MSPRZ — MSP Recovery, Inc.

MSP Recovery (MSPRZ) Q3 2022 Earnings Call Summary

1. Key Financial Results and Metrics:

• Debt Reduction: MSP Recovery negotiated a $63 million debt reduction with Brickell Key Investments, expected to save approximately $40 million in interest expenses annually.
• Potential Recoverable Claims: As of September 30, 2022, the company reported $89.2 billion in paid value of potentially recoverable claims, exceeding projections by 3.5 times.
• Claim Recovery Income: For the nine months ended September 30, 2022, MSP reported $7.9 million in claim recovery income, with 51% from previously identified recoveries and 49% from unfunneled recoveries.
• Net Loss: The company reported a net loss of approximately $13.7 million for Q3 2022, influenced by non-cash items and amortization expenses.

2. Strategic Updates and Business Highlights:

• LifeWallet Platform: MSP launched LifeWallet, a platform aimed at improving claims processing through real-time data integration and blockchain technology. A licensing agreement was established for $7.5 million, with an additional $1 million annual servicing fee starting in 2023.
• Data Matching Initiatives: The company is engaged in data matching with over 10 auto insurance carriers, identifying over $5 billion in potential recoveries. They have sent over 22,000 demand letters, receiving payments on approximately 130 demands at a recovery multiple of 2.1 times.
• Legal Wins: MSP achieved notable court victories, including a ruling affirming the right of Medicare Advantage organizations to sue primary payers, which strengthens their legal strategy.

3. Forward Guidance and Outlook:

• 2022 Recovery Projections: MSP anticipates total gross recoveries to reach approximately $992 million, although some recoveries may spill over into 2023 due to ongoing appeals.
• Revenue Streams: The company expects to see tangible returns from the LifeWallet platform and the Chase to Pay initiative, aiming for consistent and predictable revenue streams moving forward.

4. Bad News, Challenges, or Points of Concern:

• Legal Challenges: MSP faced setbacks, including a ruling from the 11th Circuit that barred a claim due to the statute of limitations. This could impact their ability to pursue certain recoveries.
• Net Losses: Despite growth in potential recoveries, the company reported significant net losses, raising concerns about financial sustainability and the impact of non-cash expenses on overall performance.
• Market Conditions: The potential for a recession could affect claims collectability, although management believes their business model is relatively insulated from economic downturns.

5. Notable Q&A Insights:

• LifeWallet Adoption: CEO John Ruiz noted that understanding and adoption of LifeWallet is progressing rapidly, with strong interest from providers and payers due to its unique capabilities in data integration and fraud prevention.
• Demand Letter Initiative: Ruiz emphasized the initiative's potential to provide more predictable revenue streams, highlighting that a significant portion of recoveries has come from previously unidentified claims.
• Market Positioning: The company believes it holds a competitive edge due to its unique combination of legal expertise and healthcare data capabilities, positioning it well for future growth and recovery opportunities.

Overall, MSP Recovery's Q3 2022 performance reflects significant growth in potential recoveries and strategic advancements through LifeWallet, despite ongoing legal challenges and financial losses. The company remains optimistic about its future revenue streams and market positioning.