As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Josh Raskin of Nephron Research. Thank you, Josh. You may begin.
Hi. Thanks, good morning, everyone. Appreciate everyone dialing in this morning. Super excited to host the Claritev team. We've got the whole team here. We've got Travis Dalton, the CEO, Doug Harris, the CFO, and Jerry Hogg is the COO as well. I'm gonna turn it over to Todd Friedman, who coordinates the investor relations for a little bit of a safe harbor, then we're gonna go through some Q&A. As we get through there, I think we're gonna try and clear up some lingering questions post the quarter, hopefully everyone finds this super helpful. With that, I'll turn it over to Todd.
Thanks, Josh. I wanna first say thank you to you and to Nephron Research for allowing us to webcast this call today so that we can make it available to all of our analyst investors. It's much appreciated. I'll read a quick safe harbor statement. Then we'll get into it. Our remarks and responses to today's questions include forward-looking statements. These forward-looking statements represent management's beliefs and expectations only as of the date of this call. The actual results may differ materially from these forward-looking statements due to a number of risks. A summary of these risks can be found in our annual report on Form 10-K 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 reconciliations to their comparable GAAP measures can be found in our February 23rd, 2026 earnings press release on our website and our SEC filings. With that, I'd like to turn the call over to Travis for some opening remarks.
Thanks. Thanks, Todd. Thanks for your time today. Also, I'll second, thank you, Josh, for hosting. Let me just say thanks to those that are on the call. We appreciate your interest in the company, and your time's valuable, thank you. I'm gonna be really concise here. I'm gonna take 3-5 minutes. We're actually having a call today, that's good. We had some difficulties with our last call. There were just a few points I think we wanted to make, and we've been fielding a lot of feedback, a lot of questions, and we're hearing you and we're listening. I'll just say that, you know, we remain realistic and very optimistic about the company and our future.
As we said on our call, we're focused on growth and execution in 2026, and the business is in a much healthier place than it was, I would say, at least on my arrival in early 2024. I think our strategy is working, so we've laid a foundation for success. We worked through what we called the turn last year and you're always evolving, but that was an important year for us to prove if we could return to growth and open up new markets. We were able to do that. We're focused on the way forward with this, which is healthy, sustainable growth. Look, I'm encouraged. We had, you know, 6.7% growth in Q4, record bookings in 2025. We're forecasting a strong double-digit bookings growth year.
We had 10 new logos in Q4 alone. Our pipeline is up 167% on sales pipeline. You look at all that bodes well for the future of the company. It also says our products are relevant in the market. We've called a growth year as promised. We have, you know, we've heard you and we have plans to manage margin and EBITDA as we go forward. We know we can do that. I have total confidence in the team to make good, sound financial decisions against those metrics. A couple more quick comments, I wanna get to the questions. Look, we're well-positioned against the needs for macro healthcare, cost transparency, the move out of the four walls of healthcare into specialty areas.
Our network, our payment revenue integrity and claims intelligence all map to those needs. The other point I'll make, and Michael can go much deeper on it there, I'm sure there's a question about it, is, you know, we don't think we're a survivor in the AI revolution. We think we're a winner. You know, we have data rights, workflow, and trust. You have those three things together, and you've got something really relevant to work with in the environment. It's not a moat, but an advantage for us. You know, we're using it today with IDR, claims, risk, sales leads, and evaluation of those, predictive, generative, and agentic.
I also think, this is a key point, is that we're a nice conduit to overlay other partners and other sources of AI intelligence on top of our infrastructure, and that's a good thing because healthcare ultimately becomes the winner. I'll close my remarks by just saying our priorities are clear: organic growth and delevering our business. We said that, we've been consistent on that. We're gonna continue to work to achieve it. We've got an investor day coming up here next week. We're very excited for that. We've got a couple, I think, material announcements to make, and we're looking forward to that. We had our sales kickoff this year with 100 of our top leaders, and it was very enthusiastic and the momentum, we're gonna start to build momentum.
With that, let me turn it back to Josh, and we're happy to work through the questions, and we're looking forward to it. Thank you.
Yeah, that's perfect, Travis. Thank you. That's, It's short but comprehensive, and I think I wanna hit on a whole bunch of things that you talked about. Maybe we just start with that confidence that you talked about and maybe you could give us a little bit more meat on the bone around the confidence that you have as that growth starts to accelerate back in the second half of 2026 and maybe just some data points there to help us frame that.
Yeah, you bet, Josh. I'll start and then, you know, Doug may have a follow. You know, from my perspective, a couple of things. One is, you know, we have better telemetry into our business, right? We have worked hard on putting people process systems in place so that we can see what's happening in the business, see where our opportunities are, and target those opportunities. That's kind of the hard work of building something that can grow. You know, when I talk about our sales growth, it's not just like, got more people out there shucking deals. It's like you're more focused on the business, you know what your critical priorities are, and you're allocating your capital in the right way. We have better telemetry, and it's showing up.
We, you know, we did $67 million ACV last year, which was growth. We're very excited for the year we have. We're selling across all vertical markets, so we put in a more emphasis last year on TPAs, brokers, our government international businesses. We're starting to see progress in those areas. When we've secured our top 10 clients, which we're also able to do, but we're selling around that into new vertical markets with pipeline growth, with increased sales, that bodes well for the future of the company. We're also become less reliant solely on those top five-seven clients for growth. Being 12%-15% less reliant on five clients is a good thing for us over time.
I would just say, you know, it's been team, pipeline, vertical launch and progress. I think we're making progress against all those vectors and starting to show up in the data. Doug, you may wanna comment on that.
Yeah. I would just add a final point on the $67 million of ACV. If you look at where it was coming from, 70% of that was upsell cross on organic growth within the install base. We've had some pretty, you know, impressive wins within the current install base. Finally, 30% of it was net new, which is a result of our new market strategy and the new logo acquisition. When you look at what we've said historically as we've introduced ACV as a metric, it takes anywhere from maybe two to four quarters for the ACV to convert to revenue. We'll start to see a material increase here as we build into the second half of the year as bookings very strong.
A record bookings quarter in Q4 of $23 million converts to revenue towards the end of this year and into 2027. Look, I mean, we're highly optimistic about a sales force that is dedicated and quota-carrying sales folks going after an internal target of strong double-digit growth on ACV. We're pleased with the progress of the business, and I think as we continue to refine our messaging going forward, ACV is a very important barometer for us for growth.
That's great. That's great. Travis, you also mentioned in the preamble that you saw AI, Claritev as a winner, you know, not a survivor, as actually a winner from this. Can we just talk a little bit more broadly about how AI affects the competitive landscape for your businesses?
Yeah, absolutely. I'm gonna let Michael take that. He's our Chief Digital Officer. Michael, if you want to jump in.
Sure, Travis. Thanks so much for the question, Josh. I, from a competitive landscape, I feel really good about Claritev's overall position. The three points I'd make about this are, first, is AI's not new to us. We're about seven years into our AI journey, and AI is used quite prevalently across all of our products and workflow. Second, we have a world-class team, and we are partnering with best-in-class companies and best-in-class tools like Oracle and OpenAI. Third, and this is a point that Travis had made before when he talked about we have the data, we have the workflow, and we have trust of our clients. It gives us an opportunity to deliver value using AI.
The one example that I will give about a proof point that shows this competitive advantage is the incredible success that we had with our AI investments around a capability called ProPricer. In our earnings call, we talked a little bit about how we had revenue growth on flat claim volume. One of the drivers of this trend is ProPricer. It's an AI-based claims workflow optimization engine, and that delivered close to $20 million in incremental revenues with the same number of claims because we optimize the results of the savings for our clients. There's an awful lot of proof points. As a result of this, I feel really good about our competitive position and the use of AI. When I look at the landscape, I think of large LLMs.
We think of them as partners and tools that we leverage. Travis talked about new entrants and startups. They want to connect with us because we're actually in the workflow today, and we have the data that they want to plug into. Having said all of that, like, we're very paranoid about AI and the competitive landscape, and we're constantly looking for potential risks and opportunities to disrupt ourselves or get additional benefits. I will say it's incredibly difficult because of the competitive moat that we have, and we'll get more into this on Investor Day later this month.
Yeah, that's great, Michael. I appreciate that. Maybe just to double-click a little bit more on that competitive moat that you're talking about, maybe just give us a little bit more color. Is it, is it the embedded in the workflow, sort of that process side of things? Is it we actually have all of the data that nobody, you know, that these, as you call them, new entrants and startups have? You know, and then kinda what stops, you know, one of your large customers from saying, "Hey, why don't we try one of these, you know, new startups and, you know, just sort of this pure AI solutions that you see out there?
What you said was accurate, Josh. It's all of the above. Proprietary data, custom business processes. Additionally, the client relationships that we have, the embedded workflow, the products that we have, and the network of 1.4 million provider contracts that we have, all of that creates a very difficult moat to cross. I think the best example of this competitive moat is surprise bill services for our No Surprises Act business that we have, which today has best-in-class results by a wide margin, and that's driven by AI. The reason it's successful, as an example, and the reason it's a competitive moat is we have 700 client relationships that's giving us the claims today, right? We're already in the workflow.
That claim that they're giving us, AI couldn't replace those client relationships. You can't, you know, AI generates the code, but you have to develop the integration with those client relationships. The first product that's a part of that is our network, which has $1.4 million providers under contract. Again, AI can replace that. The other parts of the AI that we're using to leverage these products and these relationships is that generates a ton of data. We have $20 billion claims. We know provider behavior, we know pricing, we have transparency engines, all of that allows us to develop AI models that predict provider behavior, that generate better arguments for negotiations, better results on Independent Dispute Resolution. When I think about the competitive moat, it's finding network relationships.
It's the fact that we have these products, that we're already in the workflow, that we have knowledge of all the custom business rules and intellectual property around that, and that we have the data that allows us to build all of these AI models, and it's the fuel for the AI engine that we have. All of that provides a very solid competitive moat for us today.
Yeah. Yeah. That.
Sure.
It's interesting. I hadn't really thought of it in that way, but it's sort of, yeah, there's tools that are out there that may be better than what you've developed internally, but they're not as useful without declarative, you know, data and workflow and model and, you know, the contracts and everything like that. That's a super helpful way to think about that.
Can we shift a little bit about the increase that you're talking about in terms of capital spend and maybe if that's a new baseline that we should be thinking about going forward and, you know, how this is being impacted, hopefully over time by the digital transformation and how much of that digital transformation spend is in there and maybe when that winds down, just maybe generally all of the sort of capital questions in there?
Yeah, sure. Hi, guys. This is Doug. I'll take that one. When you look at it, our guide this year implied about $160 million-$170 million of capital spend, which is roughly consistent with 2025. We had previously indicated that our Vision 2030, our tech transformation and our program was roughly a 3-year program. What I would expect is a 2026 spend kind of similar to 2025, and if you take a step back, I think our CapEx in 2024 is about $139 million and 2023 was $113 million. I think the most constructive way to think about it is CapEx as a percentage of revenue. We're kind of in the 15%-16% range as we invest in the tech modernization.
On a go-forward basis, we really should start to see a wind down in scale beginning in 2027 and then completing in 2028. For our modeling purposes, we expect R&D as a percent of sales to land kind of in the 10% range. When we ramp down the transformation spend, that ramp down and the benefit really starts to take place in 2027. We largely expect for the transformation program as outlined to be completed in calendar year 2028.
Okay. We can do the math. If you're going from, you know, call it 15%-16% down to 10, how much of that is revenue growth versus how much of that is elimination of the additional spend that I guess we're seeing in 2026 and I guess a little into 2027. Maybe, Doug, I'll stick with you on, you know, another focus of capital. You know, you guys spoke a little bit more about, I don't want to say aggressive, but, you know, more interest in M&A. Maybe you could help us with the specific capabilities that you're looking for, you know, how we should think about that spend in the context of your current leverage and, you know, increased CapEx needs in the immediate or short term.
That's great. I would say maybe to reframe the question, so M&A as well as, you know, organic investments and debt paydown and share buybacks have been kind of the four domains of our capital allocation. I would say it's not a renewed focus, but for us, it's always been on the list of our priorities. I think it's really about discipline against our capital structure. We had an interesting opportunity that we had indicated. We acquired a small company called OPCG in Q4, and they have advisory services in the provider in the government space that attach really nicely to our products. When you think about our capital allocation portfolio and kind of time and effort, M&A for most companies is always on the radar.
We're in a position to where we're looking at things that are highly impactful and complementary to the business. If you look at the last five years, a few of our acquisitions, I think with our data and analytics business and our Vistara product, which is the reference-based pricing health plan, very complementary to the core offering. We think that M&A should be part of a focus going forward. It's part of the things as a, you know, as a leadership team and as a company. We're always thinking about how the balance of organic investment versus M&A plays out. It will be a focus for us on top of the other allocation priorities.
With the primary focus on investing in our tech modernization, our transformation, which is obviously the most impactful, followed by our de-levering and debt paydown over time.
Yeah. Yeah. I think that's a helpful, we've gotten that question. I think framing it as, you know, discipline against your capital structure is probably an important point that I want to stress there. I should have asked this on the CapEx before, but there's been some shifts from CapEx to OpEx. Maybe if you could help us understand that.
Yeah, sure. Part of our updated philosophy on guiding to a total capital number was the reality is hosted software implementation hits operating cash flow. We think about it as a dollar spent relative to, you know, a return on capital. You will see a little bit of our hosted software hit our operating cash flow line. As we bring assets into service and as we, for instance, did our Oracle migration to our, the technical and to OCI, cost that historically we would have capitalized now switched to OpEx. The good news is, we previously owned and operated a data center, and most of our data assets were on-premise. We historically would have to spend, call it $12 million-$15 million a year, every year, supporting those assets and supporting our data assets.
The switch from CapEx to OpEx is just moving the geography to a cost of goods and OCI spend. We largely expect that to wash through in 2026. It's a $0 cash flow impact. The reality is, when we look at our technology transformation, some of the cost, call it about 75% of the cost, will be in the software capitalization and will be in cash flow from investing, and approximately 25% will be in the hosted software and thus hit the operating cash flow statement.
Gotcha. Gotcha. Okay. All right. Zero cash flow impact. I see what you're saying, and it shifts. I should have asked this, but I think you touched on this, Doug, also as well. You know, I'd be curious to get a little bit more specifics on the conversion, you know, when you talk about your average contract value conversion into actual revenue. I think you said two to four quarters earlier. Could you help us understand, like, is there a difference in certain segments and business lines or products that you were selling? Would you expect any changes to that over the next year or so?
Yeah, sure. Maybe I'll give a high level, and I'd love for, maybe Jerry to give a practical example of a booking in one of our lines. The two to four quarters is an approximation. We have very little bookings that convert immediately to revenue because our business model, you know, we don't sell a whole lot of licensed software. The two to four quarter estimation, so if we sign, for instance, you know, $23 million of bookings in Q4, we would start to see revenue attribution in late Q2, early Q3, and then fully ramp on the totality of the bookings by early 2027.
Similarly, if we sign deals in early 2026, we might get a little bit of revenue towards the back half of 2026 and then fully realize it in 2027. It's, it's a really good directional barometer and something that we will continue to update on a quarterly basis. I might, I might flip it over to Jerry just to give you a practical example on how a booking to revenue conversion would work with, for instance, a client implementation.
Sure. Thanks, Doug. You know, kind of give maybe three kind of variants on this topic. You know, our Vistara product, you know, is, you know, a reference-based pricing plan that leverages our network, 1.4 million providers. You know, as companies do each year, they do their healthcare planning in the first part of the year. That's where our BenInsights product is helping employers and the counselors who advise them on how to design the plan. They make their decisions, then employees, you know, sign up for the plan, you know, in the, you know, the third, fourth quarter of each year, the revenue shows up in the following year based upon enrollment.
Sales for us, you know, close in the first two quarters of the year, revenue show up in the first quarter of the following year for that product. For our network, similar kind of thing, where if a payer decides to use our network as a complementary or a wrap network, once the employer's employees decide to implement that, it shows up, you know, two to four quarters later. For our payment revenue integrity business, depending upon the data that we have, you know, where we do advanced code editing, to correct claims that are miscoded or upcoded or fraud, waste, and abuse, that can be as, you know, as quick as a quarter or, you know, or two.
If we don't have the data, it's, you know, typically like a 6-month sale to revenue lag.
Gotcha. By the time it gets fully reconciled. That makes sense as well. Maybe you could give an update on the NSA. I think you brought up the NSA marketplace and, you know, how that process is working for the payers, for your big customers. How big of a segment is that for Claritev? Then, you know, are you guys expecting any regulatory changes? You know, how are you monitoring, you know, those potential updates?
Sure, sure. You know, with like all legislation, implemented with the, you know, the most noble of intent that as it, you know, progresses through time, you know, people figure out how to play the game best to their favor. We've seen that in our NSA volume business. It's a sizable portion of our claims intelligence portfolio. But, you know, based upon CMS public use file data, we outperform, you know, one of our key competitors and frankly, all domains, meaning all of the payers who self-perform that work. It really does starts with leveraging our network by pricing those claims against the 1.4 million providers in our network, which is a unique asset that none of our competitors have.
Even our major payer clients, you know, only have a cross-section of that we've automated our process throughout the five or six steps it ultimately takes to get to the final step, you know, everyone seems to focus on, which is independent dispute resolution, where the provider disputes the bill charges and the proposed payout on it. They've, you know, depending upon which of the 15 IDRE firms adjudicates those claims, you know, the results in favor of the payer or the provider, you know, vary pretty wildly and, frankly, pretty inconsistently. These are all metrics that we track very closely, and we've designed our AI tools and our the way that we write briefs for the IDR phase to be most compelling for basically arriving at a fair market value for these services.
You know, our strategy has always been to price those claims, those cases at the network first and then, at a fair market value before they are paid. Even after they're paid, there's a post-pay process that we've implemented. Ultimately we've got an IDR phase that leverages AI tools to basically present the best case for fair market value for those services. We continue to optimize those things. It's kind of a bit of a moving target that we adjust our strategy to in real-time over time. Across all of those, all of those phases, we outperform our key competitors and all the major payers by a sizable percentage, partly because of our AI implementation, but because we've got an end-to-end solution.
A lot of the, you know, startup, you know, AI firms that could come in and say, "Well, I could create a model to do that." Well, it'd only be a part of that, and it really is a sliver. The value that we deliver to our clients is the end-to-end solution that requires all of those things that I just mentioned. That's what make that our performance better than our competitors, better than the major payers, and makes it very, very hard for anyone to come in and just propose, "I've ingested a bunch of ID, you know, NSA claim data, and I think I can do a better job.
Yeah. Yeah. That's helpful. We've spoken about a couple of different customer segments, but I am curious progress on new customer segments. I'm specifically interested in areas like CompleteVue, then, you know, you mentioned the 10 new logos again. I'd be curious to hear where some of that's coming from as well, the ones that you mentioned on the last call.
Yeah. Thanks, Josh. This is Travis. I'll take that one. Yeah, I'll just reiterate a couple of points and jump on the question. I view 2025 as a pretty integral year for us in terms of setting up the future, the future growth of the company, the current and future growth. you know, we now have clear vertical segments with leaders, lead generation, sales enablement associated with each. we've upgraded our team talent, and we've got a lot of knowledge here that is now, I think, at the proper point of sales, and we're incenting our sales leaders.
Across provider, government, international, broker, and TPA, we're now starting to see deal mix show up, pipeline growth, as I've noted before in the total of our pipeline growth over time. CompleteVue is one of those offerings. You know, it's something that we had put together based off, you know, the publicly available data, our ability to understand and use data and bring insights. We're selling it. You know, I think we've got six health systems now that we're working with that encompass over 70 hospitals. A couple of those are large systems that have a lot of needs. I view CompleteVue really as an entry point into the discussion with them.
You know, it's a conduit to continue a discussion, particularly with a product like BenInsights, which has a lot of capability inside of it. You can model risk, you can look at your benefit plans, you can look at your employee population and demographics. There's a lot to be done there. We're starting to figure out what data and analytics is and the business is for us. That client acquisition is really important. The client acquisition is important because we listen, we learn, we develop, and then we sell more into it. That is not an insignificant lead-in for us to have that many clients that we can now work inside of to find use cases off of our capabilities across not only CompleteVue, but also BenInsights. That is…
I continue to be encouraged with the work we're doing there. On the 10 logos, that was just in Q4. These are 10 new clients. We had two in international. We had three provider clients. We had three new payer logos, and then we had two brokers that joined. Again, that's encouraging. It's not just going tapping the same well over and over and over, which we'll continue to do. As Doug mentioned, we have significant white space and opportunity with our existing clients. It's surrounding the business in a healthier way with more diversity, more growth, more opportunity, the ability to fortify the results over time. That's how we're thinking about it. Our segments are showing them up both in pipeline but also in real results.
Yeah. Yeah. Yeah. I mean, part of this is just the TAM expansion, right? It's sort of you bring in, you know, two more international and three providers, as you mentioned, even new payers. It's just the flywheel continues. I think that's a helpful statistic to keep giving. Maybe just one last one from my end, I'll turn it back to Todd after this, is that, you know, you talked about that $25 million of spend that I think was part of your, you know, as you describe it, go-to market and delivery functions to maintain momentum and best support that double-digit strong ACV book and growth that you've talked about. Maybe just some color on that additional $25 million. I know we've touched on that already.
Hey, thanks, Josh. This is Doug again. Yeah, I think the last question was a perfect frame-up of why we're excited to invest in the business. I think Travis had mentioned in his opening remarks, we had a highly energized sales kickoff with, you know, we have over 100 bagged sellers now. I would partition our investment, which we called out on earnings of approximately $20 million-$25 million in kind of three buckets. As you can recall from our earlier calls and I think our last two earnings calls, we said, "Hey, if we felt good about the progress of the business, we'd continue to invest." That's precisely what we started doing towards the last half of the year.
Some of the spending is kind of baked in our run rate, and some of the spending is of course new and around investment in the business. I would say it's in three areas. First is in sales and marketing. We've moved to a segment leadership structure within our U.S. markets. Specifically in payer, TPA, provider, government, we have sales leadership that has end-to-end coverage on new client development as well as client success. Important milestone for us to be able to deliver double-digit, strong double-digit bookings growth, which we feel really confident and good about investing in. The second is the acquisition of OPCG and kind of building out our advisory offering. We acquired that business for approximately $5 million in November.
That came with a couple of dozen highly competent folks with specialty skills that we're excited about. Finally, we had mentioned we launched an international business in first half of last year. We actually had our first bit of revenue in 2025, and we have aspirations for that business to grow and potentially even contribute a decent portion of our revenue over time. I would think about it in those three domains between sales and marketing in the U.S., the acquisition of OPCG, an extension of our advisory business, and finally the full run rate and compounding of our international business, which is fully up and running and launched and off to the races.
Perfect. Perfect. Okay, great. Todd, maybe I'll turn it back over to you. I think we've got through most of my list at this point.
Hey, Todd. Let me just close out. I think, Josh, let me just again say thank you for hosting this on, that was on short notice. We appreciate it 'cause we got a lot of questions post the earnings call or the lack of earnings call considering technical difficulties we had. That won't happen again, we promise you. Thanks for giving us the opportunity. There's a lot of people that are thoughtful about our company that have real pressing questions, and we wanna continue to give more communication, not less, which is why we're spending this time today.
I'll just close by saying, you know, we're looking forward to our investor day, which is coming up next week, where we're gonna talk about the work we're doing similar to what we're doing today, the financial model of the company, but we're also gonna talk about some of the things that are beyond that are aspirational for us based on our ability to use our talents, and our innovation in a way that's different than what you may expect from this company over time as we evolve the company. An investor day is a spot for us to be able to, I think, demonstrate our products. You'll hear from some of our clients.
We got a number of clients that are coming that wanna express their point of view on the market and the value they think we bring. We believe in our company, believe in our people and what we're doing. We think we're undervalued. We're gonna continue to try our best to explain our story. We know it's not a simple one, we're gonna continue to push forward. From my view, this is just the beginning. You know? We're early in this process, but I'm very excited that we've been able to return to top-line growth, and we know we have to manage the envelope below that, both in terms of CapEx, OpEx, and our spend forward in order to meet our full objectives.
I want our investors to hear that we know that, we're focused on it, and we'll continue to do that. I'll just close it with that. Again, we're thankful for your time today and we'll continue to field questions and we'll continue to answer them honestly and straightforward. Thank you.
Yeah. Thanks again, guys, for letting me host. Looking forward to seeing you in New York, a week from Monday.
Yeah. We'll see you there, Josh. Thank you.
All right.
Thanks, Josh.
Thanks.