Claritev Corp (CTEV) Q4 2024 Earnings Call Transcript

Hello all and welcome to today's Claritive Corporation fourth quarter 2024 earnings call. My name is Drew and I will be the operator on today's call. After today's prepared remarks we will have a Q&A session. To register a question please press star followed by one on your telephone keypad and to withdraw your question it's star followed by two. I would now like to hand the call over to Sean Agassik, Assistant Vice President Investor Relations. Thank you, please go ahead.

Thank you, Drew. Good morning, and welcome to Claritive's fourth quarter 2024 earnings call. Joining me today is the investor relations section of our website at claritive.com. During the call, we will refer to the sub-wall on the investor relations portion of our website, along with the fourth quarter 2024 earnings press release issued earlier this morning. Before we begin, a couple reminders. Our remarks and responses to questions today may include forward-looking statements. These forward-looking statements represent management's beliefs and expectations only as of the date of this call. Actual results may differ materially from these forward-looking statements due to a number of risks. A summary of these risks can be found on the second page of the supplemental slide deck in a more complete description on our annual report on Form 10-K and other documents we file with the SEC. We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Claritive's underlining operating results. An explanation of these non-GAAP measures and reconciliation to their most comparable GAAP measures can be found in the earnings press release and in the supplemental slide deck. With that, I would now like to turn the call over to Travis. Travis?

Thank you, Shawna. Good morning to all of you on the call. Welcome to our first team repeatedly that we would not chase a rebrand as a shiny lure. We needed to earn the right to brand as a health technology company first year anniversary with the current integrity new innovative product and mutual interest is vision and mission and insights essential to address rampant rights are needed to make a real impact unit in action i think in mutual interest employers want to manage who continues to provide national journey and achieve our vision 20 data and insights company folks the team is operating at a high level with more urgency and impact various team Well, to enable this, we have existing clients via event insights to educate stakeholders, exchange offers to refinance our entire debt structure in approximately three years to align with Vision 2030. This transaction closed in January 2025 with a 99.75% participation outcome to do this at an attractive cost of capital. More importantly, it was a demonstration of a percent increase in a key focal area going of 1.1 million additional 14 million acb potential participate in the with innovative probe of what we offer for a new client with a new innovative business and revenue and change how the market buys 50 million in serviceable obtainable predictive risk modeling solutions to taylor care to improve their member engagement we announced our new complete and additional house j2 partnership activated logos in 20 we continue to serve and deliver on our promise continued acknowledgement and through a single client impact that we believe will stay I have continued work to do with how we are managing the challenges of my teams and our associates about the need to go faster in the marketplace. Several key milestones.

Case of progress has picked up notably since we last reported the pivotal transformation program we announced yesterday. It is a culmination of the foundation year that Travis spoke to and defines our multi-year initiative to modernize operations, deliver meaningful cost efficiencies, and position the company for future growth as part of our Vision 2030 plan. We briefly hinted at this plan. I'm happy to outline the three key components of the transformation program, technology enablement, structure or OCI, platform and applications, allow us to take full advantage of AI and will enable us to deliver our plan updating our commercial agreements to optimize market positioning, enhancing deal management, a general manager leadership focus across using advanced shared services by an application and global best practices for automation where appropriate long-term growth objectives operations 15 percent in cost base and to accelerate our growth 2030 plan dedicated growth events with the aim strategically expand current markets and white space within those markets and aggressively pursue new addressable markets with our growth product real key milestones in support of the transfer company that we recently announced at by then improving our internal processes pricing packaging and growth We are well positioned to drive Vision 2030 the closing of our debt refinancing exchange offerings in January with a 99.75% average funded indebtedness with the credit holder groups throughout the fourth quarter to negotiate and accomplish. These discussions were to get direct feedback that takes a village and there is no shortage of diligent resources to complete this transaction. The perceptiveness of the existing credit holders to our Vision 2030 concept, our team being able to briefly summarize $6 million, down 3.2% from FYI. The fact of one large client, 3.6% for 24 revenue of $232.1 million was in line with what we communicated on the third quarter earnings. We would be running similar news decline, 17.1% from increased 1.4% from our payment and revenue and tech work. we experienced growth of identified potential h7 of the supplemental deck total fy24 build charges increased 5.3 percent to 177 while identified potential savings increased 7.5 percent to 24.7 billion plan segment 23 to 24 while identified potential savings increased 7.3 percent to 23.2 billion for FY24, the 20-day exception period, emissions in mid-June, product in particular. These metrics to guide the outlook on top-line formation of our business into a data analytics and technology business, along with the broadening of our products and pipeline, and innovative revenue models with which we are going to market and winning, warrants a new set of metrics to present these new metrics on our first quarter 2025 earnings call and develop more informative communications that more clearly align to the successes of the company. The EBITDA margin for Claritive, given its strong adjusted EBITDA on the low to mid. The EBITDA expenses were $354 million, increasing $10.424, along with the increase of legal fees and IVR fees for year-over-year expenses in areas, including facilities and insurance. 24 and 18 million in the prior Q4 24 adjusted but out of 141.63.3 million but equal to Q3 24. Adjustity but a margin was 62 percent in FY24 down roughly 230 basis points from 64.3 percent in the prior year due to volume plus the additional cost in FY24 mentioned earlier. Moving on to our page 9 of the Sub-2025 Revenue Guidance Range to be down 2% to flat to 20% retention rate within our core product segments includes the impact of one large client decrease which will normalize by Q3. Since from the record TCV deal Travis mentioned in his opening comments and modest options we have baked into our model. Additionally, we expect to show suggestee in our data and decision science bookings and related ACV that we are seeing such realizations from overall revenues in EBITDA by single digit growth. We are providing our adjusted EBITDA guidance as a margin range between 62.5% to this range in lockstep with our revenue outcome during the year. We are confident that continued prudent cost management for the transformation program, earnings and margin power, that the best use of our business lead to organic investments.

As we move into the future as Clarity, we are proud of the company and are here featured in our new logo in facilitating the mutual interest.

Thank you. We will now start today's Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. And if you wish to withdraw your question, then it is star followed by two. Our first question today comes from Joshua Raskin from Nefron Research. Your line is now open. Please go ahead.

Hi, thanks. Good morning. I wanted to follow up on a couple of comments that you made. I think, Travis, I heard you say you renewed one of your largest clients at the current value or sort of the same value for the next three years. Is that the same economics you're earning on that specific contract? And then that 97% core retention, is that a net number that includes some core growth or is that just sort of a count of clients that you've renewed? Okay, that's helpful. And then can you speak to the underlying volume you're seeing with the commercial health plans, maybe even into 2025, maybe remind us which areas of claims are most valuable to you or ones where you can create the most savings opportunity? And I'm assuming a strong flu season doesn't really present a lot of savings opportunities. Thank you.

Our next question today comes from Daniel Grisleit from Citigroup. Your line is now open. Please proceed.

Thanks for taking the question. I was curious if you could provide revenue growth and net revenue retention stats in 2025, excluding the large client attrition. And then as we think about, you know, this turn and going into 26, do you think you'll be able to accelerate overall revenue growth back up to kind of a mid single digit, even getting up to high single digit in 26? or is it going to take longer to see that growth really come through?

All digits, just to get the capital to invest in the business.

And as we think about 2026, understanding you're not providing guidance for 2026, but the 2023 was a big year for contract renewals. You mentioned that most renewals are kind of two years, maybe going out to three years. So that would put 26 as potentially another big year for renewals. I was just hoping you can provide a little more detail on what we should expect in terms of renewals, pricing in 26, as we potentially had for another big renewal year.

Yeah, maybe I'll start. The recent renewal was devaluing the business model.

You know, and so I see some of the nature of the business changing over time, but we're confident in our renewal.

Just as a reminder, if you would like to ask a question today, please press star followed by one on your telephone keypad and to withdraw your question, it's star followed by two. Our next question comes from Jessica Tassen from Pipe Assembler. Your line is now open. Please go ahead.

Thanks for the question and congratulations on the rebranding. I wanted to start with just on the top three customer renewal, can you maybe qualitatively qualitatively describe like what was the value proposition and the key reasons this customer renewed? We know you've seen some business loss to internal operations at payers, but not every payer necessarily has the capacity to bring their multiple in contract in-house. It's kind of what sealed the deal on the three-year term and the stable economics, if you could help us there.

Yeah, also the including some of our newer processes that we provide through our data and decision science business. These we think are incredible products that will yield immense value market is to more deeply penetrate our existing and core markets because they're they're pretty substantial to 15 billion and so there is there is a lot of white space there left and so the conversation continue to add value so that you guys can focus on your opx your medx and affordability because you have large pnls to manage as well that's really helpful thank you

just to clarify so does that mean that you guys are providing a more comprehensive product sweep at the same economics and then just secondarily can you remind us how does the core out-of-network claims repricing products interact with the no surprises act both in your experience and over time as players converge on QPA schedules kind of does the savings opportunity for for claritive change um thanks again thanks Jessica so maybe I'll take the first full areas as well

i mentioned most of our and so i think there's we think there's growth we have no further questions

in the queue at this time so that does conclude today's q a session therefore concluding today's call. Thank you all for your participation. You may now disconnect your line.