MSP Recovery, Inc. d/b/a LifeWallet (NASDAQ: LIFW) (“LifeWallet,” or the “Company”), a Medicare, Medicaid, commercial, and secondary payer reimbursement recovery and technology leader, announced financial results for the fiscal year and fourth quarter Ended December 31, 2023.

Highlights

• The Company announced a comprehensive settlement with 28 affiliated property and casualty insurers (“P&C Insurers”) that, in addition to settling existing claims, establishes a going-forward process to collaboratively and timely resolve future claims.
• The Company furthered its litigation and data-matching strategies during 2023, continuing to advance its recovery efforts. Recoveries are dependent on the completion of litigation and the negotiation of settlements, the timing of which can be subject to the risk of delays associated with the litigation and settlement process. However, we continue to make progress in the data matching process associated with those settlement negotiations, whereby primary payer insurers reconcile what they owe as a result of detailed data exchanges.
• On November 14, 2023, the Company entered into a $250 million standby equity purchase agreement with Yorkville (“Yorkville SEPA”), which replaced the existing Yorkville committed equity facility and which included pre-paid advances in the amount of $15 million, subject to a 5% original issue discount, resulting in net funding of $14.23 million to the Company.
• The Paid Value of Potentially Recoverable Claims (“PVPRC”) decreased by about $700 million or 0.8% for a total of $88.9 billion as of December 31, 2023.
• The Company strategically reduced its operating costs during 2023. These cost reductions did not impact the systems the Company has already created to support recovery efforts of the claims owned by the Company or other resources available to third parties.

2023 Financial Highlights

• Revenue: Total revenue for the year ended December 31, 2023 was $7.7 million compared to $23.4 million for the year ended December 31, 2022, out of which $18.5 million pertained to claim recovery service income, which was terminated at the beginning of 2023.
• Operating loss: Operating loss for the year ended December 31, 2023 was $559.9 million, compared with $331.5 million during the year ended December 31, 2022. Adjusted operating loss for the year ended December 31, 2023 was $82.5 million, excluding non-cash claims amortization expense of $476.5 million and shared-based compensation of $830 thousand.¹
• Net loss: Net loss for the year ended December 31, 2023 was $835.1 million and $56.3 million to controlling members, or net loss per share of $6.32 per share, based on 8,914,761 million weighted average shares outstanding. Adjusted net loss for the year ended December 31, 2023 was $73.3 million, excluding the non-cash item noted above, change in fair value of warrant and derivative liabilities of $4.6 million, and $289.2 million of non-cash expenses related to paid in kind interest.¹
• Liquidity: As of December 31, 2023, cash and cash equivalents were $11.6 million. We announced on March 29, 2023, the Company entered into the Working Capital Credit Agreement consisting of a commitment to fund up to $48 million in proceeds, which has been used throughout the year to fund operations. The Company has potential additional capital resources, which include the Yorkville SEPA. In addition, the Company still has in effect the Investment Capacity Agreement, by and among MSP Recovery and Virage Capital Management, LP., and up to an additional $250 million from the Prudent Sale, however, its uncertain if or when the Company would transact on the agreements.

Assigned Recovery Rights Claims Paid and Billed Value

The table below outlines the Company’s growth in claims data received in the most recent periods. The amounts represent data received from current and new assignors:

1. During the year ended December 31, 2023, the Company has received total recoveries of $7.2 million. However, the settlement amounts do not provide a large enough sample to be statistically significant, and are therefore not shown in the table.
2. On August 10, 2022, the United States Court of Appeals, Eleventh Circuit held that a four-year statute of limitations period applies to certain claims brought under the Medicare Secondary Payer Act’s private cause of action, and that the limitations period begins to run on the date that the cause of action accrued. This opinion may render certain Claims held by the Company unrecoverable and may substantially reduce PVPRC and BVPRC as calculated. As our cases were filed at different times and in various jurisdictions, and prior to data matching with a defendant we are not able to accurately calculate the entirety of damages specific to a given defendant, we cannot calculate with certainty the impact of this ruling at this time. However, the Company has deployed several legal strategies (including but not limited to seeking to amend existing lawsuits in a manner that could allow claims to relate back to the filing date as well as asserting tolling arguments based on theories of fraudulent concealment) that would apply to tolling the applicable limitations period and minimizing any material effect on the overall collectability of its claim rights. In addition, the Eleventh Circuit decision applies only to district courts in the Eleventh Circuit. Many courts in other jurisdictions have applied other statutes of limitations to the private cause of action, including borrowing the three-year statute of limitations applicable to the government’s cause of action; and borrowing from the False Claims Act’s six-year period. The most recent decision on the issue from the District Court of Massachusetts, for example, applies the same statute of limitations as Eleventh Circuit, but expressly disagrees with the Eleventh Circuit’s application of the “accrual” rule and instead adopted the notice-based trigger that the company has always argued should apply. This would mean that the limitations period for unreported claims has not even begun to accrue. This is a complex legal issue that will continue to evolve in jurisdictions across the country. Nevertheless, if the application of the statute of limitations as determined by the Eleventh Circuit was applied to all Claims assigned to us, we estimate that the effect would be a reduction of PVPRC by approximately $7.02 billion. As set forth in our Risk Factors, PVPRC is based on a variety of factors. As such, this estimate is subject to change based on the variety of legal claims being litigated and statute of limitations tolling theories that apply.

• Total Paid Amount of owned claims has decreased to $369.8 billion, as of December 31, 2023, down $5 billion or 1.3% from $374.8 billion as of December 31, 2022. This figure represents the amounts our clients/assignors have paid for in medical bills (including capitation payments).
• Paid Value of Potential Recoverable Claims decreased to $88.9 billion, as of December 31, 2023, down $0.7 billion or 0.8% from $89.6 billion as of December 31, 2022. This figure represents the amounts LifeWallet estimates are potentially recoverable as identified by LifeWallet algorithms.

Financial Outlook

Recoveries Guidance: The Company continues to make progress in its recovery efforts, and management continues to believe such projected recoveries are ultimately collectible. Recoveries are dependent on the completion of litigation and the negotiation of settlements, which are inherently uncertain and are subject to risk of delay and litigation outcomes. As a result, the Company will not provide future guidance on recoveries that are dependent on litigation or subrogation process.

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.

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