Image source: The Motley Fool.

DATE

Friday, Aug. 7, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• Head of Investor Relations - Todd Friedman
• President and Chief Executive Officer - Travis Dalton
• Chief Financial Officer - Doug Garis

TAKEAWAYS

• Revenue -- $257.5 million, representing a 6.6% year-over-year increase and marking the fifth consecutive quarter of top-line growth.
• Net Loss -- $59.2 million, an improvement compared to the $62.6 million net loss reported in the same period of the prior year.
• Adjusted EBITDA -- $155.8 million, up 1.1% year over year and representing the highest absolute dollar performance in 13 quarters.
• Adjusted EBITDA Margin -- 60.5%, reflecting a decrease from 63.8% in the prior-year period due to increased investments in transformation initiatives.
• H1 2026 Bookings -- $74 million in annual contract value (ACV), representing a 150% increase compared to the first half of 2025.
• Q2 2026 Bookings -- $30 million in ACV, exceeding the $67 million total booked for the entire 2025 fiscal year.
• Revenue Guidance -- $1 billion to $1.02 billion for the full year, representing a 2 percentage point increase from the previous range.
• Adjusted EBITDA Guidance -- $610 million to $620 million for the full year, raised from the prior range of $605 million to $615 million.
• Free Cash Flow Guidance -- $5 million to $15 million, an upward revision of $5 million over the previous guidance.
• Active Pipeline -- Over $300 million at the end of the quarter, up 50% year over year with a coverage ratio of greater than 3x.
• Operating Cash Flow -- $93 million, a 51% increase versus the prior year driven by a five-day improvement in working capital conversion metrics.
• Claims Intelligence Revenue -- $220 million, increasing nearly 14% year over year and reaching its highest level in nearly four years.
• Large Deal Count -- 16 deals with ACV greater than $1 million closed through the first half of 2026, an increase of 25% year over year.
• Average Deal Size -- Grew more than 300% on an absolute dollar basis through the first half of the year compared to the prior-year period.
• Claims Volume -- Increased 11% sequentially and 3% year over year, driven by a recent large client win in the No Surprises Act business.
• TPA Booking Contribution -- Expected to contribute approximately 30% of total new bookings in 2026, the second-largest segment behind the payer vertical.
• New Client Logos -- Five net new client logos added in the quarter, bringing the year-to-date total to 11.
• Booking Mix -- 75% of second quarter bookings were derived from cross-selling and upselling to existing clients.
• Adjusted Cash Conversion Ratio -- Expected to normalize to levels greater than 50% by the end of the 2026 fiscal year.
• Capital Expenditures Guidance -- Maintained at $160 million to $170 million for the full year to support technology and data architecture investments.
• Unlevered Free Cash Flow -- $89.5 million, up 24% year over year during the second quarter.
• Levered Free Cash Flow -- $54.6 million, a 49% increase compared to the second quarter of 2025.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Garis stated, "since the debt refinancing transaction concluded in January '25, we expect Q1 and Q3 to be cash consumption quarters," indicating cyclical liquidity fluctuations in the midterm.
• Dalton warned that the No Surprises Act system "is being overwhelmed with volume that drives unnecessary administrative cost and delay," creating operational burdens for payers and providers.
• Dalton noted that medical inflation is "running between 8% and 10% annually," which is significantly higher than overall economic growth and creates pressure on the healthcare system.

SUMMARY

Management characterized 2026 as the "Year of the Way Up," reflecting a transition toward sustainable growth within its multiyear transformation strategy. The company is executing a vertical market expansion strategy, specifically targeting third-party administrators (TPAs) and the Medicare Advantage market to diversify revenue. Technology modernization is a core strategic pillar, with the company integrating artificial intelligence to automate claims validation and enhance developer productivity. Financial objectives remain focused on improving operating leverage, reducing debt leverage over time, and unlocking free cash flow to support long-term value creation.

• CFO Garis reported that technological integration is accelerating software development, stating, "more than half of our code now is generated by AI."
• CEO Dalton noted the company's competitive advantage in independent dispute resolution, stating, "Our arbitration outcomes continue to outperform the industry by approximately 8 percentage points."
• Management reported that nearly 50% of independent dispute resolution submissions are currently ineligible, presenting an opportunity for the company to apply AI-powered provider data validation.
• The company expects its modernization of over 400 applications will allow the existing workforce to perform fourfold to eightfold more work through AI-enabled efficiency gains.
• The ProPricer product has identified over $1 billion in cumulative healthcare savings for clients through the use of advanced AI and data science models.
• The TPA segment is emerging as a critical growth engine, led by several seven-figure deals in the second quarter including an engagement with Marpai for payment and revenue integrity solutions.
• Management confirmed the recent signing of a high six-figure ACV deal to build a Medicare Advantage network, representing a strategic diversification into the government-funded healthcare space.

INDUSTRY GLOSSARY

• ACV: Annual Contract Value, the annualized value of a customer's contract, often used to measure sales momentum.
• PSAV: Percentage of Savings, a revenue model where the service provider receives a fee based on the medical costs saved for the client.
• NSA: No Surprises Act, a federal law designed to protect consumers from unexpected medical bills from out-of-network providers.
• IDR: Independent Dispute Resolution, the federal process for resolving payment disputes between healthcare providers and insurers under the No Surprises Act.
• TPA: Third-Party Administrator, an organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity.
• PRI: Payment and Revenue Integrity, solutions designed to identify and eliminate billing errors, fraud, waste, and abuse in healthcare payments.
• QPA: Qualifying Payment Amount, the median in-network rate used to determine cost-sharing for certain out-of-network items and services.

Full Conference Call Transcript

Operator: Ladies and gentlemen, welcome to the Claritev Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Also, please note that this call is being recorded. I would now like to turn the call over to Todd Friedman, Head of Investor Relations. Todd, you may begin.

Todd Friedman: Thank you, Mark. Good morning, everyone, and welcome to Claritev's Second Quarter 2026 Earnings Call. Joining me today are Travis Dalton, President and Chief Executive Officer; and Doug Garis, Chief Financial Officer. During our call, we will refer to the supplemental slide deck that is available on the Investors portion of our website along with the second quarter 2026 earnings press release that we issued earlier this morning. Our remarks and responses to questions today will 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 in our annual report on Form 10-K and 10-Q and other documents that we file with the SEC. We'll also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of Claritev's underlying operating results. An explanation of these non-GAAP measures and the reconciliations to the comparable GAAP measures can be found in the earnings press release and in the supplemental slide deck. And with that, I would now like to turn the call over to Travis.

Travis Dalton: Good morning. Thank you for joining us. We're pleased to announce another strong quarter for Claritev and continued progress on our turnaround journey. You are what your record says you are, and our results demonstrate that our strategy is working, our execution is strengthening, growth is returning, and we are building forward momentum across the business. The hard work and discipline over the last 2 years of laying the foundation of clarity, alignment, focus resulted in the turn last year, which has positioned us to take advantage of the opportunities in front of us.

At our Investor Day in March, we introduced 2026 as the year of the way up, which is a return to sustainable growth in our multiyear transformation. The first half of the year has demonstrated that our strategy of driving horizontal solutions in vertical markets is working. In addition to focusing on our core client solutions and attacking new markets, we're building leaders in a culture of growth at the company. I'm most proud of the way our people have embraced change and new opportunities to impact health care. We also have made thoughtful and smart investments in our technology platforms, data architecture and talent over the last 2 years.

Our technology modernization positions us to quickly adapt and harness the power of new tools and technology like AI to bring more value to clients much faster. The organizations that have the knowledge and aligned structurally to unleash the potential of AI will be winners going forward. Our greatest asset is the knowledge and industry acumen we possess versus the competition. On today's call, I'll cover our strong second quarter results, the macro health care environment that demonstrates the challenges we are so good at tackling for consumers of health care, the continued progress and potential we see in AI. Let me begin with our Q2 performance, which exceeded our expectations on nearly every key metric.

Revenue and adjusted EBITDA both came in above plan. We had another great bookings quarter, exceeding $70 (sic) [ 74 ] million ACV for the first half of 2026 and well on our way to achieve our $100 million full year stretch target. Just as important, we are seeing larger deal sizes, broader contribution from our entire sales team, improving win rates and a healthy and growing pipeline. Doug will give some color on the conversion cycle from bookings to revenue, but this quarter's business performance validates the foundation against the multiyear financial goals that we outlined at our Investor Day.

I do want to highlight one area that we stressed on our first quarter earnings call, where we have ramped up our focus and brought in new leadership and that's the third-party administrator or TPA business. The TPA vertical represented our largest contributor to second quarter bookings with several 7-figure deals. Among them was Marpai, which selected our payment and revenue integrity solutions for both prepaid and postpaid claims. We also expanded adoption of our network and advanced code editing solutions across the TPA market. Equally important is the breadth of our momentum with wins spanning large national TPAs, regional mid-market organizations and technology-focused players.

Our new segment leader, Dallas Scrip, has provided immediate energy to the business, and we expect this segment to contribute roughly 30% of our total new bookings this year, second only to our payer segment. We also see an expanded opportunity in Medicare Advantage. We recently signed a high 6-figure ACV deal in new logo in the quarter to build an MA network. While not a significant revenue driver for us today, we believe it represents a meaningful long-term growth opportunity as plans increasingly seek solutions that improve payment accuracy, optimize networks, identify high-cost trends and enhance provider performance.

This is an example of the diversification strategy we set in motion over the past 2 years, and we're beginning to see it translate into a broader, more durable growth profile. Taken together, our bookings momentum and revenue growth reinforce our confidence in the long-term strategy, focus on our core solutions and faster innovation with our existing clients, expand aggressively across new vertical markets with those solutions, create new capabilities for launch that the cost reduction and transparency demand of the market. This strategy is starting to yield sustainable growth momentum that will allow us the financial flexibility to invest, drive down our debt leverage over time, improve operating leverage and unlock free cash flow to maximize long-term value.

Next, I'd like to highlight several macro trends that continue in health care and make our mission of affordability and transparency so important. First, medical cost trends continue to rise with medical inflation running between 8% and 10% annually, well above overall economic growth. Health care spending is almost 20% of U.S. GDP, creating significant pressure on employers, the government and consumers. Claritev exists to help solve that problem, whether it's our network providing access to predictable care, transparency solutions bringing insights, PRI solutions tapping waste, or Claims intelligence driving cost savings. Simply put, we make health care more affordable for consumers.

Second, self-funded plan enrollment remains stable and out-of-network claim volumes have remained in the mid-7% range over the last 5 years. Utilization is stable, but mix is shifting to higher cost areas such as emergency care, behavioral health and specialty facilities, creating a durable demand environment for our network, payment and revenue integrity and No Surprises Act solutions. And third, the regulatory complexity persists with NSA IDR changes and reduced federal funding for several programs. These changes and challenges can only be met by nimble, scaled technology-enabled companies like Claritev. Affordability and transparency remains central priorities for the federal government, aligning closely with our core capabilities and strategies. Let me highlight a key area where government intervention is most measurable.

2022 introduction of the No Surprises Act and the independent dispute resolution process. The recently finalized IDR rules increased the operational and compliance requirements for both payers and providers. As those requirements grow, our scale, technology and expertise become even more valuable. No company has demonstrated a greater ability to manage NSA claims at scale than Claritev. Our arbitration outcomes continue to outperform the industry by approximately 8 percentage points, and we're seeing existing clients consolidate more of their NSA workflow onto our platform. The same dynamics are driving demand across our Payment and Revenue Integrity portfolio.

As health care organizations face increasing pressure to reduce costs, identify fraud, waste and abuse and improve payment accuracy, our solutions become increasingly strategic. We're proud that Everest Group recently recognized Claritev as a leader in payment integrity and wins like the Marpai engagement underscore the growing momentum we continue to see across this portfolio. Finally, let me turn to AI. We view artificial intelligence as an accelerator of both growth and operating leverage in an area where Claritev has built a meaningful competitive advantage. AI is only as valuable as the quality of the data behind it, the harness engineering engage, the workflows it improves and the trust users place in its recommendations.

Those are areas where Claritev stands apart. Our multiyear digital transformation positioned us well before AI became today's headline. We have organized data, modern cloud-based workflow and deep domain expertise that allows us to deploy AI responsibly and at scale. Today, we're already using AI across numerous models and production use cases to improve efficiency, accelerate decision-making and deliver better outcomes for our clients. We have AI initiatives across all solutions and business functions, but I'll focus today on a few IDR examples where the need and the impact can be seen immediately.

If you listen to recent health care earnings calls or read any of the current articles related to NSA, you know that the system is being overwhelmed with volume that drives unnecessary administrative cost and delay. Payers on behalf of employers often have only a narrow window to validate claims, identify missing information and screen out ineligible submissions. Our analysis indicates that nearly half of all IDR submissions are ineligible, highlighting a significant opportunity to use AI to improve efficiency and accelerate our clients' ability to respond quickly. This is where Claritev's combination of scale, data and AI makes a meaningful difference.

Over the past 6 months, we've launched AI-powered capabilities that automate provider data validation and ineligibility assessments, improving both speed and accuracy. We're also automating case creation for resubmission and enhancing predictive models that optimize pre arbitration strategy. Together, these types of innovations reduce operating costs, improve outcomes and resolve disputes earlier in the process, which is good for both parties. Finally, we operate in a highly competitive environment with large and growing challenges facing our clients. The need for more health care affordability and transparency has never been greater. Our strategy is delivering results, and we have the people, technology, data and client relationships to capitalize on the opportunities to deliver right now and in the future.

With that, let me turn the call over to Doug.

Doug Garis: Thank you, Travis, and good morning, everyone. In Q2, we outperformed virtually all of our internal financial metrics for revenue, adjusted EBITDA, cash flow and bookings or ACV. As Travis indicated in his opening remarks, we are executing against the key objectives necessary, and we are on track to deliver or exceed the multiyear financial targets we outlined at our March 26 Investor Day. We are encouraged by our first half results and the momentum we are carrying into the back half of the year. Total revenue in the quarter was $257.5 million, up 6.6% year-over-year. This marks the fifth straight quarter of year-over-year revenue growth and was our highest revenue quarter in 15 quarters back to Q3 of '22.

Growth in Q2 came primarily from our largest business where we saw noted performance in the Claims Intelligence service line, especially within our NSA business. Claims Intelligence was up close to 14% in Q2, and our total PSAV revenue of $220 million was at its highest level in nearly 4 years. Additionally, our network and payment and revenue integrity service lines performed at or slightly above internal expectations in the quarter. Network revenues would have been positive year-over-year if you exclude the $5.4 million of onetime revenue from Q2 last year. On a comparable basis, excluding the onetime revenue from last year, our total growth in Q2 was nearly 9%.

Q2 adjusted EBITDA was $155.8 million, our strongest performance in 13 quarters on an absolute dollar basis and represented 60.5% of revenue. Margin was in line with our expectations for the quarter. I'd like to take a moment to note the strength of our cash flow metrics this quarter because they were meaningful. We generated $93 million of operating cash flow, up 51% versus prior year, $89.5 million of unlevered free cash flow, up 24% versus prior year, and we generated $54.6 million of levered free cash flow, up 49% versus prior year. With respect to levered free cash flow, this was our highest quarterly performance in 15 quarters.

We also did a great job of managing working capital and improved the pacing of our working capital cash conversion metrics, DPO and DSO by greater than 5 days. As a reminder, since the debt refinancing transaction concluded in January '25, we expect Q1 and Q3 to be cash consumption quarters and Q2 to Q4 to be cash generation quarters in the near to midterm. Our strong Q2 cash flow performance gives us confidence to invest with the elevated pace of investment required to fund our multiyear transformation and to support our growth initiatives. Our diversification strategy continues to be supported by strong sales momentum, highlighted by another record bookings quarter. Travis provided some stats about strong bookings.

With $30 million of ACV booked in Q2, we have already surpassed the $67 million we booked for the full year in '25. We plan on achieving the $100 million bookings aspiration we announced earlier this year. Our first half '26 bookings were up 150%, and we exited June with greater than $300 million of active pipeline, up 50% on a comparable basis with greater than 3x coverage. As we have said before, bookings are not linear, but given improvements to our processes and insights into our pipeline, we feel highly confident in our ability to deliver at least 50% ACV bookings growth for the full year.

In Q2, bookings reflected a balanced mix of expansion between existing clients and new client acquisition. Cross-sell and upsell activity accounted for approximately 75% of bookings, while 25% came from 5 net new client logos, which included several from the provider and public sector verticals. A few additional highlights on Q2 bookings performance. Pipeline growth remains exceptionally strong alongside continued improvements in lead qualification and sales execution. So far in '26, we've closed 16 deals with greater than $1 million of ACV, up 25% versus last year. Through the first half of the year, our average deal size has grown more than 300% on an absolute dollar basis.

Beyond deal size, most of our other key sales metrics continue to trend favorably. Sales cycle times from lead gen to deal close continue to shorten and our win rates continue to improve. Our momentum is building. Our performance this quarter is reflective of the aggressive sales strategy and realignment to segments we announced at the end of last year. In our supplemental deck, you'll find on our website, you'll see a shift in some of our claims and charges trends. In Q2, claims volume grew 11% sequentially and 3% versus prior year, reversing recent trends.

There are 2 primary drivers here that speak about the diversification of our business and why we balance these metrics instead of relying on just one. First, we have now largely lapped the residual impact of a single client issue from several years ago, whose volumes declined increasingly over the last few years. Future quarters starting in Q3 will make for a better comparison to the run rate of our core business as we go forward. Second and more notable, we saw a significant increase in the volume of NSA claims we process driven by a recent client win.

Because NSA claims typically cover a broader set of services, gross NSA claims volumes stepped up meaningfully, while total charges per claim and revenue per claim moved lower sequentially. This is simply a product mix shift, not pricing or margin pressure. Total PSAV revenue dollars grew 8% sequentially and 10% in the quarter versus prior year, and the net dollar contribution is clearly accretive. While we do not give a guide to claims volumes, we note that this mix dynamic could persist in the second half, which could keep volumes elevated and revenue per claim averages closer to our Q2 exit rate in the near future. Turning to guidance.

On the strength of Q2, we are raising our revenue guide 2 full percentage points to a new range of $1 billion to $1.02 billion, reflecting 4% to 6% growth and marking a return to greater than $1 billion of annual revenue, which we last eclipsed in 2022. As you review your second half model, I'll note, Q2 included a small amount of volume-based revenue that was originally modeled in Q1. Therefore, for the quarterly revenue cadence, we suggest modeling Q3 revenue flat sequentially, largely consistent with current analyst models. We are raising our full year adjusted EBITDA guide to $610 million to $620 million with margins of approximately 61%.

As we stated last quarter, we will continue to invest increasingly in sales, marketing and operations to support the growth in ACV. New bookings take on average 2 to 4 quarters to convert to revenue and then another 4 quarters to achieve fully annualized revenue contribution, which means we will continue to invest now for new and expansion revenue drivers that largely begin contributing to our top and bottom line growth in '27 and '28. We are not changing our guidance for total capital spend at $160 million to $170 million in '26. We are raising our free cash flow guide by $5 million to a new range of $5 million to $15 million.

In '26, we expect to deliver substantial operating unlevered and levered free cash flow growth with adjusted cash conversion normalizing to pre-'25 levels of greater than 50% by the end of this year. Finally, we remain committed to our capital allocation plan on a multiyear basis. We plan to primarily invest in our business to drive organic growth and drive absolute dollar earnings and free cash flow yield. All of this aligns with our guiding principles to diversify and accelerate expanding our solutions, verticals and channels to drive growth while also deleveraging and derisking our business to enhance cash flow and operating agility.

With that, I'll turn the call back over to Travis for some final remarks before taking your questions.

Travis Dalton: Thanks, Doug. I've got one quick closing comment, and then we'll open the line for questions. Our leadership team is fully formed and it's finding its rhythm. Transforming a 45-year-old business is not a small task, but the momentum at Claritev is real, and you can feel it every day. Change is a constant and continuous course, and we're building the organization to adapt. Our strategy is working. Our alignment internally has allowed us to focus on our clients, and we're executing with greater speed and discipline as we attack new areas to ensure long-term sustainable growth. I also want to give a quick shout-out to Ryan Fox on his recent victory at the Open Championship.

When we relaunched our brand last year, we made a decision to align ourselves with brand ambassadors who do more than wear a logo and represent the value -- values we aspire to as a company. Ryan is not just an amazing golfer, but he's a tremendous human being and all of us at Claritev could not have been prouder to support him and cheer him along the way. It was a cool moment to watch him sink that last [ birdie ] putt and see the Claritev name. With that, I'll turn to the operator for questions.

Operator: [Operator Instructions] And your first question comes from the line of Daniel Grosslight with Citi.

Daniel Grosslight: Congrats on reaching what seems to be a nice inflection point. I know it was a lot of hard work to get here. I wanted to focus on the nice improvement in PSAV volume you saw this quarter. I know you noted it was largely driven by NSA claim growth. I'm wondering how much of that was due to maybe a bolus in 2Q just getting through the system? And how much is more structural? I'm trying to think through the volume dynamic in the back half of this year.

Doug Garis: Yes. Thank you, Daniel. Thanks for the kudos and happy to take that one. So when you look at our first half volume, we modeled low single-digit volume on the full year. We think there was approximately maybe $45 million to $60 million of savings that kind of slipped into Q2, which is a few million of revenue. We're actually highly encouraged by the volume environment heading into the second half of the year. As the new pronouncements of NSA come about, it's going to be really hard to tell why we've taken a little bit more of a modest view of volumes in our base modeling for the second half.

Some of the structural changes to NSA actually have us very well positioned. But we basically modeled a low single-digit volume decline on the full year. And if you look at the sequential progression of volume, we think the Q2 exit rate is a pretty fair baseline for us heading throughout the year.

Daniel Grosslight: Got it. Okay. As a follow-up, more of a math question. If I hold 3Q revenue constant relative to 2Q and I plug in kind of the midpoint of guidance for the full year, that implies a step down from 3Q to 4Q of about $7-ish million. Is that just conservatism in the guide and you really expect to be kind of closer to the high end of the revenue guide or even above it? I'm just trying to square why should we see a sequential step down in 4Q implied by the guide?

Doug Garis: Yes. No, that's a great question. So what I would say is we're managing between the base and the high end of the range. If you look at the base case, that implies a 2H about $508 million of total revenue, which year-over-year is up 3% sequentially is up 1%. So if you kind of take the base of $1.01 on the year, between the base and the high end of the range, you kind of have a sequential step-up of 1% to 3% and then a year-over-year progression of about 3% to 5%. Again, largely dependent on claims volume and kind of flow through of the PSAV business.

But we tend to plan the business a little bit more conservatively so we can manage free cash flow. But that's how I would think about your model for Q3 and Q4 exit rate.

Operator: Your next question comes from the line of Richard Close with Canaccord Genuity.

Richard Close: Congratulations on the performance here. Doug, I think you mentioned this a little bit in your prepared remarks. But can you just remind us the -- on new booking wins, like just the time to implement and trigger revenue recognition. Has there been any changes there? Just trying to plan out when these new wins come online.

Doug Garis: Yes. No, that's a great question, and thanks for the question. So our average booking, when we have a new booking, it takes anywhere from about 2 to 4 quarters to turn into the first dollar of revenue, and then it takes about 4 quarters for the revenue to annualize. And so our ACV bookings metric is not indifferent to like a software ARR metric. It operates in principle the same. Our -- we had a larger NSA win earlier in the year that took about 1.5 quarters to turn on, which is why we had a little bit of overperformance in Q2.

But on the ground, when you look at our Claims Intelligence business and especially our Payment revenue integrity business, those tend to be closer to 2 to maybe 3 quarters, whereas, for instance, we had a large win, a large public sector win with the World Trade Center in the federal space, which takes anywhere from 3 to 4 quarters to turn into a first dollar of revenue. But 2 to 4 quarters is kind of our midpoint of how we plan for ACV to revenue conversion. And if you recall in the annual guide that we provided we had about a 6% to 7% step-up in revenue ACV to revenue conversion at the begin of the year.

I think it's fair that we probably are seeing a point higher of revenue conversion this year, which is preempting our beat and raise heading into the second half of the year.

Richard Close: Okay. That's helpful. And then just on the digital transformation, maybe an update there. Is it going as expected? Are you able to accelerate it at all? Just any thoughts in terms of how that's tracking?

Travis Dalton: Yes, Richard, this is Travis. Yes, we're -- look, I think we -- as I said in my opening remarks, I think we made a smart decision 2 years ago to start that transformation program to start aggressively modernizing the company. The point I would make is that we had investments to make in core systems. We had investments to make in digital transformation, and we had investments to make for growth. And I think the team has done, frankly, a tremendous job of what I call threading the needle of bringing the company up to modern standards and then investing in our growth thesis by opening new markets, talent, people. Our digital transformation remains on track.

It remains core and central to the company. We've been able to move most of our applications to cloud-based environments. And what was underpinning a lot of the digital work we were doing was really around data architecture and infrastructure. So I think it's positioned us really well, not just to run the company in its current form, but also to take full advantage of AI models and capability and forward progressing technology. So I would say we're very pleased with the progress. The team is executing, and we're starting to see real value from those models that are emerging.

Doug Garis: And I would just say AI has been a focal point, obviously, for a lot of organizations. Our digital transformation enables us to be a winner in AI. We have dozens of use cases and models in place. And look, I mean, last quarter, I think we said it more than half of our code now is generated by AI. And I think the expectation is going forward, as we fully modernize our over 400 applications, we'll have approximately the same number of humans doing 4 to 8x more work. And so we're pretty well positioned in our digital transformation. I always joke around with our Chief Digital Officer, ask him to go faster.

But I think we're well on track to our multiyear transformation in the last update that we gave at Investor Day in March.

Operator: Your next question comes from the line of Stan Berenshteyn with Wells Fargo.

Stanislav Berenshteyn: Maybe first on bookings. Obviously, you've year-to-date executed against most of the book that you anticipated. There's maybe $26 million remaining. Do you see a path to get to over $100 million here? And how have bookings been converting into revenue versus your expectations at the start of the year?

Doug Garis: Yes. Thanks, Stan. So we are going to deliver in excess of $100 million of bookings this year. So we've delivered $74 million of bookings through the first half of the year. So we're already ahead of our pace from last year. And what I had said earlier, is I think we got about an additional point of ACV to revenue conversion on a larger win we had in the NSA space that has been progressing well, a very large payer win that we had earlier in the year that turned on at or maybe a little bit ahead of schedule. So I think part of the uptick in our guide is attributable to the ACV conversion.

But on average, the 2 to 4 quarters for ACV ramp is still a very good paradigm.

Stanislav Berenshteyn: Got it. And then maybe it's a little bit early to start talking about 2027. But as you look at your sales pipeline, do you see any differences in the mix of opportunities versus what you've executed against in 2026?

Doug Garis: Yes. So I would -- so we felt comfortable coming out and giving a little bit more color into our actual funnel. So we have north of $300 million of active pipeline. And about 1/3 of that is within our new verticals. And so some of them, especially in the public sector are a little bit longer to lead time. But just like the World Trade Center, it business we would have never bid on before. And so our realignment under our Chief Growth Officer, 2 segments was really smart. And then our pipeline and funnel and our bookings progression has been pretty steady at 70% to 75% of upsell and cross-sell.

And so this notion that there's not growth in our core business is simply not true. When you look at -- when you look at our payer space, about 80% of our revenue or our TPA space, a little less than 20%. There is significant white space left to go, and we're actively hitting the market, especially in the TPA space, thinking about pricing and packaging more strategically. We want to be the single vendor to a lot of large customers. We've seen great progress and momentum thinking about our sales motion differently. But we did close 5 new logos. We have 11 this year. We did 30 last year.

And so it's goodness all around, but we're keeping the core business the focus because that's where most of our uplift in scale is going to come from over the next few years. I don't know if you have anything.

Travis Dalton: Yes. I would just add a little -- a tiny bit of commentary to that. I mean I think Doug hit it, but our strategy we set out really a couple of years ago that we're executing is to put together vertical market strategies against products that could work across those without massive customization investment needed for each vertical market. So that's been something we've been focused on. We're now getting to it, and we're starting to execute against that. So it's not just calling on the same customers over and over. We expanded aggressively in the TPA market. We think MA represents a real advantage for us as opportunity as we build out our sales apparatus.

This quarter was great. We had TPA deals. We had 2 public sector deals. We had 2 services deals. International continues to be a business that we think could yield results for us. So the totality of it is healthier. I think it will take time for us in those new markets to become a significant portion of our ongoing revenue performance, but I'm very, very happy with what looks like early returns and durability of the business.

Operator: Your next question comes from the line of Jason Cassorla with Guggenheim.

Jason Cassorla: Congrats on the quarter. Maybe just on the NSA revenue upside. Can you help a little bit in terms of the mix of drivers? It sounds like it was predominantly from the win earlier this year. But I'm just curious if you're seeing that funnel widen just given the backdrop? And then maybe following up on that, like can you help in terms of how to think about the puts and takes for NSA moving forward in that business? Like do you think that this year could be a tough comp for you? Or how sticky is this NSA revenue in your view? Just any thoughts there would be great.

Doug Garis: Yes. Thanks for the question, Jason. So the uptick in NSA was primarily due to one client and it's not just NSA, it's Surprise Bill. Surprise Bill both includes the NSA as well as state Surprise Bill, which is there's 27 different versions of state Surprise Bill, which is yet another reason why we continue to be the market leader. We actually recently published a report on our performance on our website, and we can share those details and follow-ups. We're performing 8 points better than the next closest compare. And I think we're the fourth largest provider aside from folks who do it in-source. And so we really like our position in NSA.

The recent final rulings and the rollout of those, it will be interesting to see how volume unfolds in the second half. I think we probably need a quarter or 2 to see whether there is a material volume uptake. But just as a point of clarification, the cost per dispute went from $115 to $15. We think that we're well positioned with our large clients who rely on us. And we think not just the Surprise Bill product, which is now our second largest category, our second largest offering. We have the full end-to-end set of solutions.

And keep in mind, greater than 85% to 90% of the time, when we get a Surprise Bill claim, it doesn't go through the IDR process. So everything funnels in through our network. Oftentimes, we're able to get to an immediate clearing price that's acceptable. And then we go through a prepaid and postpaid negotiation process. All of these in total, I think, are a net positive for the business.

But it's when kind of the final, I would say, implementation of the rules happen in Q3 and Q4, I think it probably bodes net positive for us from a volume perspective, but I think we're waiting to see some of that volume come through in the back half of the year.

Jason Cassorla: Got it. Okay. Very helpful. And then maybe just wanted to ask about the AI initiatives that are identifying more savings per claim. I guess curious, is there a way to help sort of quantify how incremental those savings are developing against sort of like your normal blocking and tackling? And then maybe a way to frame what the remaining savings opportunity there looks like? Like are you in inning 2 or 3 of this kind of AI-related savings potential? Just any thoughts around that would be helpful.

Doug Garis: Yes. So at our Investor Day, we had announced our ProPricer product, which has identified over $1 billion of additional savings. So that the uplift from us using AI to make our stuff work better is real. And it's baked into our -- the way the existing R&D we put into the business. With respect to kind of additional savings, some of the stuff that is competitive, we probably wouldn't give further insight. But I will tell you that historically, we spent about 12% to 14% of our capital on R&D and about half of that was historically devoted to making our stuff work better. And so we've been investing in AI for a very long time.

But notable last year was ProPricer, which was an AI-based initiative to identify and deliver more savings, which I think we came out and said it's worth about $1 billion in our core business of savings.

Operator: [Operator Instructions] And our next question comes from the line of Jessica Tassan with Piper Sandler.

Jessica Tassan: Congrats on the results. I'm wondering if you can just help us understand the variance versus consensus across each of your 3 revenue segments. So just drivers and any comments. Network, it looks like was a $2.7 million beat, Analytics, $12.6 million beat and then Payments, $2.6 million missed. I appreciate the comments on flat sequential revenue in 3Q, but just helpful if you could provide detail on the performance versus consensus kind of across each of those 3 revenue lines.

Doug Garis: Yes, sure. Thanks, Jess, and thanks for the question. So on payment and revenue integrity, the miss is timing, we still expect that business to be up versus prior year. The network, we mentioned in the prepared remarks, that network and payment and revenue integrity performed in line with our expectations. And if we need to go a little bit further in detail in the post call, we can. Network is going to be down high single digits this year because we have approximately $18.5 million of onetime revenue from last year. Our Claims Intelligence, obviously being up roughly 14% in the quarter was a highlight, and that's where our Data iSight financial negotiation and NSA products land.

And part of the beat this quarter and the raise in the full year was due to the performance in NSA. I would expect the trend in Claims Intelligence to continue and just as a quick highlight for the first half of the year, we broke approximately $25 million of ACV in the Payment and Revenue Integrity space. So when we announced several of the large deals, including the Marpai deals, these are all in deals that a majority of the revenue is associated with Payment and Revenue Integrity. It was very nice to be included in the leader category in the recent Everest report.

We're finding great success in selling our Payment and Revenue Integrity solutions, both pre and postpaid as a bundled offering. So the medium- to long-term prospects of the Payment and Revenue Integrity business, especially with payers focus on fraud waste and abuse is a specific area of investment and growth for us in the medium to long term. But we do expect the Payment and Revenue Integrity business to be a growth business this year when we snap the chalk on the full year.

Jessica Tassan: That's so helpful. So just one quick clarification, $25 million of the $37 million ACV booked was Payment and Rev Integrity. And then my follow-up question is just can you maybe discuss of your top 3 customers, how many use Claritev for IDR help? And then just you mentioned eligibility determinations, but I guess, what is Claritev doing in that process from the time the out-of-network service is rendered? And I would appreciate just any color on kind of the suite of products that address the NSA and the IDR process.

Doug Garis: Yes, great. So several of our top 10 customers use our services explicitly. And as I mentioned, we are the largest independent provider of Surprise Bill and NSA outside of the large payers and carriers who do the services themselves. We think we do it much better and the recent update from CMS confirms that. So -- most often, when we get an NSA claim and it comes through our NPI core database, we can resolve the claim with our hosted solutions, whether it's the network rate, which we have 1.4 million providers. We have a financial negotiation team with hundreds of folks who have decades of relationships with providers.

And then we're often able to assign value through the QPA process so that the disputes do not go to the IDR process. When a dispute does go to the IDR process, which is a fraction of the time, that's where our win rates stand apart and they're exceptional. But this is the value of the service that several of our large customers rely on us. It's better, faster, cheaper, more economical and the most important point is it gives the best outcome for employers and consumers of health care, which is our core strategy with transparency and affordability.

Operator: There is no further question at this time. I will now turn the call back over to the company for closing remarks.

Travis Dalton: Yes. Thanks, everybody, for your time. We appreciate it. Like we said, we're pleased with our results and the positive momentum, and thanks for your time. Appreciate it.

Operator: This concludes today's conference call. You may now disconnect.