MSP Recovery Announces Fiscal Second Quarter 2022 Financial Results

August 11, 2022

Completed Business Combination Between Lionheart Acquisition Corporation II and MSP Recovery
Paid Value of Potentially Recoverable Claims Grew to $88.3 Billion During Quarter
Acquired Claim Recovery Rights and Rights to Cash Flows Increasing Balance Sheet Assets from $104 Million at December 31, 2021 to $6.6 Billion at June 30, 2022
Executed Agreements which could provide approximately $1.5 Billion of Capital

CORAL GABLES, Fla., Aug. 11, 2022 (GLOBE NEWSWIRE) -- MSP Recovery, Inc. (NASDAQ: MSPR) ("MSPR," "MSP Recovery," or the "Company"), a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery and technology leader, today announced financial results for the second quarter ended June 30, 2022.

MSPR has seen substantial growth of assets from $104 million at December 31, 2021 to $6.6 billion at June 30, 2022. The company’s significant asset growth paves the way for future revenue generation and reflects increased demand from health plans, providers, and self-insured entities for MSPR’s services, expertise, and portfolio of revenue streams. With 27% of the U.S. automobile insurance market in data matching or settlement discussions, new contracts, and the deployment of new strategic alliances and strategies, company leadership believes the company is primed for future success.

“We are off to a strong start in 2022,” said MSP Recovery Founder and CEO, John H. Ruiz. “Our continued asset growth sets us up for significant future revenue generation. I truly believe that nobody has a better combined understanding of (1) healthcare, (2) healthcare data, and (3) the law; enabling MSP to recover improperly paid claims while also deploying revolutionary technology that we believe will correct the major flaws in the U.S. healthcare system – making our business unique and difficult to replicate."

“We have already exceeded projections for many of the Company's key performance indicators following the business combination thanks to the strength of our expanding claims portfolio,” said MSP Recovery Co-Founder and Chief Legal Officer, Frank C. Quesada. “We believe we will continue to see increased recoveries as our litigation process continues against multiple parties. The recent completion of our business combination was an important milestone for our company. It further increases the market's awareness of MSP Recovery and provides additional resources to execute our growth strategy.”

“Cash flows from operations is one of MSPR’s main priorities and we continue to be focused on closing out pending cases as well as starting a general business practice of billing claims at large scale," said Ruiz. "MSPR has established, through court decisions, the rights of Medicare Part C entities as well as downstream providers to collect from those parties that are primarily responsible. Those rights were solidified by two recent decisions rendered by the Eleventh Circuit Court of Appeals in MSP v. ACE and MSP v. Metropolitan. As per our press release on June 13, 2022, we have commenced billing over $1.5 billion to payers. Coupled with the agreements with Prudent and Virage where MSPR can monetize its claims, the claims billed for which MSPR has begun collecting, and ongoing settlement discussions, I believe MSPR has a clear line of approach to meet our recovery projections.1

Second Quarter 2022 Financial Highlights

  • Revenue: Total revenue for the second quarter of 2022 was $5.3 million, up 57% from the second quarter of 2021.
  • Operating loss: Operating loss for the second quarter of 2022 was $52.2 million, compared with $1.5 million for the second quarter of 2021. Adjusted operating loss for the second quarter was $8.3 million excluding a one-time non-cash item as part of the business combination of $20.1 million of professional fees - legal related to share-based compensation expense and non-cash claims amortization expense of $23.8 million.2
  • Net loss: Net loss for the second quarter of 2022 was $77.1 million and $1.3 million to controlling members, or net loss per share of $0.09 per share, based on 13.6 million weighted average shares outstanding. Adjusted net loss for the second quarter was $7.9 million excluding the non-cash items noted above and an additional $14.4 million and $11.0 million of non-cash expenses related to change in fair value of warrant and derivative liabilities and paid in kind interest, respectively.2
  • Liquidity: As of June 30, 2022, cash and cash equivalents were $25.0 million. On June 16, 2022, MSP principals John H. Ruiz and Frank C. Quesada loaned the company $112 million to provide operating cash to the Company and cover costs related to the business combination. In addition, we announced potential additional capital resources totaling $1.5 billion which includes cash, $36.5 million prepaid for MSP Law Firm expenses, $1 billion from the Company Common Stock Purchase Agreement (the “CF Purchase Agreement”) between MSP Recovery and CF Principal Investments LLC (“CF”), $200 million from the Investment Capacity Agreement, by and among MSP Recovery and Virage Capital Management LP (the “Virage ICA”), based on anticipated initial closing under the Virage ICA, and up to an additional $250 million from the Prudent Sale.

1 The guidance provided is an estimate based on management’s knowledge. The nature of the Company’s business and the timing and amount of recoveries, can, depending on various factors, be unpredictable and the Company cannot provide assurances in that regard.

2 Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.

Second Quarter 2022 Key Metrics

Since announcing the business combination with Lionheart Acquisition Corporation II, our portfolio has continued to grow. Below is detail on the increase in our portfolio since the announcement:

Select Portfolio Metrics 
As ofJune 30  September 30  December 31  March 31  June 30 
(in millions)2021  2021  2021  2022  2022 
Total Paid Amount$66,011  $67,162  $364,438  $366,879  $370,154 
Paid Value of Potentially Recoverable Claims (PVPRC) 14,340   15,248   86,629   87,284   88,305 
Billed Value of Potentially Recoverable Claims (BVPRC) 53,710   55,366   363,231   367,836   371,321 

As of June 30, 2022, MSPR has the following developments:

  • Total Paid Amount of owned claims has increased to $370 billion, as of June 30, 2022, up 2% from $364 billion as of December 31, 2021 and up 461% from $66.0 billion from June 30, 2021.
  • Paid Value of Potential Recoverable Claims grew to $88.3 billion, as of June 30, 2022, up 2% from $86.6 billion as of December 31, 2021 and up 516% from $14.3 billion from June 30, 2021.
  • Prudent Group committed to cash payments of up to $250 million to purchase a portion of the value of the individual demand letters, starting in Q3 of 2022 (the "Prudent Sale").
  • Strategic alliance with litigation firms Milberg Coleman Bryson Phillips Grossman, PLLC and Rivero Mestre, LLP, adds significant additional resources to secure recoveries.
  • Currently in data matching or settlement discussions with 27.4% of the Auto Insurance Market.
  • MSPR entered into agreements with multiple top auto insurers to halt litigation to explore whether a framework for a global resolution exists, where auto insurers will provide data to MSP.
  • Cano Health and La Colonia Medical Center have agreed to upload patients’ data to LifeWallet.
  • MSPR working with Tokenology on tokenized healthcare initiative on the Polygon network. This initiative, combined with LifeWallet’s biometric technology targets fraud and abuse in the U.S. healthcare system.
  • Signed an agreement with Mexico’s SeguriTech, to enhance MSPR’s data capabilities, position with MSPR for international growth, and expand MSPR’s services across Mexico.

Portfolio Growth:

MSPR seeks assignment of recovery rights from secondary payers by acquiring the recovery rights to claims from secondary payers via Claims Cost Recovery Agreements (“CCRA”). Prior to executing a CCRA, the Company utilizes its proprietary internal data analytics platform to review the set of claims and identify claims with probable recovery paths. MSPR’s assets are these irrevocable assignments of health claims recovery rights that are automatic, all-encompassing and superior to other interests supported by Federal and State laws and regulations. The table below outlines the Company's growth in these assignments:

 MSP Recovery CCRA and Claims Growth by Year 
 Year of CCRA Claims Count  PVPRC  BVPRC  Total Paid Amount  Total
Billed Amount
 
   (thousands)  (millions)  (millions)  (millions)  (millions) 
 2014  9,400  $668  $3,286  $3,077  $13,187 
 2015  8,390   819   3,207   3,589   13,279 
 2016  20,186   3,305   18,233   14,261   75,623 
 2017  65,704   5,824   14,108   19,775   53,527 
 2018  23,742   3,407   10,831   17,920   62,483 
 2019  29,094   2,645   10,281   15,515   59,155 
 2020  171   19   128   68   429 
 2021  490,269   71,617   311,248   295,949   1,275,489 
 2022  -   -   -   -   - 
 Total  646,956  $88,305  $371,321  $370,154  $1,553,172 


Demand Letters:

MSPR recently announced a strategy whereby the Company is sending out individual demand letters on identified recoverable claims to responsible payers for prompt payment. We expect this strategy to result in more predictable and visible revenues. The table below outlines specific dollar amounts identified by the Company, broken down by litigation and demand letter type, that it plans to pursue against different responsible parties:

Recoveries Being Sought by Category            
($'s in millions) Identified Incidents  Total Claims  Paid Amounts  Billed Amounts Sought 
Accident Related:            
Data Matching(1)  334,622   58,605,326  $4,472.50  $17,821.70 
Demand Letter(2)            
1st Party Demands  11,807   1,328,278  $117.60  $818.30 
3rd Party Demands  16,212   2,433,565  $227.30  $1,631.20 
Case and Lien Recoveries  2,068   135,702  $17.10  $69.20 
             
Fraud & Misconduct Cases:            
Private Lien Resolution Programs(3)342   33,244  $4.40  $23.00 
Big Pharma/Product Liability(2)  1,683,811   56,635,380  $5,274.70  $17,032.10 
             
Group Health Plan Recovery  15,792   21,589  N/A  $13.00 

(1) Data Matching represents potential recovery opportunities the Company has identified via court orders or agreements with primary payers. These represent potential recoveries that MSP could receive from a portion of our settlement discussions with 27.4% of Auto Insurance industry or via demand letters.

(2) As previously announced June 13th and 27th 2022, MSP initiated billing amounts to primary payers (i.e., property and casualty insurers) and Big Pharma, giving these parties the opportunity to pay without the need for litigation or extended litigation.

(3) PLRPs are established to resolve health care liens asserted by private health insurance providers in mass tort settlements. MSPR is actively working with various lien resolution administrators to recover on those owned claims for which manufacturers have already settled other lawsuits and established PLRPs.

Financial Outlook

MSP Recovery is providing guidance for its full year 2022 as follows:

  • Portfolio 2022 Guidance: Exceeded target for 2022 for growth in paid value of potentially recoverable claims by 3.2 times.
  • Full Year 2022 Recoveries Guidance: Total Gross Recoveries2 is expected to be approximately $992 million. The guidance provided is an estimate based on management’s knowledge. The nature of the Company’s business and the timing and amount of recoveries, can, depending on various factors, be unpredictable and the Company cannot provide assurances in that regard.

Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.

2 Total Gross Recoveries is the cash received or to be received by MSPR for recoveries that may be through consolidated or non-consolidated entities.

Quarterly Conference Call

MSP Recovery will host a conference call today at 8:30 a.m. Eastern Time to review the Company’s financial results for the second quarter ended June 30, 2022. To access this call, dial (866) 652-5200 for the U.S. or Canada, or (412) 317-6060 for callers outside the U.S. or Canada. A live webcast of the conference call will be accessible from the Investors section of MSP Recovery’s website at https://www.msprecovery.com/, and a recording will be archived and accessible at https://investors.msprecovery.com/. An audio replay of this conference call will also be available through November 11, 2022, by dialing (877) 344-7529 for the U.S. or Canada, or (412) 317-0088 for callers outside the U.S. or Canada, and entering 5611243.

About MSP Recovery

Founded in 2014, MSP Recovery has become a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery leader, disrupting the antiquated healthcare reimbursement system with data-driven solutions to secure recoveries against responsible parties. MSP Recovery provides the healthcare industry with comprehensive compliance solutions, while innovating technologies to help save lives. For more information, visit: www.msprecovery.com.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts, including for example guidance for 2022 portfolio recovery and total gross recoverables. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, these statements are not guarantees of future performance or results and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by MSP Recovery herein speaks only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for MSPR to predict or identify all such events or how they may affect it. MSPR has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to, MSPR’s ability to capitalize on its assignment agreements and recover monies that were paid by the assignors; litigation results; the validity of the assignments of claims to MSPR; the ability to successfully expand the scope of MSPR’s claims or obtain new data and claims from MSPR’s existing assignor base or otherwise; MSPR’s ability to innovate and develop new solutions, and whether those solutions will be adopted by MSPR’s existing and potential assignors; negative publicity concerning healthcare data analytics and payment accuracy; and those other factors included in MSPR’s S-1 Registration Statement dated July 7, 2022, Quarterly Reports on Form 10-Q and other reports filed by it with the SEC. These statements constitute the Company's cautionary statements under the Private Securities Litigation Reform Act of 1995.


MSP RECOVERY, INC. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

 June 30,  December 31, 
(In thousands except per share amounts)2022  2021 
ASSETS     
Current assets:     
Cash and cash equivalents$25,045  $1,664 
Restricted cash 11,420   - 
Accounts receivable 901   - 
Affiliate receivable 2,111   4,070 
Indemnification asset 719,413   - 
Prepaid expenses and other current assets 36,890   13,304 
Total current assets 795,780   19,038 
Property, plant and equipment, net 950   750 
Deferred tax asset 857   - 
Intangible assets, net 2,095,735   84,218 
Investment in rights to claim recovery cash flows 3,673,610   - 
Total assets$6,566,932  $104,006 
      
LIABILITIES AND EQUITY     
Current liabilities:     
Accounts payable$29,575  $4,609 
Affiliate payable 20,202   45,252 
Commission payable 476   465 
Deferred service fee income 249   249 
Derivative Liability 9,003   - 
Warrant Liability 9,708   - 
Guaranty obligation 719,413    
Other current liabilities 11,057   3,489 
Total current liabilities 799,683   54,064 
Claims financing obligation & notes payable 111,395   106,805 
Loan from related parties 125,759   - 
Interest payable 111,324   94,545 
Total liabilities$1,148,161  $255,414 
Commitments and contingencies (Note 12)     
      
Class A common stock subject to possible redemption, 1,129,589 shares at redemption value as of June 30, 2022 2,417   - 
      
Stockholders' Equity (Deficit):     
Class A common stock, $.0001 par value; 5,500,000,000 shares authorized; 66,051,029 issued and outstanding as of June 30, 2022$7  $- 
Class B common stock, $0.0001 par value; 0 and 10,000,000 shares authorized; 0 and 5,750,000 shares issued and outstanding as of June 30, 2022 and December 31, 2021 -   - 
Class V common stock, $.0001 par value; 3,250,000,000 shares authorized; 3,154,473,292 issued and outstanding as of June 30, 2022 315   - 
Additional paid-in capital 187,269   - 
Members' equity -   (155,756)
Accumulated deficit (23,074)  - 
Total Stockholders' Equity$164,517  $(155,756)
Non-controlling interest 5,251,837   4,348 
Total equity$5,416,354  $(151,408)
Total liabilities and equity$6,566,932  $104,006 


MSP RECOVERY, INC. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

 For the three months
ended June 30,
  For the six months
ended June 30,
 
(In thousands except per share amounts)2022  2021  2022  2021 
Claims recovery income$1,319  $  $1,428  $15 
Claims recovery service income 3,971   3,360   12,047   6,774 
Total Claims Recovery$5,290  $3,360  $13,475  $6,789 
Operating expenses           
Cost of claim recoveries 694   -   701   8 
Claims amortization expense 23,818   36   26,535   67 
General and administrative 5,982   2,723   10,428   5,336 
Professional fees 3,118   1,970   5,056   3,067 
Professional fees - legal 23,765   8   26,237   30 
Depreciation and amortization 72   135   151   167 
Total operating expenses 57,449   4,872   69,108   8,675 
Operating Loss$(52,159) $(1,512) $(55,633) $(1,886)
Interest expense (10,977)  (6,667)  (21,392)  (12,589)
Other (expense) income, net 39   899   37   1,323 
Change in fair value of warrant and derivative liabilities (14,353)  -   (14,353)  - 
Net loss before provision for income taxes$(77,450) $(7,280) $(91,341) $(13,152)
Provision for income tax benefit (expense) 326   -   326   - 
Net loss$(77,124) $(7,280) $(91,015) $(13,152)
Less: Net (income) loss attributable to non-controlling members 75,836   -   89,727   - 
Net loss attributable to controlling members$(1,288) $(7,280) $(1,288) $(13,152)
            
Basic and diluted weighted average shares outstanding, Class A Common Stock 13,607,255  N/A   13,607,255  N/A 
Basic and diluted net income per share, Class A Common Stock$(0.09) N/A  $(0.09) N/A 


Non-GAAP Financial Measures

MSP RECOVERY, INC. and Subsidiaries
Non-GAAP Reconciliation
(Unaudited)

 Three months ended 
(In thousands)June 30, 2022 
GAAP Operating Loss (52,159)
Share based compensation 20,055 
Claims amortization expense 23,818 
Operating Loss excluding non-cash or one time items$(8,286)
   
GAAP Net Loss (77,124)
Share based compensation 20,055 
Claims amortization expense 23,818 
Paid-in-kind Interest 10,977 
Change in fair value of warrant and derivative liabilities 14,353 
Net Loss excluding non-cash or one time items$(7,921)

In addition to the financial measures prepared in accordance with GAAP, this press release also contains Non-GAAP financial measures. We consider "Net loss excluding non-cash and one-time expenses" and "Operating loss excluding non-cash or one-time items" as non-GAAP financial measures and important indicators of performance and useful metrics for management and investors to evaluate our business's ongoing operating performance on a consistent basis across reporting periods. Net loss excluding non-cash and one-time expenses represents Net loss adjusted for certain non-cash and non-recurring expenses, and Operating loss excluding non-cash or one-time items represents Operating loss adjusted for certain non-cash and non-recurring expenses. These measures provide useful information to investors, and a reconciliation of these measures to the most directly comparable GAAP measures and other information relating to these Non-GAAP measures will be included in Management's Discussion and Analysis in the Form 10-Q.

For Investors:
ICR, Inc.
Marc Griffin
Marc.Griffin@icrinc.com

For Media:
ICR, Inc.
MSP@icrinc.com