Business Context and Reporting Period
This Form 10-Q covers the quarter and nine months ended September 30, 2020. The filing identifies the registrant as MultiPlan Corporation, successor to Churchill Capital Corp III, rather than Claritev Corp. Through September 30, the entity operated as a special purpose acquisition company and had no operating business or revenue. The business combination with MultiPlan Parent closed on October 8, 2020, after the reporting period; therefore, the interim financial statements do not reflect the operating results of the acquired MultiPlan business.
Financial Highlights
| Metric | Three months ended September 30, 2020 | Nine months ended September 30, 2020 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating costs | $8.6 million | $10.7 million |
| Loss from operations | $(8.6) million | $(10.7) million |
| Other income | $0.2 million | $4.4 million |
| Net loss | $(8.7) million | $(7.0) million |
| Basic and diluted loss per share | $(0.28) | $(0.31) |
| Net cash used in operating activities | Not separately reported | $(2.6) million |
Other income primarily consisted of interest earned on Trust Account funds. Operating margins and comparable operating metrics are not meaningful because the reporting entity was a pre-combination blank-check company and generated no revenue.
At September 30, 2020, total assets were $1.11 billion, including $1.104 billion in cash equivalents held in the Trust Account and $3.2 million in cash outside the Trust Account. Total liabilities were $49.1 million, including a $38.5 million deferred underwriting fee payable and a $1.5 million related-party convertible promissory note. Common stock subject to possible redemption was presented as temporary equity at $1.053 billion. Stockholders’ equity was $5.0 million.
Material Changes Versus the Prior Comparable Period
- Compared with December 31, 2019, cash increased from $34,000 to $3.2 million, and Trust Account investments increased to $1.104 billion following the February 2020 initial public offering.
- Total assets increased from $318,930 to $1.108 billion, primarily due to the $1.1 billion public offering and related Trust Account funding.
- Liabilities increased from $295,380 to $49.1 million, principally due to accrued transaction costs, the deferred underwriting fee and the related-party convertible note.
- The Company reported a nine-month net loss of $7.0 million versus the nominal formation-period results at December 31, 2019; no meaningful operating comparison is available because the Company had not begun operating the MultiPlan business.
Business Combination, Outlook, Risks and Unusual Items
- On October 8, 2020, the Business Combination closed and the Company changed its name from Churchill Capital Corp III to MultiPlan Corporation. The transaction was accounted for as a reverse recapitalization.
- Public stockholders redeemed 8.7 million shares for approximately $87.2 million, or approximately $10.03 per share.
- The closing included a $1.3 billion common equity PIPE investment and $1.3 billion aggregate principal amount of 6.00%/7.00% convertible senior PIK toggle notes due 2027.
- Subsequent to quarter-end, the Company approved up to $20 million of transaction bonuses and expects to record approximately $106.2 million of expense for accelerated vesting of Holdings Units, both in the fourth quarter of 2020.
- On October 29, 2020, a subsidiary issued $1.3 billion of 5.750% senior notes due 2028 and increased its revolving credit facility commitments from $100 million to $450 million. Proceeds and $715 million of cash were used to refinance existing debt, including $369 million of term loans and the 7.125% senior notes due 2024.
- On November 9, 2020, the Company acquired HSTechnology Solutions, Inc. for $140 million in cash and incurred approximately $4.3 million of transaction costs. Purchase accounting was incomplete at the filing date.
- After giving effect to the subsequent refinancing, the filing states that total indebtedness was approximately $4.941 billion, excluding $1.8 million of letters of credit, with $450 million of additional revolving availability. The filing also highlights variable-rate exposure, leverage, debt covenants and refinancing risk.
- Key operating risks include COVID-19 effects on healthcare utilization and customer enrollment, customer concentration, pricing pressure, provider-network changes, healthcare regulation, privacy and cybersecurity, litigation, acquisition integration and substantial leverage.
- Management reported effective disclosure controls at a reasonable assurance level, but the filing notes that MultiPlan Parent had identified two material weaknesses in internal control over financial reporting relating to staffing and formal accounting policies and procedures.
- Five stockholder lawsuits relating to the Business Combination had been filed; all five were subsequently voluntarily dismissed by November 2, 2020, according to the filing.
Investor Verification Checklist
- Confirm the issuer and company name, because the supplied metadata references Claritev Corp while the filing identifies MultiPlan Corporation and Churchill Capital Corp III.
- Verify post-combination operating results, including revenue, adjusted EBITDA, margins and cash flow, in later filings because this Form 10-Q contains only pre-combination SPAC results.
- Reconcile the post-closing capital structure, including the $1.3 billion convertible notes, $1.3 billion senior notes, term loans, revolver availability and warrant dilution.
- Assess liquidity and debt-service capacity after the refinancing, including compliance with the first-lien secured leverage covenant.
- Track recognition and cash payment of the approximately $20 million transaction bonus and $106.2 million accelerated equity-vesting expense.
- Review the HST acquisition accounting, integration performance and any resulting goodwill or intangible assets.
- Monitor remediation of the two material weaknesses and future auditor assessments of internal control over financial reporting.