes 5,064 
Other current assets, net1,139 999 
Total current assets469,309 319,257 
Property and equipment, net222,022 213,238 
Operating lease right-of-use assets24,108 30,104 
Goodwill4,363,121 4,363,070 
Other intangibles, net3,114,756 3,285,037 
Other assets, net22,505 9,701 
Total assets$8,215,821 $8,220,407 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$12,137 $13,005 
Accrued interest55,199 55,685 
Accrued taxes3,066  
Operating lease obligation, short-term7,072 6,883 
Current portion of long-term debt13,250 13,250 
Accrued compensation30,689 25,419 
Other accrued expenses26,585 27,666 
Total current liabilities147,998 141,908 
Long-term debt4,877,670 4,879,144 
Operating lease obligation, long-term20,414 26,725 
Private Placement Warrants and Unvested Founder Shares66,408 74,000 
Deferred income taxes694,395 753,825 
Other liabilities83 135 
Total liabilities5,806,968 5,875,737 
Commitments and contingencies (Note 6)
Shareholders’ equity:
Shareholder interests
Preferred stock, $0.0001 par value — 10,000,000 shares authorized; no shares issued
  
Common stock, $0.0001 par value — 1,500,000,000 shares authorized; 666,176,911 and 665,456,180 issued; 639,059,505 and 638,338,774 shares outstanding
67 67 
Additional paid-in capital2,318,353 2,311,660 
Retained earnings282,602 225,112 
Treasury stock — 27,117,406 and 27,117,406 shares
(192,169)(192,169)
Total shareholders’ equity2,408,853 2,344,670 
Total liabilities and shareholders’ equity$8,215,821 $8,220,407 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
7

MULTIPLAN CORPORATION
Unaudited Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(in thousands, except share and per share data)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenues$290,128 $276,272 $588,174 $531,136 
Costs of services (exclusive of depreciation and amortization of intangible assets shown below)49,977 44,368 97,049 84,098 
General and administrative expenses40,085 39,927 72,673 71,923 
Depreciation17,171 17,008 33,767 33,173 
Amortization of intangible assets85,127 85,167 170,281 169,875 
Total expenses192,360 186,470 373,770 359,069 
Operating income97,768 89,802 214,404 172,067 
Interest expense72,696 64,004 144,141 127,721 
Interest income(46)(7)(58)(11)
Gain on investments  (25)(289)(25)
Loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares5,149 81,560 (7,592)41,185 
Net income (loss) before taxes19,969 (55,730)78,202 3,197 
Provision (benefit) for income taxes6,457 (8,798)20,712 4,252 
Net income (loss)$13,512 $(46,932)$57,490 $(1,055)
Weighted average shares outstanding – Basic639,001,506 655,609,718 638,750,938 655,361,621 
Weighted average shares outstanding – Diluted640,097,349 655,609,718 639,709,247 655,361,621 
Net income (loss) per share – Basic$0.02 $(0.07)$0.09 $(0.00)
Net income (loss) per share – Diluted$0.02 $(0.07)$0.09 $(0.00)
Comprehensive income (loss)$13,512 $(46,932)$57,490 $(1,055)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
8

MULTIPLAN CORPORATION
Unaudited Condensed Consolidated Statements of Shareholders' Equity
(in thousands, except share data)
Three Months Ended June 30, 2022
Common Stock IssuedAdditional Paid-in CapitalRetained
Earnings
Treasury stockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balance at beginning of period666,045,694 $67 $2,314,488 $269,090 (27,117,406)$(192,169)$2,391,476 
2020 Omnibus Incentive Plan131,217 — 4,104 — — — 4,104 
Tax withholding related to vesting of equity awards— — (239)— — — (239)
Net income— — — 13,512 — — 13,512 
Balance at end of period666,176,911 $67 $2,318,353 $282,602 (27,117,406)$(192,169)$2,408,853 
Three Months Ended June 30, 2021
Common Stock IssuedAdditional Paid-in CapitalRetained
Earnings
Treasury stockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balance at beginning of period664,277,068 $66 $2,297,504 $168,909 (9,144,461)$(89,874)$2,376,605 
2020 Omnibus Incentive Plan756,232 — 7,474 — — — 7,474 
Tax withholding related to vesting of equity awards— — (24)— (276,679)(2,059)(2,083)
Net loss— — — (46,932)— — (46,932)
Balance at end of period665,033,300 $66 $2,304,954 $121,977 (9,421,140)$(91,933)$2,335,064 
Six Months Ended June 30, 2022
Common Stock IssuedAdditional Paid-in CapitalRetained
Earnings
Treasury stockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balance at beginning of period665,456,180 $67 $2,311,660 $225,112 (27,117,406)$(192,169)$2,344,670 
2020 Omnibus Incentive Plan720,731 — 8,889 — — — 8,889 
Tax withholding related to vesting of equity awards— — (2,196)— — — (2,196)
Net income— — — 57,490 — — 57,490 
Balance at end of period666,176,911 $67 $2,318,353 $282,602 (27,117,406)$(192,169)$2,408,853 
Six Months Ended June 30, 2021
Common Stock IssuedAdditional Paid-in CapitalRetained
Earnings
Treasury stockTotal
Shareholders’
Equity
SharesAmountSharesAmount
Balance at beginning of period664,183,318 $66 $2,530,410 $116,999 (9,107,963)$(89,610)$2,557,865 
Cumulative effect of ASU 2020-06 on the accounting for convertible instruments— — (233,874)6,033 — — (227,841)
2020 Omnibus Incentive Plan849,982 — 8,442 — — 8,442 
Tax withholding related to vesting of equity awards— — (24)— (313,177)(2,323)(2,347)
Net loss— — — (1,055)— — (1,055)
Balance at end of period665,033,300 $66 $2,304,954 $121,977 (9,421,140)$(91,933)$2,335,064 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
9

MULTIPLAN CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended June 30,
20222021
Operating activities:
Net income (loss)$57,490 $(1,055)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation33,767 33,173 
Amortization of intangible assets170,281 169,875 
Amortization of the right-of-use asset3,339 3,525 
Stock-based compensation7,234 8,442 
Deferred income taxes(59,481)303 
Non-cash interest costs5,192 5,805 
Gain on equity investments (289) 
Loss on disposal of property and equipment2,785 685 
(Gain) loss on change in fair value of Private Placement Warrants and Unvested Founder Shares(7,592)41,185 
Changes in assets and liabilities, net of assets acquired and liabilities assumed from acquisitions:
Accounts receivable, net5,900 4,952 
Prepaid expenses and other assets9,888 2,468 
Prepaid taxes5,064 (54,148)
Operating lease obligation(5,403)(3,417)
Accounts payable and accrued expenses and other7,464 (7,404)
Net cash provided by operating activities235,639 204,389 
Investing activities:
Purchases of property and equipment(43,399)(36,787)
Proceeds from sale of investment289 5,641 
Purchase of equity investments(15,000) 
HST Acquisition, net of cash acquired (28)
DHP Acquisition, net of cash acquired (149,676)
Net cash used in investing activities(58,110)(180,850)
Financing activities:
Repayments of Term Loan B(6,625) 
Taxes paid on settlement of vested share awards(2,196)(2,323)
Net cash used in financing activities(8,821)(2,323)
Net increase in cash, cash equivalents and restricted cash168,708 21,216 
Cash, cash equivalents and restricted cash at beginning of period188,379 126,755 
Cash, cash equivalents and restricted cash at end of period$357,087 $147,971 
Cash and cash equivalents$354,310 $147,971 
Restricted cash2,777  
Cash, cash equivalents and restricted cash at end of period$357,087 $147,971 
Noncash investing and financing activities:
Purchases of property and equipment not yet paid$4,589 $3,913 
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$40 $1,025 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest$(139,013)$(123,115)
Income taxes, net of refunds$(72,452)$(68,766)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
10

MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements

1.General Information and Basis of Accounting
General Information
We are a provider of data analytics and technology-enabled solutions designed to bring affordability, efficiency and fairness to the U.S. healthcare industry. We do so through services focused on reducing medical cost and improving payment accuracy for the payors of healthcare, which are health insurers, self-insured employers and other health plan sponsors (typically through their health plan administrators), and, indirectly, the plan members who are the consumers of healthcare services.
Throughout the notes to the unaudited condensed consolidated financial statements, unless otherwise noted, "we," "us," "our", "MultiPlan", and the "Company" and similar terms refer to Polaris and its subsidiaries prior to the consummation of the Transactions, and MultiPlan and its subsidiaries after the Transactions.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements of MultiPlan Corporation have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Certain information and disclosures required by accounting principles generally accepted in the United States (GAAP) for complete consolidated financial statements have been condensed or omitted pursuant to the SEC’s rules and regulations, although management believes that the disclosures are adequate and make the information presented not misleading. The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of MultiPlan Corporation and the notes thereto, included in the Company’s 2021 Annual Report. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), necessary for a fair statement of the Company’s financial position as of June 30, 2022 and December 31, 2021, and its results of operations for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021 have been included.
Summary of Significant Accounting Policies
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from the Company's estimates. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, revenue recognition, recoverability of long-lived assets, goodwill, valuation of Private Placement Warrants and Unvested Founder Shares, valuation of stock-based compensation awards and income taxes.
COVID-19
COVID-19 has negatively impacted our business, results of operations and financial condition since the first quarter of 2020 as various federal, state, and local governments and private entities mandated, and in some cases continue to mandate, restrictions on travel, restrictions on public gatherings, closure of non-essential commerce, and shelter in place orders. For the three and six months ended June 30, 2022, the Company’s revenues continue to be negatively impacted as a result of the medical charges received on non-COVID-19 claims from customers not yet reaching pre-COVID-19 pandemic levels due to fewer elective medical procedures and non-essential medical services. Such negative impacts, however, have been to a lesser extent compared to the same period in 2020 and 2021 as vaccination rates have increased and most restrictions on medical services have been lifted. The extent of the ultimate impact of COVID-19 will depend on the severity and duration of the evolving pandemic. Future developments remain uncertain, including the number of confirmed cases, the emergence of highly contagious variants, and any actions taken by federal, state and local governments such as economic relief efforts, as well as U.S. and global economies, consumer behavior and healthcare utilization patterns.
Segment Reporting
Operating segments are defined as components of an entity for which separate financial information is available and regularly reviewed by the chief operating decision maker. The Company manages its operations as a single segment for the
11

MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
purposes of assessing performance and making decisions. The Company's singular focus is being a leading value-added provider of data analytics and technology-enabled end-to-end cost management, payment and revenue integrity solutions to the U.S. healthcare industry.
In addition, all of the Company's revenues and long-lived assets are attributable to operations in the United States for all periods presented.
Revenue Recognition
Disaggregation of Revenue
The following table presents revenues disaggregated by services and contract types:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Revenues
Network-Based Services$63,420 $72,073 $132,044 $141,438 
PSAV49,282 55,297 101,245 109,539 
PEPM12,801 14,062 27,739 27,577 
Other1,337 2,714 3,060 4,322 
Analytics-Based Services193,294 170,793 389,412 327,953 
PSAV187,517 166,602 377,809 319,680 
PEPM5,777 4,191 11,603 8,273 
Payment and Revenue Integrity Services33,414 33,406 66,718 61,745 
PSAV33,295 33,267 66,479 61,547 
PEPM119 139 239 198 
Total Revenues$290,128 $276,272 $588,174 $531,136 
Due to the nature of our arrangements, certain estimates may be constrained if it is probable that a significant reversal of revenue will occur when the uncertainty is resolved. For our percentage of savings contracts, portions of revenue that is recognized and collected in a reporting period may be returned or credited in subsequent periods. These credits are the result of payers not utilizing the discounts that were initially calculated, or differences between the Company’s estimates of savings achieved for a customer and the amounts self-reported in the following month by that same customer. Significant judgment is used in constraining estimates of variable consideration, and is based upon both client-specific and aggregated factors that include historical billing and adjustment data, client contract terms, and performance guarantees. We update our estimates at the end of each reporting period as additional information becomes available. There have not been any material changes to estimates of variable consideration for performance obligations satisfied prior to the six months ended June 30, 2022.
The timing of payments from customers from time to time generates contract assets or contract liabilities, however these amounts are immaterial in all periods presented.
2.Investments
In June 2022, the Company, acquired for cash consideration of $15.0 million, a minority interest of Abacus Insights, Inc., a leading data management and interoperability platform that enables health plans and their providers to standardize data across the healthcare ecosystem by providing a highly secure unified data infrastructure that maximizes analytics enablement to reduce costs and improve outcomes.
The investment does not have a readily determinable fair value and the Company has elected to record the investment at cost, less impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. During the three and six months ended June 30, 2022, there were no observable price changes or impairments recorded. Refer to Note 5 Fair Value Measurements for additional information.
12

MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
3.Long-Term Debt
As of June 30, 2022, and December 31, 2021, long-term debt consisted of the following:
Key TermsJune 30, 2022December 31, 2021
(in thousands)CharacterPriorityMaturityCoupon
Term Loan BTerm LoanSenior Secured
9/1/2028(1)
Variable(2)
$1,315,063 $1,321,688 
5.50% Senior Secured Notes
NotesSenior Secured9/1/2028
5.50%
1,050,000 1,050,000 
5.750% Notes
NotesSenior Unsecured11/1/2028
5.750%
1,300,000 1,300,000 
Senior Convertible PIK Notes
Convertible Notes(3)
Senior Unsecured10/15/2027
Cash Interest 6.00%, PIK Interest 7.00%
1,300,000 1,300,000 
Finance lease obligations, non-currentOtherSenior Secured2022-2024
3.38% - 20.31%
30 71 
Long-term debt4,965,093 4,971,759 
Less: current portion of long-term debt(13,250)(13,250)
Discount - Term Loan B(12,005)(12,864)
Discount – Senior Convertible PIK Notes(25,690)(27,715)
Less: debt discounts, net(37,695)(40,579)
Debt issuance costs - Term Loan B(6,538)(7,008)
Debt issuance costs - 5.50% Senior Secured Notes
(13,408)(14,188)
Debt issuance costs - 5.750% Notes
(16,532)(17,590)
Less: debt issuance costs, net(36,478)(38,786)
Long-term debt, net$4,877,670 $4,879,144 
(1)Beginning December 31, 2021 and quarterly thereafter, we shall repay a principal amount of the Term Loan B equal to 0.25% of the initial aggregate principal of $1,325.0 million. These scheduled principal repayments may be reduced by any voluntary or mandatory prepayments made in accordance with the credit agreement.
(2)Interest on Term Loan B and Revolver B is calculated, at MPH's option, as (a) LIBOR (or, with respect to the term loan facility only, 0.50%, whichever is higher), plus the applicable margin, or (b) the highest rate of (1) prime rate, (2) the federal funds effective rate, plus 0.50%, (3) the LIBOR for an interest period of one month, plus 1.00% and (4) 0.50% for Term Loan B and 1.00% for Revolver B, in each case, plus an applicable margin of 4.25% for Term Loan B and between 3.50% and 4.00% for Revolver B, depending on MPH's first lien debt to consolidated EBITDA ratio. The interest rate in effect for Term Loan B was 5.82% as of June 30, 2022.
(3)The Senior Convertible PIK Notes are convertible into shares of Class A common stock based on a $13.00 conversion price, subject to customary anti-dilution adjustments.
4.Private Placement Warrants and Unvested Founder Shares
The Company classifies the Private Placement Warrants and Unvested Founder Shares as a liability on its unaudited condensed consolidated balance sheets as these instruments are precluded from being indexed to our own stock given the terms allow for a settlement that does not meet the scope of the fixed-for-fixed exception in Accounting Standards Codification 815.
13

MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
The Private Placement Warrants and Unvested Founder Shares were initially recorded at fair value on the date of consummation of the Transactions and are subsequently adjusted to fair value at each subsequent reporting date. The fair value of the Unvested Founder Shares and unvested Private Placement Warrants is obtained using a Monte Carlo model and the fair value of the remaining Private Placement Warrants is obtained using a Black Scholes model, together referenced as the "option pricing" model. The Company will continue to adjust the liability for changes in fair value for the founder shares until the earlier of the re-vesting or forfeiture of these instruments. The Company will continue to adjust the liability for changes in fair value for the Private Placement Warrants until the warrant is equity classified.
As of June 30, 2022 and December 31, 2021, the fair value of the Private Placement Warrants and the Unvested Founder Shares were:
(in thousands)June 30, 2022December 31, 2021
Private Placement Warrants$30,188 $38,028 
Unvested Founder Shares36,220 35,972 
For the three and six months ended June 30, 2022, the change in fair values was primarily due to the decrease in the expected stock volatility and the passage of time over that period, partially offset by the increase in the stock price of the Company's Class A common stock. The accompanying unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) include loss and (gains) related to the change in fair value of the Private Placement Warrants and Unvested Founder Shares for the three and six months ended June 30, 2022 and 2021 as follows:
Three Months Ended June 30, Six Months Ended June 30,
(in thousands)2022202120222021
Private Placement Warrants$932 $32,936 $(7,840)$17,741 
Unvested Founder Shares4,217 48,624 248 23,444 
Loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares$5,149 $81,560 $(7,592)$41,185 
5.Fair Value Measurements
Fair value measurements are based on the premise that fair value represents an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value:
Level 1 — Quoted prices in active markets for identical assets or liabilities on the reporting date.
Level 2 — Inputs, other than quoted prices in active markets (Level 1), that are observable for the asset or liability, either directly or indirectly.
Level 3 — Unobservable inputs in which there is little or no market data, which require the entity to develop its own assumptions
Financial instruments
Certain financial instruments which are not measured at fair value on a recurring basis include cash and cash equivalents, accounts receivable and accounts payable, which approximate fair value due to their short-term nature. The financial instrument that potentially subjects the Company to concentrations of credit risk consists primarily of accounts receivable.
Cash and cash equivalents as of June 30, 2022 included money market funds of $150.0 million, which were valued based on Level 1 measurements using quoted prices in active markets for identical assets. Our cash and cash equivalents as of December 31, 2021 did not include money market funds.
14

MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
As of June 30, 2022 and December 31, 2021, the Company's carrying amount and fair value of long-term debt consisted of the following:
June 30, 2022December 31, 2021
(in thousands)Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Liabilities:
Term Loan B, net of discount$1,303,058 $1,205,329 $1,308,824 $1,294,312 
5.50% Senior Secured Notes
1,050,000 936,600 1,050,000 1,029,680 
5.750% Notes
1,300,000 1,080,300 1,300,000 1,245,436 
Senior Convertible PIK Notes, net of discount1,274,310 1,061,500 1,272,285 1,245,958 
Finance lease obligations30 30 71 71 
Total Liabilities$4,927,398 $4,283,759 $4,931,180 $4,815,457 
As of June 30, 2022, the fair value of long-term debt, including current maturities of finance lease obligations, was obtained using quoted prices in active markets. As such, this is considered a Level 1 fair value measurement.
As of December 31, 2021, we estimated the fair value of long-term debt, including current maturities of finance lease obligations, based on estimates using present value techniques that were significantly affected by the assumptions used concerning the amount and timing of estimated future cash flows and discount rates that reflect varying degrees of risk. Assumptions included interest rates currently available for instruments with similar terms as well as the five, seven, and eight-year Treasury bill rates. As such, this was considered a Level 2 fair value measurement.
Recurring fair value measurements
The Private Placement Warrants and Unvested Founder Shares are measured at fair value on a recurring basis. The fair value of these instruments was determined based on significant inputs not observable in the market which would represent a level 3 measurement within the fair value hierarchy. The Company uses an option pricing simulation to estimate the fair value of these instruments.
Non-recurring fair value measurements
We also measure certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill and long-lived tangible and intangible assets, in connection with periodic evaluations for potential impairment. We estimate the fair value of these assets using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements. There were no material impairment charges for these assets for fiscal years 2022 and 2021.
Our non-marketable equity securities using the measurement alternative are adjusted to fair value on a non-recurring basis. Adjustments are made when observable transactions for identical or similar investments of the same issuer occur, or due to impairment. These securities are classified as Level 2 in the fair value hierarchy because we estimate the value based on valuation methods using the observable transaction price at the transaction date. At June 30, 2022, the carrying amount of these alternative investments, recorded under Other assets, net in the unaudited condensed consolidated balance sheets, was $15.0 million. There were no write-ups due to observable price changes or write-downs due to impairment in the current period.
6.Commitments and Contingencies
Commitments
The Company has certain irrevocable letters of credit used to satisfy real estate lease agreements for three of our offices in lieu of security deposits in the amount of $1.8 million outstanding as of June 30, 2022 and December 31, 2021.
Claims and Litigation
The Company is a defendant in various lawsuits and other pending and threatened litigation and other adversarial matters as well as regulatory investigations, all of which have arisen in the ordinary course of business. While the ultimate outcome
15

MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
with respect to such proceedings cannot be predicted with certainty, the Company does not believe they will result, individually or in the aggregate, in a material adverse effect upon our financial condition or results of operations, or cash flows.
On March 25, 2021 and April 9, 2021, we were named as a defendant in two putative class action lawsuits relating to the Transactions that have since been consolidated under the caption In Re MultiPlan Corp. Stockholders Litigation, Consolidated C.A. No. 2021-0300-LWW (Del.Ch) ("Delaware Stockholder Litigation"). The Delaware Stockholder Litigation asserts breach of fiduciary duty claims and aiding and abetting breach of fiduciary duty claims against the former directors of the Churchill board, the Sponsor, KG and M. Klein (collectively, the "Churchill Defendants") and the Company. The Delaware Stockholder Litigation complaint alleges that the Transactions were a product of an unfair process by Churchill, which was allegedly impacted by conflicts of interest, resulting in mispricing of the Transactions. The complaint seeks, among other things, damages, certain equitable relief including the reopening of redemptions, and attorneys’ fees and costs. The Company and the Churchill Defendants filed motions to dismiss the complaint. On January 3, 2022, the Chancery Court issued a ruling granting in part the Company’s motion to dismiss and denying the motion to dismiss filed by the Churchill Defendants. The Company is therefore dismissed from the Delaware Stockholder Litigation, which is proceeding against the Churchill Defendants. The Company has agreed to indemnify certain of the Churchill Defendants with respect to the Delaware Stockholder Litigation.
We accrue for costs associated with certain contingencies, including, but not limited to, settlement of legal proceedings, regulatory compliance matters and self-insurance exposures when such costs are probable and reasonably estimable. Such accruals are included in other accrued expenses on the accompanying unaudited condensed consolidated balance sheets. In addition, we accrue for legal fees incurred in defense of asserted litigation and regulatory matters as such legal fees are incurred. To the extent it is probable under our existing insurance coverage that we are able to recover losses and legal fees related to contingencies, we record such recoveries concurrently with the accrual of the related loss or legal fees. Significant management judgment is required to estimate the amounts of such contingent liabilities and the related insurance recoveries. In our determination of the probability and ability to estimate contingent liabilities and related insurance recoveries we consider the following: litigation exposure based on currently available information, consultations with external legal counsel, adequacy and applicability of existing insurance coverage and other pertinent facts and circumstances regarding the contingency. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances change, or contingencies are resolved; and such changes are recorded in the accompanying unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) during the period of the change and appropriately reflected in other accrued liabilities on the accompanying unaudited condensed consolidated balance sheets.
7.Basic and Diluted Earnings (Loss) Per Share
Basic and diluted earnings (Loss) per share was calculated as follows:
Three Months Ended June 30,Six Months Ended June 30,
($ in thousands, except number of shares and per share data)2022202120222021
Numerator for earnings per share calculation
Net Income (Loss)$13,512 $(46,932)$57,490 $(1,055)
Denominator for earnings per share calculation
Weighted average number of shares outstanding – basic639,001,506 655,609,718 638,750,938 655,361,621 
Effect of stock-based compensation1,095,843  958,309  
Weighted average number of shares outstanding – diluted640,097,349 655,609,718 639,709,247 655,361,621 
Income (Loss) per share – basic and diluted:
Net income (loss) per share – basic$0.02 $(0.07)$0.09 $(0.00)
Net income (loss) per share – diluted$0.02 $(0.07)$0.09 $(0.00)
As of the three and six months ended June 30, 2022 and 2021, we have excluded from the calculation of diluted net income per share the instruments whose effect would have been anti-dilutive, including (i) 58,500,000 warrants outstanding, (ii) 100,000,000 shares which may be issued upon conversion of the Senior Convertible PIK Notes, and (iii) 12,404,080 Unvested Founder Shares. Additionally, we have excluded from the calculation of diluted net income (loss) per share awards within the 2020 Omnibus Incentive Plan, whose effect would have been anti-dilutive of 12,939,954 and 5,520,722 for the three and six months ended June 30, 2022 and 2021, respectively.
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MULTIPLAN CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements
8.Related Party Transactions
The accompanying unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) include expenses and revenues to and from related parties for the three and six months ended June 30, 2022 and 2021 as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Revenues$395 $872 $1,038 $1,439 
Total revenues from related parties395 872 1,038 1,439 
Cost of services(290)(49)(602)(739)
General and administrative (148) (413)
Total expense from related parties$(290)$(197)$(602)$(1,152)
The accompanying unaudited condensed consolidated balance sheets include accruals from related parties as of June 30, 2022 and December 31, 2021 as follows:
(in thousands)June 30, 2022December 31, 2021
Current liabilities:
Accounts payable$1,726 $2,297 
Total liabilities from related parties$1,726 $2,297 
In 2022 and 2021, the related party transactions included the following:
The Company purchased PPO network services from a company controlled by Hellman & Friedman LLC, an affiliate of H&F, to supplement our provider network. We also recognize revenues from that same company for the use of our provider network and other claims processing services.
The Company has obtained insurance brokered through a company controlled by Hellman & Friedman LLC.
The Company reimburses Hellman & Friedman LLC for reasonable out of pocket expenses that include travel, lodging, meals, and any similar expenses.
Companies controlled or managed by members of the Board have participated in the PIPE Investment, including the Senior Convertible PIK Notes.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes thereto contained elsewhere in this Quarterly Report and together with the information included in the Company’s 2021 Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties; the results described below are not necessarily indicative of the results to be expected in any future periods.
Cautionary Note Regarding Forward-looking Statements
All statements other than statements of historical fact included in this Quarterly Report including, without limitation, statements under this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the next quarter and beyond. When used in this Quarterly Report, words such as “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology represent forward-looking statements that include matters that are not historical facts. They may appear in a number of places throughout this Quarterly Report and these forward-looking statements reflect management’s expectations regarding our future growth, results of operations, operational and financial performance and business prospects and opportunities. Such forward-looking statements are based on available current market material and management’s expectations, beliefs and forecasts concerning future events impacting our business. Factors that may impact such forward-looking statements include:
the impact of COVID-19 and its related effects on our projected results of operations, financial performance or other financial metrics;
loss of our customers, particularly our largest customers;
decreases in our existing market share or the size of our Preferred Provider Organization (“PPO”) networks;
effects of competition;
effects of pricing pressure;
the inability of our customers to pay for our services;
decreases in discounts from providers;
the loss of our existing relationships with providers;
the loss of key members of our management team;
pressure to limit access to preferred provider networks;
the ability to achieve the goals of our strategic plans and recognize the anticipated strategic, operational, growth and efficiency benefits when expected;
our ability to identify, complete and successfully integrate acquisitions;
changes in our industry;
interruptions or security breaches of our information technology systems and other cyber security attacks;
our ability to protect proprietary applications;
our inability to expand our network infrastructure;
our ability to maintain effective internal controls over financial reporting;
our ability to continue to attract, motivate and retain a large number of skilled employees, and adapt to the effects of inflationary pressure on wages;
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changes in our regulatory environment, including healthcare law and regulations;
the expansion of privacy and security laws;
heightened enforcement and investigations activity by government agencies;
our ability to pay interest and principal on our notes and other indebtedness;
the possibility that we may be adversely affected by other political, economic, business, and/or competitive factors;
other factors disclosed in this Quarterly Report; and
other factors beyond our control.
The forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors referred to under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report or as described in our 2021 Annual Report. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
Company Overview
MultiPlan is a leading provider of data analytics and technology-enabled solutions designed to bring affordability, efficiency and fairness to the United States healthcare industry. We do so through services focused on reducing medical cost and improving payment accuracy for the payors of healthcare, which are health insurers, self-insured employers and other health plan sponsors (typically through their health plan administrators), and, indirectly, the plan members who are the consumers of healthcare services.
Founded initially in 1980 as a New York-based hospital network, MultiPlan has evolved both organically and through acquisition into a national organization offering three categories of services:
Analytics-Based Services: data-driven algorithms which detect claims over-charges and either negotiate or recommend fair reimbursement using a variety of data sources and pricing algorithms;
Network-Based Services: contracted discounts with healthcare providers to form one of the largest independent preferred provider organizations ("PPO") in the United States with over 1.3 million providers under contract, as well as outsourced network development and/or management services; and
Payment and Revenue Integrity Services: data, technology, and clinical expertise deployed to identify and remove improper and unnecessary charges before or after claims are paid, or to identify and help restore and preserve underpaid premium dollars.
Although the end beneficiary of our services are employers and other plan sponsors and their health plan members, our direct customers are mostly health plan administrators ("Payors"). We offer these Payors a single electronic gateway to a comprehensive set of services in each of the above three categories, which are used in combination or individually to reduce the medical cost burden on their health plan customers and members while fostering fair and efficient payments to the providers. These comprehensive offerings have enabled us to maintain long-term relationships with a number of our customers, including relationships of over 25 years with some of the nation's largest Payors. For the six months ended June 30, 2022 and year ended December 31, 2021 our comprehensive services identified approximately $11.2 billion and $21.7 billion in potential medical cost savings, respectively.
We believe our solutions provide a strong value proposition to Payors, their health plan customers and healthcare consumers, as well as to providers. Overall, our service offerings aim to reduce healthcare costs in a manner that is orderly, efficient and fair to all parties. In addition, because in most instances the fee for our services is directly linked to the savings we identify, our revenue model is aligned with the interests of our customers.
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Uncertainty Relating to the COVID-19 Pandemic
As discussed above in Note 1 General Information and Basis of Accounting of the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report, COVID-19 has negatively impacted our business, results of operations and financial condition since the first quarter of 2020.
Effects from COVID-19 began to impact our business in first quarter 2020 with various federal, state, and local governments and private entities mandating restrictions on travel, restrictions on public gatherings, closure of non-essential commerce, and shelter in place orders. We temporarily closed all of our offices and restricted travel in 2020 and 2021 due to concern for our employees’ health and safety and also in compliance with state orders. Most of our approximately 2,500 employees continue to work remotely. Other than these modifications, we have not experienced any material changes to our operations including receiving and processing transactions with our customers as a result of COVID-19.
For the three and six months ended June 30, 2022, the Company’s revenues continue to be negatively impacted as a result of the medical charges received on non-COVID-19 claims from customers not yet reaching pre-COVID-19 pandemic levels due to fewer elective medical procedures and non-essential medical services. Such negative impacts, however, are to a lesser extent compared to the same period in 2020 and 2021, as vaccination rates have increased and most restrictions on medical services have been lifted. The extent of the ultimate impact of COVID-19 will depend on the severity and duration of the evolving pandemic. Future developments remain uncertain, including the number of confirmed cases, the emergence of highly contagious variants, and any actions taken by federal, state and local governments such as economic relief efforts, as well as U.S. and global economies, consumer behavior and healthcare utilization patterns.
Factors Affecting Our Results of Operations
Medical Cost Savings -
Our business and revenues are driven by the ability to lower medical costs through claims savings for our customers. The medical charges of those claims can influence our ability to generate claim savings.
The following table presents the medical charges processed and the potential savings identified for the periods presented:
Six Months Ended June 30,Change
(in millions)20222021
Medical charges processed(1)(3)
$63,560.1 $57,383.9 10.8 %
Potential medical cost savings(2)(3)
$11,196.9 $10,522.4 6.4 %
While the medical charges processed on claims received from customers have increased, the medical charges on our non-COVID-19 services have not yet returned to pre-pandemic levels as a result of fewer elective medical procedures and non-essential medical services. A portion of this increase is the result of medical charges and related savings for COVID-19 services, such as COVID-19 testing, treatment, and vaccines, which were higher in the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021.
_____________________________
(1)Medical charges processed represent the aggregate dollar amount of claims processed by our cost management and payment accuracy solutions in the period presented. The dollar amount of the claim for purposes of this calculation is the dollar amount of the claim prior to any reductions that may be made as a result of the claim being processed by our solutions. Medical charges processed exclude medical charges processed by DHP in both time periods.
(2)Potential medical cost savings represent the aggregate amount of potential savings in dollars identified by our cost management and payment accuracy solutions in the period presented. Since certain of our fees are based on the amount of savings achieved by our customers, and our customers are the final adjudicator of the claims and may choose not to reduce claims or reduce claims by only a portion of the potential savings identified, potential medical cost savings may not directly correlate with the amount of fees earned in connection with the processing of such claims. Potential medical cost savings exclude potential medical cost savings identified by DHP in both time periods.
(3)Changes to previously reported medical charges processed and potential medical cost savings are due to claim development such as client claim resubmissions or cancellation of claims. Examples of these changes include, but are not limited to, adjudication changes, billing changes, and elimination of claims that were later determined to be invalid.
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Components of Results of Operations
Revenues
We generate revenues from several sources including: (i) Network-Based Services that process claims at a discount compared to billed fee-for-service rates and by using an extensive network, (ii) Analytics-Based Services that use our leading and proprietary information technology platform to offer customers solutions to reduce medical costs, and (iii) Payment and Revenue Integrity Services that use data, technology, and clinical expertise to identify improper, unnecessary and excessive charges. Payors typically compensate us through either a PSAV achieved or a PEPM rate.
Costs of Services (exclusive of depreciation and amortization of intangible assets)
Costs of services (exclusive of depreciation and amortization of intangible assets) consist of all costs specifically associated with claims processing activities for customers, sales and marketing, and the development and maintenance of our networks, analytics-based services, and payment and revenue integrity services. Two of the largest components in costs of services are personnel expenses and access and bill review fees. Access and bill review fees include fees for accessing non-owned third-party provider networks, expenses associated with vendor fees for database access and systems technology used to reprice claims, and outsourced services. Third-party network expenses are fees paid to non-owned provider networks used to supplement our owned network assets to provide more network claim savings to our customers.
General and Administrative Expenses
General and administrative expenses include corporate management and governance functions composed of general management, legal, treasury, tax, real estate, financial reporting, auditing, benefits and human resource administration, communications, public relations, billing and information management. In addition, general and administrative expenses include taxes, insurance, advertising, transaction costs, and other general expenses.
Depreciation Expense
Depreciation expense consists of depreciation and amortization of property and equipment related to our investments in leasehold improvements, furniture and equipment, computer hardware and software, and internally generated capitalized software development costs. We provide for depreciation and amortization on property and equipment using the straight-line method to allocate the cost of depreciable assets over their estimated useful lives.
Amortization of intangible assets
Amortization of intangible assets includes amortization of the value of our customer relationships, provider network, technology, and trademarks which were identified in valuing the intangible assets in connection with the June 6, 2016 acquisition by H&F, as well as recent acquisitions of HST and DHP by the Company.
Interest expense
Interest expense consists of accrued interest and related interest payments on our outstanding long-term debt and amortization of debt issuance costs and discounts.
Interest income
Interest income consists primarily of bank interest.
Loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares
The Company re-measures at each reporting period the fair value of the Private Placement Warrants and Unvested Founder Shares. The changes in fair value are primarily due to the changes in the stock price of the Company's Class A common stock, the expected stock volatility and the passage of time over the reporting period.
Income tax expense
Income tax expense consists of federal, state, and local income taxes.
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Non-GAAP Financial Measures
We use EBITDA, Adjusted EBITDA and Adjusted EPS to evaluate our financial performance. EBITDA, Adjusted EBITDA and adjusted EPS are financial measures that are not presented in accordance with GAAP. We believe the presentation of these non-GAAP financial measures provides useful information to investors in assessing our financial condition and results of operations across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our financial operating results of our core business.
These measurements of financial performance have important limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Additionally, they may not be comparable to other similarly titled measures of other companies. Some of these limitations are:
such measures do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
such measures do not reflect changes in, or cash requirements for, our working capital needs;
such measures do not reflect the significant interest expense, or cash requirements necessary to service interest or principal payments on our debt;
such measures do not reflect any cash requirements for any future replacement of depreciated assets;
such measures do not reflect the impact of stock-based compensation upon our results of operations;
such measures do not reflect our income tax (benefit) expense or the cash requirements to pay our income taxes;
such measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and
other companies in our industry may calculate these measures differently from how we do, limiting their usefulness as a comparative measure.
In evaluating EBITDA, Adjusted EBITDA and Adjusted EPS, you should be aware that in the future we may incur expenses similar to those eliminated in the presentation.
EBITDA, Adjusted EBITDA, and Adjusted EPS are widely used measures of corporate profitability eliminating the effects of financing and capital expenditures from the operating results. We define EBITDA as net income (loss) adjusted for interest expense, interest income, income tax expense, depreciation, amortization of intangible assets, and non-income taxes. We define Adjusted EBITDA as EBITDA further adjusted to eliminate the impact of certain items that we do not consider to be indicative of our core business, including other expenses, net, loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares, transaction related expenses, gain on investments and stock-based compensation. See our unaudited condensed consolidated financial statements included in this Quarterly Report for more information regarding these adjustments. Adjusted EBITDA is used in our agreements governing our outstanding indebtedness for debt covenant compliance purposes. Our Adjusted EBITDA calculation is consistent with the definition of Adjusted EBITDA used in our debt instruments.
Adjusted EPS is used in reporting to our Board and executive management and as a component of the measurement of our performance. We believe that this measure provides useful information to investors because it is the profitability measure we use to evaluate earnings performance on a comparable year-to-year basis. Adjusted EPS is defined as net income (loss) adjusted for amortization of intangible assets, stock-based compensation, transaction related expenses, gain on investments, other expense, loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares and tax effect of adjustments to arrive at Adjusted net income divided by our basic weighted average number of shares outstanding.
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The following table presents a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods presented:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2022202120222021
Net income (loss)$13,512 $(46,932)$57,490 $(1,055)
Adjustments:
Interest expense72,696 64,004 144,141 127,721 
Interest income(46)(7)(58)(11)
Income tax provision 6,457 (8,798)20,712 4,252 
Depreciation17,171 17,008 33,767 33,173 
Amortization of intangible assets85,127 85,167 170,281 169,875 
Non-income taxes440 489 993 1,002 
EBITDA$195,357 $110,931 $427,326 $334,957 
Adjustments:
Other expenses, net2,543 53 1,653 711 
Integration expenses1,024 4,129 2,696 4,688 
Loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares5,149 81,560 (7,592)41,185 
Transaction-related expenses1,457 1,206 4,012 6,431 
Gain on investments— (25)(289)(25)
Stock-based compensation4,104 7,474 7,234 8,442 
Adjusted EBITDA$209,634 $205,328 $435,040 $396,389 
Material differences between MultiPlan Corporation and MPH for the three and six months ended June 30, 2022 include differences in interest expense, loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares, and stock-based compensation. For the three and six months ended June 30, 2022, interest expense for MultiPlan Corporation is $20.3 million and $40.8 million higher than interest expense for MPH, respectively, due to interest expense incurred by MultiPlan Corporation on the Senior Convertible PIK Notes. The loss (gain) on change in fair value of Private Placement Warrants and Unvested Founder Shares, and stock-based compensation are recorded in the parent company MultiPlan Corporation and not in the MPH operating company and therefore the entire amount represents differences between MultiPlan Corporation and MPH.
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The following table presents a reconciliation of net income (loss) to Adjusted EPS for the periods presented:
($ in thousands, except share and per share amounts)Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net income (loss)$13,512 $(46,932)$57,490 $(1,055)
Adjustments:
Amortization of intangible assets85,127 85,167 170,281 169,875 
Stock-based compensation4,104 7,474 7,234 8,442 
Transaction-related expenses1,457 1,206 4,012 6,431 
Gain on investments— (25)(289)(25)
Other expenses, net2,543 53 1,653 711 
Integration expenses1,024 4,129