Earnings call transcript: Claritev Corp Q1 2025 sees revenue dip, stock reacts negatively

Claritev Corp reported a slight decline in its Q1 2025 revenue to $231.3 million, marking a 1.4% decrease year-over-year, and a 0.4% drop sequentially. The company’s stock reacted negatively in premarket trading, falling by 4.95% to $20.18. According to InvestingPro data, Claritev currently maintains a "Fair" overall financial health score, though operating with significant debt burden. Despite the revenue dip, Claritev reaffirmed its full-year revenue guidance and expressed optimism about returning to growth in the upcoming quarters.

Key Takeaways

• Claritev’s Q1 2025 revenue fell 1.4% year-over-year to $231.3 million.
• Stock price dropped 4.95% in premarket trading following the earnings release.
• The company reaffirmed its full-year revenue guidance and expects growth in Q3.
• New product enhancements and international expansion are key strategic focuses.

Company Performance

Claritev Corp experienced a decline in revenue for Q1 2025, primarily due to challenges in the market environment. Despite this, the company saw significant growth in its Payment and Revenue Integrity segment, which rose by 9.7% year-over-year. The Core Commercial Health Plan also showed a strong performance with a 14% increase in billed charges. These figures highlight the company’s ability to capitalize on specific growth areas even amid broader revenue challenges.

Financial Highlights

• Revenue: $231.3 million, down 1.4% year-over-year
• Adjusted EBITDA: $142.1 million, down 3.2% year-over-year
• Adjusted EBITDA Margin: 61.4%
• Revenue Retention: 98.6%

Market Reaction

Claritev’s stock saw a significant drop of 4.95% in premarket trading, bringing the price to $20.18. This decline comes after a 4.68% increase in the previous trading session, where the stock closed at $21.23. Despite recent volatility, InvestingPro analysis indicates the stock has shown remarkable momentum with a 149.76% gain over the past six months. The current movement reflects investor concerns over the revenue decline and market uncertainties, despite the company’s positive outlook for future growth. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued.

Outlook & Guidance

The company remains optimistic about its future, reaffirming its full-year revenue guidance. Claritev expects to return to year-over-year growth by Q3 2025. The company is focusing on expanding its international presence, particularly in the Middle East, and is exploring new revenue models to drive growth.

Executive Commentary

Travis Dalton, CEO of Claritev, emphasized the strategic importance of the healthcare IT intersection, stating, "In changing times and uncertain environments, the intersection of health care and IT is a good place to be." He also highlighted the company’s commitment to reducing healthcare costs, saying, "Absent the work we do, health care would be more costly."

Risks and Challenges

• Revenue Decline: The recent dip in revenue could indicate underlying market challenges.
• Market Expansion: Expanding into new international markets presents both opportunities and risks.
• Healthcare Costs: Rising healthcare costs may impact the company’s ability to maintain margins.
• Competitive Landscape: Increasing complexity in insurance marketplaces could affect Claritev’s competitive position.

Q&A

During the earnings call, analysts inquired about the performance of Claritev’s NSA product and its partnership strategy with Lantern. The company also addressed its international expansion plans and expectations for utilization environment and volume growth.

Full transcript - Claritev Corp (CTEV) Q1 2025:

Sami, Call Coordinator: Hello, everyone, and thank you for joining the Claritev Corporation First Quarter twenty twenty five Earnings Call. My name is Sami, and I’ll be coordinating your call today. I would now like to hand the conference over to Shauna Gassick, AVP of Investor Relations. Thank you, and please go ahead.

Shauna Gassick, AVP of Investor Relations, Clarative Corporation: Thank you, Sammy. Good morning, and welcome to Clarative’s first quarter twenty twenty five earnings call. Joining me today are Travis Dalton, Chairman and Chief Executive Officer and President Doug Garris, Executive Vice President and Chief Financial Officer and Will Mintz, Senior Vice President of Corporate Affairs and Strategy. This call is being webcast and can be accessed through the Investor Relations section of our website at clarative.com. During our call, we will refer to the supplemental slide deck that is available in the Investors portion of our website along with the first quarter twenty twenty five earnings press release issued earlier this morning.

Before we begin, a couple of 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 and a more complete description on our annual report on Form 10 ks 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 Claritiv’s underlying operating results. An explanation of these non GAAP measures and reconciliations to their comparable GAAP measure 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?

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Thank you, Shauna, and good morning to everyone on the call. It’s a pleasure to welcome you into 2025 and what we’ve termed here at Claritif as the year of the turn. We chose an aperture for our new logo because we believe that transparency and insights are critical parts of improving health care economics going forward. We will deliver those by focusing on affordability, transparency and health plan optimization across the continuum. We have been busy and working to improve our speed to value across our breadth of scalable products and services.

We continue to make and keep our commitments, improving our say do ratio, including reaffirming our full year guidance. I’ve said since joining in March of twenty twenty four that we will be focused on an operating mechanism built upon clarity of purpose, alignment of talent, focus on results, fitness for growth and opening new horizons for growth. This will allow us to transform into a health technology company that delivers not only continuous improvement, but breakthrough solutions over time. Our refreshed and revitalized management team and associates are fully committed. Clarity stems from our strategic vision to utilize technology, data and insights to deliver affordability, transparency, and quality.

I’m very pleased with our new corporate branding as Clarative and the feedback we have received from clients, partners, and stakeholders. It’s a new day here at Clarative. And as I have told the team many times, the brand is earned and it will be embodied by all of us based on how we serve our clients. Alignment of talent and resources is critical and continues to be a focus for us. We are building a company with accountable leaders focused on a common goal with the autonomy to quickly make decisions.

This will allow us to move with speed and go faster, not because we simply try harder, which we are and will, but because we have discerned the critical few priorities from the many inputs that hit the windshield daily. Furthermore, we are attracting world class talent. For example, our new Chief AI Officer is already delivering strategic thinking for our digital transformation and product development. Our Chief Medical Officer will collaborate across our product, sales and technology teams to enhance and guide our core data and analytics network solutions to serve across the health care continuum. This includes interfacing with executives from hospital and health systems, payer networks, and other medical organizations to align Claritib’s products and services with their evolving needs.

The CMO role is one of several key positions we’ve hired recently to help accelerate our business transformation strategy, and I’m looking forward to the impact he and others will have on making the turn we need for sustainable growth. In terms of our focus on objectives, we launched a new performance management and goal setting initiative. Every one of our associates knows the five key pillars of focus for our company and how each of their roles fits and the goals that are expected of them. We track progress and publish a regular scorecard. Some examples include total net revenue retention is at 98.6% within our full year revenue guidance range.

Pipeline expansion is up 127% quarter over quarter. Average deal size is increasing with the average annual contract value growth of 35% quarter over quarter. Our competitive win rate climbed 32%, nearly doubling our prior year’s percentage. Creating more opportunities, managing larger deal sizes and improving win rates will be the leading indicators of our growth over time. We now have these metrics and others so we can actively measure and manage the company with rigor and discipline.

You are what your record says you are, and we are keeping score to ensure accountability. We’re also shaping up to be fit for growth. The strategic roadmap for our growth organization is now set. I was at our energizing sales kickoff session in early April where we communicated our new growth organization structure, targets, and priorities for 2025 and resources to better monitor success and opportunities with our go to market process. Additionally, Doug will provide commentary on the progress of our digital transformation, which enables us to grow faster with agile products for new markets.

Finally, we’re advancing our horizons for growth. We have gone from essentially one market segment to a total of seven now across payer, provider, brokerconsultant, employer, government, partner and international, with an accountable leader over each. We have dramatically increased our addressable market and targets, which is starting to show up in our pipeline growth as a positive leading indicator. I’m thrilled with our progress and the results to start the year. Some other key highlights to share since the start of 2025 include: As I announced on our last call, we successfully completed a three year renewal with our largest client at the end of last year.

I’m also pleased to announce that we renewed a top 20 client at $13,000,000 annual contract value for five years at current value and are progressing well with other early renewal conversations with significant clients. These renewals at current values are becoming proof points for the value we bring to our clients, not only with our core products, but expanding with our growth solutions as well. We have identified white space opportunities that will deliver value to existing clients. These opportunities represent a strong 42% of our twenty twenty five active pipeline. We announced another key partnership yesterday with Lantern, specialty care platform that helps employers reduce costs and improve health care outcomes for surgery, cancer, and infusion care patients.

We will be using Venn Insights to unify clinical and financial data to identify health care spending patterns and benefit plan design. We have an opportunity to deploy BEN Insights for employer groups comprising over 1,700,000 covered lives. We have already expressed an interest in obtaining savings validation studies with unprecedented visibility and surgical cost variation and concrete opportunities for optimized care pathways and savings. These are the types of innovations that we are advancing in health care together. We are gaining traction in our data and decision sciences and continue to receive industry recognition for our products.

Our CERES solution, which empowers supplemental carriers and benefits brokers with the ability to deliver unbiased customized recommendations, won the 2025 Data Breakthrough Award as the Data Solution of the Year for insurance. We continue to make strides with provider health systems and our friends at the National Rural Health Association, penetrating the market with CompleteView and other provider analytics solutions. Last week, Carlinville Hospital presented with us at Becker’s Healthcare Conference, demonstrating the competitive insights and the revenue maximization potential of our solutions, resulting in over 100 new leads. We closed on 179 opportunities in the first quarter and signed five new logos, New and or reactivated logos and employer groups are a major focus for us and represent 53% of our twenty twenty five active pipeline. We launched six new product enhancements in Q1, weakening our pace of enhancement and innovation across our product set.

As we are now in the second quarter, we have more milestones to achieve. With the growth organization launched, our sales kickoff behind us and a renewed market segment focus, we will continue our quick and pace by building out the pipeline and realizing faster conversion of bookings and revenue. One example for growth product is our value driven health plan. This product set continues to distinguish itself as a flagship initiative, now representing the largest segment of our twenty twenty five active pipeline. Earlier this year, we enhanced the VDHP offering by integrating our prepay payment integrity solution, ACE, further strengthening its value proposition and are continuing to add new features to enhance the member experience.

Later this year, we will introduce a new broker sales model designed to more clearly communicate our value and accelerate revenue. Another example is CompleteView. We continue to develop enhancements that bring additional clarity to providers facing increased market pressures to optimize their operations. The enhancements powered by Claritiv’s advancing digital infrastructure will not only bring greater transparency to market data, but do so in an easily searchable and digestible way to make such competitive pricing insights actionable and valuable for our clients. Finally, we recently announced our international business unit in partnership with Burjeel Holdings in Abu Dhabi.

I had the pleasure of working with Burjeel directly while running a global business in my prior role before joining Claritiv. I came to Claritiv with a thesis that our solutions could serve a broader mission in global health care. Much of the world uses similar US based coding standards, and our tools are tailor made to improve efficiency and optimize revenue cycle in key markets around the globe. We have a perfect world class partner in Virgil to test and build these capabilities to drive material value. This is only the beginning.

With that, let me take a moment to comment on the macro environment and the state of health care. In changing times and uncertain environments, the intersection of health care and IT is a good place to be. We sit squarely in that intersection and are supportive of the aims to improve transparency, reduce waste fraud abuse, and drive health care cost economics downward. We feel that we are well positioned as costs continue to rise and the constituents of health care seek innovative ways to manage those costs with transparent insights. Employers will be looking for solutions that predict risks and improve benefits while managing costs.

We believe our solutions are uniquely positioned to do just that. Health care remains a highly competitive environment with rising costs and demand for critical services. Those challenges have not changed. At the same time, developing data driven insights around affordability, transparency and quality, the areas where Clarative excels, are more important than ever to lawmakers, clients and patients across the nation. We have a depth of talent here at Clarative, and Will Mintz, our Chief Strategy Officer, joined us last year to work on hardening our corporate affairs and drive strategic planning and partnerships.

Will has not only been instrumental in our partnership and digital transformation with Oracle, but also with our international expansion into The Middle East and North Africa. Will just came back from the MENA region, and a group of us are going next week. I asked Will to come on and describe why we are so excited about this expansion potential.

Will Mintz, Senior VP of Corporate Affairs and Strategy, Clarative Corporation: Thanks, Travis, and hello to our earnings call audience. I want to share some of the insights into our international market strategy in light of the announced memorandum of understanding with Virgil Holdings that Travis just mentioned. This MOU covers expansion into the region where our expertise is highly applicable, namely the GCC markets of The UAE, Oman and Qatar. Why this region? In these markets, we see an existing private insurance marketplace with increasing complexity.

$21,000,000,000 of aggregate claims growth in high single digits prominent use of U. S. Coding standards for billing and reimbursements pressures from rising health care costs and evolving regulatory reforms. Why Virgil? Our executive team has had a strong relationship with Virgil from prior experiences.

And Virgil’s focus on elevating health care delivery in The Middle EastNorth Africa region is a perfect gateway to integrate our highly scalable technology products and services in the region. With our payment and revenue integrity solutions and business process outsourcing services, we are positioned to support clients facing rapidly increasing structural problems such as variations in insurance schema, inefficiencies that increase cost and provider competitiveness for specialized skills. We are currently mapping out a joint go to market strategy with Virgil. It doesn’t stop there. We see similarly formally single payer markets evolving towards multi payer systems to combat rising costs, inefficiencies and ultimately to create a sustainable health care system.

And we are building roadmaps to open the apertures in such markets. With that, I will turn the call over to Doug to review our financial results, progress on digital transformation and financial guidance for the year.

Doug Garris, Executive VP and CFO, Clarative Corporation: Thank you, Will, and good morning, everyone. Before we get into Q1 twenty twenty five financial results, I wanted to provide an update on the progress we are making with the recently announced transformation program. If you recall, this program was launched earlier this year as a multiyear initiative to modernize operations, drive significant cost efficiencies, to best position Claritin for future growth as part of the Vision 02/1930 plan. We communicated three key areas of focus for this program. One, digital transformation and technology enablement, two, business realignment, and three, business process optimization.

Regarding our digital transformation work as part of our yearlong lift and shift to Oracle Cloud Infrastructure or OCI, we have already started development tasks directly on OCI’s clouds with our engineer actively building code related to certain products. In the development environment, we are already seeing four to seven times performance gain in OCI’s high compute infrastructure. We expect all of our on premise systems to be moved to OCI before the end of the year. Next, we have two great examples related to our business realignment mentioned earlier by Travis. In early April, we had our first annual sales kickoff session for our new growth organization.

This was an important step to drive clarity, alignment, and focus to the markets we serve as we accelerate and intensify our go to market strategy. Additionally, our rebranded Clarative has helped drive an understanding of our focus on improving affordability, transparency, and quality in health care, and where our vision 2030 journey will lead. Finally, we achieved a significant milestone in April related to business process optimization with a go live of a modern cloud based enterprise resource planning or ERP system. This was a successful outcome of over a year of detailed preparation, analysis, numerous iterations of testing, and multifunctional training. We expect the new operating system to allow us to scale internal operations in any geography much faster with a slight significantly lower total cost of ownership or TCO.

Now that we have a modern cloud based operating system, we expect to achieve significant improvements to our revenue management, pricing and packaging, general accounting, business governance, financial planning, and business insights and analytics. As you can see, we have a lot going on as we complete the turn this year, and I want to take a moment to personally thank all the team members involved for their devotion to deliver this project on time and within the budget allotted. We are still targeting a net 10% to 15% reduction to our cost base over the next few years, and I look forward to providing updates on our transformation program as we progress. Moving on to first quarter results. As shown on Page five of the supplemental deck, Q1 ’twenty five revenue was $231,300,000 down 1.4% from last year and down 0.4% sequentially.

While revenue was slightly sequentially, revenue came in above our internal expectations for the quarter with stronger charges and savings in our core business offset by a known decline at OneClient. Excluding the OneClient, revenue was up 3.2% in the first quarter versus last year, which is largely aligned with the charges and savings we show on subsequent slides. Turning to first quarter revenue by service line, as shown on Page six of the supplemental deck. Analytics based revenue declined 4.2 from last year and was down 2.3% sequentially. Of note, we saw a strong performance in our reference based pricing and surprise bill NSA products against our internal assumptions.

Network based revenue increased 1.6% from last year but was down 0.8 sequentially and was in line with our internal assumptions. Our Payment and Revenue Integrity revenue increased 9.7% from last year and was up 11.5% sequentially. Our Payment and Revenue Integrity business was a highlight this quarter, posting its highest quarterly revenue since Q2 of ’twenty two. The revenue increase was primarily due to increases in prepayment clinical review and post payment accuracy product lines as we delivered more savings to our clients despite slightly lower charges processed. During the first quarter, as shown on Page seven of the supplemental deck, total first quarter billed charges decreased 7% sequentially to $42,900,000,000 Identified potential savings decreased 2% sequentially to $6,200,000,000 And our core Commercial Health Plan segment billed charges decreased 3% sequentially, but were up 14% versus last year.

And Identified Potential savings decreased 3% sequentially but increased 8% versus last year to $5,800,000,000 As shown on Page eight in our core percentage of savings revenue model, identified potential savings decreased approximately 2% sequentially and were roughly flat year over year at 4,300,000,000 In our core percentage of savings revenue model, our revenue yield was down five basis points sequentially and down 18 basis points versus last year, which had a resulting impact on our revenue of about 5,000,000 and $8,000,000 respectively. On our previous call, we shared that we’re working on meaningful new metrics to analyze the performance of the business. These center around the rate volume mix relationships and fluctuations of our significant product categories and for select larger clients. We will utilize 25 to continue to set these base benchmarks so that we can articulate the progression of our core business on a revenue retention and a whole dollar revenue basis and provide new and compelling bookings and recurring revenue metrics as our growth businesses ramp up. We added a new exhibit on Page nine of the supplemental deck that highlights the sequential performance of our PSA business on a whole dollar basis.

As a reminder, our P Safe revenue is approximately 90% of our total revenue. In Q1 ’twenty five, P Safe revenue declined $10,000,000 due to the seasonality of claims and declines at one client and was offset by approximately $5,000,000 of favorable rate mix due to higher savings and revenue per claim. While claims volumes have steadily declined over the last few years, we have seen substantial improvements to savings per claim, up 32% from $676 to in Q1 ’twenty three to $894 in Q1 of ’twenty five, and corresponding revenue per claim up 20% from $35 in Q1 of ’twenty three to $41 in Q1 of ’twenty five. Both have increased double digits over the last eight quarters. Notably, none of the decline in our PSA revenue yield in the quarter was related to contract changes with clients.

Turning to expenses. First quarter adjusted EBITDA expenses were $89,300,000 increasing $1,500,000 from last year but decreasing $1,300,000 sequentially. The increase versus last year was primarily due to increases in professional fees and access and bill review fees, partially offset by lower personnel and facilities expenses. For the sequential comparison, the $1,300,000 decrease in adjusted EBITDA expenses was primarily due to lower access and bill review fees and expenses related to digital transformation, partially offset by higher personnel costs as we reset our annual incentive compensation. Adjusted EBITDA was $142,100,000 in Q1 ’twenty five, down 3.2% from $146,800,000 last year and down 0.4% from $141,600,000 in Q4 ’twenty four.

Adjusted EBITDA margin was 61.4% in Q1 ’twenty five, up 40 basis points sequentially, down approximately 120 basis points from 62.6% last year. Our Q1 ’twenty five adjusted EBITDA dollars and margin were both in line to slightly better than our expectations to begin the year. Based on Q1 momentum and notably improved visibility into our sales funnel, we can reaffirm our full year guidance for all the metrics shared from our last readout, as shown on Page 10 of the deck. We expect to continue to deliver improvements to both revenue and adjusted EBITDA quarterly and expect to return to year over year growth starting in Q3. Revenue retention in the core business remains strong, and conversations with key clients are positive and helps us reaffirm the year and the fundamentals in our underlying business.

We continue to emphasize measurable value creation with an elevated intensity around our go to market channels and partners. Turning to the balance sheet and capital allocation. Our reported net cash provided by operating activities was a use of $30,100,000 for Q1 ’twenty five, while the levered free cash flow was a use of $68,900,000 Unlevered free cash flow was $13,100,000 for the quarter. As a reminder, our normally our normalized quarterly cash flow generation varies based on the timing of our debt interest and tax payments. This quarter, we also had an additional uses of cash related to our 4,600,000,000.0 comprehensive debt refinancing transaction that we closed in late January.

As shown on Page 10 of the supplemental deck, we ended the quarter with $23,100,000 of unrestricted cash. We did not buy back any securities this quarter. Net of cash, our total debt leverage ratio was 8.1x, and our outlook for the capital expenditures in the year remains unchanged. Our long term capital priorities are clear. Our highest priority remains investing in the business to drive organic growth to fuel our Vision 02/1930 plan, followed by using excess cash to reduce net operating leverage.

That brings me to the end of my prepared remarks. Operator, would you kindly open up the call for questions?

Sami, Call Coordinator: Thank you very much. Our first question comes from Joshua Raskin, Nephron Research LLC. Your line is open. Please go ahead.

Marco, Analyst, Nephron Research LLC: Hey, good morning. This is actually Marco on for Josh. Appreciate you taking the question. I guess my first one would just be if you could provide a little bit more detail around the underlying utilization environment and how that impacted your results in the first quarter? And then maybe a bit more specifically, if there was any impact from the very active flu season we saw in the first quarter or if you expect that impact to flow into the second quarter?

And then if you could also just remind us of what your full year guidance assumptions were around volume and utilization? Thanks.

Doug Garris, Executive VP and CFO, Clarative Corporation: Great. Thanks, Marco, and good morning. I’ll take a stab at that one. So I think we talked about in the prepared remarks that over the last few years, we’ve seen a slight contraction of total claims coming through the system. But we’ve seen a notable improvement to our savings and revenue per claim.

We think it is is likely a confluence of, our largest clients sending us their more challenging and higher dollar value out of network claims. With respect to the flu season, I don’t think we’ve seen anything of note or out of the ordinary, and we haven’t modeled any changes to our assumptions for the year. And as you recall in our, last guide, and recently had an investor roundtable, we had called for a revenue retention on our core business of approximately 98%, which is in line with how Q1 shook out. So excluding one client, we expect core volumes to be up, roughly mid single digits, and we expect our growth areas to contribute about 7% of our revenue. And if you put those into, conjunction with each other, you get to about, a 98% to 100% total revenue retention on a net basis for

Travis Dalton, Chairman, CEO and President, Clarative Corporation: the for the total business.

Marco, Analyst, Nephron Research LLC: Great. Thanks. That’s that’s very helpful. And then I guess one other one on the Bergil partnership. I guess, specifically, what products do you see as potentially being a good fit for the Middle East market?

And then what is the timeline that you see those products being launched? And how do you see or how do you envision the cadence over which you start to see some benefit from that? And then also if you could just give a little color on what the competitive landscape in those markets look like? Thanks.

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Sure. This is Travis, and I’ll turn it to Will for a comment. Look, as I noted in the script, I I my view was that we had products that we could launch into other markets, right? As I mentioned, it’s not just international. When I came, we essentially had one market.

Now we have seven, including international. These same challenges are global, quality, you know, investments, cost, adequacy, coverage, networks. So we really view the problem in a very similar way, and they use ICD-ten and CPT and other coding standards. Also, many of us have worked in the regions. I personally know the team there very well, did a a large agreement with them and executed on it in the past.

And so we a real opportunity for focus on optimization, particularly with rev cycle management and EMR integration with them, and that they’re a perfect operating partner for us because they actually operate hospitals, ambulatory surgery centers, and have a rev cycle management company. So we we’re gonna work to drive optimization efficiency with them, and we have a number of key objectives with them that our products plug in and fit really nicely. I expect us to start to see real, real, real results the second half of the year from them, but we’ll be we’ll do more to quantify what we think those results are beyond the addressable market with a clear view on bookings and revenue as we make progress. And I’ll turn it to Will to talk a little bit more about specific product set. Sure.

Will Mintz, Senior VP of Corporate Affairs and Strategy, Clarative Corporation: Thanks for the question. Maybe I’ll address kind of the state of the market. It’s rapidly evolving over there. There are increasing pressures, on affordability, and that is causing, the insurance schema to rapidly evolve as well as the increasing cost of care. So there’s plenty of opportunity for us to bring our solutions around payment and revenue integrity, network optimization, and then just our advanced analytics capabilities to bring insights into the, data that is needed to ensure the sustainability of the health care infrastructures that they’ve built, especially as you, have an increasing mandatory insurance, protocol across the region.

Luis, Analyst, Citigroup: Doug, do want to Yeah.

Doug Garris, Executive VP and CFO, Clarative Corporation: And then finally, on the the economic assumptions where, Travis mentioned that a few of us are going over there next week. And I think the hope is to have at least, you know, from an internal perspective, at least $1 revenue from from outside the from outside The US by the end of the year. But I think over the next quarter or two, we’ll be in a a much better place to give, to give you guys a formal update on the state of play.

Marco, Analyst, Nephron Research LLC: Great. Appreciate all the color.

Sami, Call Coordinator: Our next question comes from Madison Aaron from JPMorgan. Your line is open. Please go ahead.

Madison Aaron, Analyst, JPMorgan: Hi, thanks for taking my questions. First on the average contract value bookings, can you just walk us through where you’re seeing those wins? Is it mostly within your existing product offerings or is it in the new product offerings? And with that on the new pipeline, I know it’s an annualized number, but can you also walk through that mix shift? Is it mostly all Ben Insights?

And can you walk us through the onboarding process of that new pipeline or for that new pipeline?

Doug Garris, Executive VP and CFO, Clarative Corporation: Yeah. Great. Thanks, Madison, for the question. I’ll take the first part on the math and the orchestration of the pipeline. Then, Travis, if you have any color on that kind of lead gen process, I think that would be great.

So we had talked about the pipeline increasing about 127% quarter over quarter, and we are measuring a couple of things. One, funnel sufficiency. So we’re locking down how much funnel we need to convert to revenue to achieve our long term growth objectives. Strong indication is we’re gonna continue to communicate the funnel growth, and it is a, I would say, a newer function here with sales operations that exist at most other large technology companies. So on our current and existing funnel, it’s really nice because about half of the funnel is white space with existing clients, and we’ve hired 13 new salespeople to attack, and in intensely go after, existing clients with new leads.

And we’ve reorganized our sales organization into kind of business development, client success, go to market, and new markets against the seven regions that we have. And if you look at the orchestration of the total funnel, about 40% of that is contained within BDHP, which is an exciting growth area for us. And so as we look at our go to market and our channel partners, we’re highly optimistic about the prospects of that business. And then about 15% of the funnel is in D and DS, and that’s where we’ve made the most progress with respect to CompleteView, our PlanOptics, and Venn Insights products, which about half of the funnel in D and DS is on Venn Insights, but we expect that funnel to continue to grow. And one important part of our strategy is engaging with channel partners as well as brokers to help incent them to get those products to market because they are of significant value.

And then I mentioned in the opening comments the bright spot with payment revenue integrity. That business is on fire. Right? It’s up 10% year over year, up 11% sequentially. And about one out of every three new opportunities is in the payment revenue integrity space because, prepayment payment revenue integrity has become a a source of value as just the general inflation of health care cost has made its way into our clients.

And so to kinda unpack it, half of it’s white space. We just have to sell better, and then about half of it’s new opportunities with BDHP and our data and division science business quickly generating dozens, and dozens of new leads each quarter.

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Yeah. And I’ll do this is Travis. I’ll just add a tiny bit of commentary on that. So, you know, as I mentioned, our our pillars that we’re focused on. So value driving value in the core, new markets and logos, operating excellence, meaning using Salesforce, ERP, modern tools, best talent, so we’re hiring sales talent, and innovation, so bringing products to market.

You know, as Doug mentioned, we see not only do we think that our core is something we don’t believe the core is something to shrink. We think something’s gonna grow. And now we have a white space report for every single client that we have that is a current client. We didn’t have that a year ago. So we know the white space, the opportunity, and the targets that every single client we have is a lead.

And so we’re gonna start attacking that with value based on their needs and what they see. BDHP is a big opportunity for us. I mentioned we’re gonna launch a new broker incentive model. We’re gonna go and attack that space like we never have before because we think we have the best product and the right to win, and we intend to win. Ben Insights, we’re seeing a lot of growth.

That partnership with Lantern is interesting. We can sell through that channel in a way where we don’t have to exert maximum effort to bring maximum value. So key partnerships are gonna be really important for us. And then I’ll just close by saying on this one, you know, market leads are how do you how do we generate market leads? One is relationships.

We know people. We have relationships, and we’re just gonna hustle. Secondarily, we know our white space. We know what products we have, and we know that we need to sell in. Thirdly, we’re gonna be not we’re going to.

We are showing up at events that we’ve never been before. We were at Vibe this year. We were at Becker’s Health where a provider client went up and presented on our behalf for an hour on the value that he gets from our products. We had 100 leads out of that that are now logged in Salesforce. That’s lead generation.

And so those are the kind of things that we’re doing in maximizing our tools and what our growth leader and the growth team have been focused on doing. So I’m actually very pleased with with the work that they’re doing and the focus and the use of the tooling and the insights, and that’s how you focus and target. And we’ll be incenting our salespeople on a much more aggressive way, as Doug mentioned on the call. Thanks.

Madison Aaron, Analyst, JPMorgan: Great. And if I could just follow-up. You know, in the last in the roundtable that we had a few, months ago, you talked about new revenue models that you’re, evaluating. Where do you stand with those new revenue models? And then just specifically, and I know you mentioned this, briefly, but with regards to the provider channel, can you just maybe elaborate or further dive into that opportunity?

And how do you see that playing out through the course of the year?

Doug Garris, Executive VP and CFO, Clarative Corporation: Yes. So, I’ll take the business model, and then, Travis can cover the provider. Yes. So we had mentioned on last quarter, we signed our largest total contract value deal ever with a subscription booking on our reference based pricing product. As a CFO, I love that because it’s recurring revenue.

And as a CFO on the other side, it’s a recurring cash flow that provides a meaningful subscription value that helps our client share in the upside. So within our core business, we’re continuing to evaluate those opportunities, and we have a few dozen opportunities in the pipeline that we’ll look to close on our core business with respect to a recurring revenue model. And then for the growth areas within Data and Decision Sciences and BDHP, we mentioned the use of channel partners to help us get to market. So if you think about the force multiplier of having dozens, if not hundreds, of other folks incented to sell your products, I think for the VDHP business, it will continue to be a PEDM. It will be a membership based business.

But for D and DS, we’re actually doing some third party market research right now to help inform the best go to market model. And I think it might depend on the channel, whether we go through a distribution partner or we work directly with large employer groups. But I expect to have a a combination of professional services, licensed software, and subscriptions with potentially a percentage of value capture, in certain circumstances. But the goal is to, to align that with, obviously, our cost structure and then also our clients’ needs. But those are the the revenue models that we’re working on right now.

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Yeah. On the provider side, you know, we’re I view it as really a a two, three step process. So, you know, we’re we started with zero and no product. And by the end of the year, we had seven seven clients, and we were actively pushed actually actually selling CompleteView. And so CompleteView is, you know, our product, our analytic that allows competitive positioning.

You can look at your pricing position versus like hospitals, like facilities in similar markets. So it’s actually really helpful when you can see that competitive position. It also allows for insights as it relates to revenue maximization. And so our our clients are very, very interested, and we’re starting to gain client testimonials related to the value that we bring, not just us trying to sell the product. And so we see that as a real opportunity.

Secondarily, we also it turns out that most in in cases, particularly in in rural and mid market regional health, the the hospital is the largest employer in the region. And so we’re we’re starting to have discussions as a second conversation of, yeah, I think I can improve your revenue by 10 to 15%, but also think I can take your cost down by 10 to 15%. And we can do that continuing through BenInsight’s product set by work doing the work that we did on ourselves as employer, which is looking at the market, looking at our demographic, looking at our benefits package, and evaluating the optimal opportunity for us, to improve our benefits and reduce our cost. We were able to do that last year in a significant way, and every one of our our clients we’re talking to is interested in that. And then finally, we intend to launch another piece of the solution, the second half of the year that we’re gonna call Vitality, which is gonna be automating quality reporting for providers as we go.

So we think that we’ve got a a a multistep process that we can execute with them that’s bearing out to be true, not only based on the the pilots we have, but also, as I mentioned, on the hundred plus clients that we now have in the pipeline. And we’ve also you know, I hope to be announcing pretty soon a much larger deal size with a provider that will demonstrate that. And so I’m very optimistic about that segment as we go forward.

Luis, Analyst, Citigroup: Thank you.

Sami, Call Coordinator: Our next question comes from Luiz Mario Higuera from Citigroup. Your line is open. Please go ahead.

Luis, Analyst, Citigroup: Hey, this is Luis on for Daniel. And I’m joining from a different call, I apologize if this isn’t covered already. Last quarter, you noted that your NSA product is pressured by declining a larger client, and you also said there’s a one hundred day exception period from CMS that also created a headwind for that product. Are there any updates in the NSA product and have those issues resolved? Thank you.

Doug Garris, Executive VP and CFO, Clarative Corporation: I had a little bit

Travis Dalton, Chairman, CEO and President, Clarative Corporation: of trouble hearing that. Can you repeat the question? Sorry. We didn’t catch it.

Luis, Analyst, Citigroup: Yes. Sorry. So last quarter, noted that the NSA product is pressured by decline in a larger client, and there’s also one hundred day one hundred and twenty day exception period from CMS that also created a headwind. Is there any updates on the NSA product and have those issues resolved?

Doug Garris, Executive VP and CFO, Clarative Corporation: Got you. Okay. Thank you. So for the NSA product, we had mentioned that one of the reasons that we called the the year down 2% to flat as we expected, one client to insource NSA. That has started to happen, and so we expect that client to fully insource NSA.

However, if you look at our NSA and surprise bill across some of our other clients, that’s actually been an area for growth. And the hundred and twenty day exception period, I would say, hasn’t necessarily impacted our business other than we also negotiate and help manage the independent dispute resolution to where we serve as the kind of a conduit there as well. And so, I would say the surprise bill is, a a decent business excluding that one client. But with respect to the hundred and twenty day exception period, I don’t think we’ve seen I don’t think we’ve seen any any meaningful or, diminishing, impacts from the rest of the client base.

Luis, Analyst, Citigroup: Got it. Thank you.

Sami, Call Coordinator: Our next question comes from Derek Grosse from Piper Sandler. Your line is open. Please go ahead.

Doug Garris, Executive VP and CFO, Clarative Corporation: Hey, guys. This is Derek Gross on for Jess Tasson. Thanks for taking the question and congrats on the quarter. I wanted to ask about the new partnership with Lantern. Could you give any additional color on what it is, how it came about and how the revenue model works?

Thank you.

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Yes. Will will take that.

Will Mintz, Senior VP of Corporate Affairs and Strategy, Clarative Corporation: Sure, Derek. Thanks for the question. I think the way to think about the Lantern partnership, is a true channel partner synergy, where the Lantern products in terms of care navigation to high quality, lower cost specialty providers is a direct value add to our VDHP product in our reference based network. So this product will help employers identify new opportunities to to enhance their benefits through our BEN Insights tool as well as driving down lower costs by helping your employees navigate the care delivery system to higher quality, lower cost specialty providers.

Doug Garris, Executive VP and CFO, Clarative Corporation: Yes. And I would just say from a business model or revenue perspective, I think a lot of our distribution and channel partner agreements would be some sort of revenue arrangement. But our core and underlying business within DNDS and BDHP would just be our core economic model. Correct. And so it’s the the path to market gives you better scale.

So every time we want to address that part of the market, we don’t have to hire another 13 people. But it would be it would be a revenue sharing or a sales commission arrangement. Sure.

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Yeah. And I I I’ll just add. I I just have to add this. We’re a I’ve said this before. I this a health tech solution.

Right? This is so what we’re doing here is, ultimately, what what we care about is not just cost, but quality. And so the reason I love the partnership with Lantern so much is what they do is really important because it gets people to the right pathway. You get to the right pathway, your costs are down, but guess what? You have a better chance to live.

And so those are the kind of partnerships that when we came, we wanted to do. Right? And so we’re very excited about it because our tools can help with cost reduction. They also help with Lantern, bringing that to the correct pathway, and care navigation, getting the right care to the person that’s in a critical need as it relates to cancer or other complex conditions. And so, we’re very proud of the fact that they chose to partner with us, because we think what they do is really important.

We think it’s good for health care. And, that’s the company that we’re evolving into, in addition to the core that we serve, and we’re proud to serve that core as well.

Doug Garris, Executive VP and CFO, Clarative Corporation: Great. Super helpful. Thank you.

Sami, Call Coordinator: We currently have no further questions. So I’ll hand back to Travis Dalton for some closing remarks.

Travis Dalton, Chairman, CEO and President, Clarative Corporation: Thank you. So thank you all again for joining us today. As we continue with our year of the turn, I’m emboldened by the commitment of our people. We have great associates, and all of us here today are really proud to represent them. We’re acting with intent and urgency.

I’m certain those of you that have followed us, can see that. And while the external environment remains dynamic, we are prepared strategically and operationally to respond with with agility as we as we move forward. Since I joined Claritiv, I’ve maintained that I believe in the character integrity of our people. What we do is good for health care. Absent the work we do, health care would be more costly.

It would be less efficient for employers, employees, and ultimately patients. We appreciate the opportunity to do this work that matters, and we ultimately are proud to serve our clients. We’re gonna be steadfast in building the company. It’s gonna be fit for sustainable growth, and we’re gonna build it to last, and we’re gonna have a mission that we care deeply about. And I’m encouraged with our pace and our progress on many on many fronts.

It’ll transformation, AI, product life cycle, go to market competitors, our pipeline, insights and fidelity to the pipeline, increased markets and opportunities. And I think things are are looking up at Claritiv, and we look forward to the future. And with that, I’m gonna just say thank you for your time today, and we appreciate your focus and attention with us. Thank you.

Sami, Call Coordinator: This concludes today’s call. Thank you very much for joining. You may now disconnect your lines.

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