Multiplan Corp
NYSE:MPLN
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Multiplan Corp
Earnings Call Analysis
Q4-2023 Analysis
Multiplan Corp
Investors would be intrigued to find that the company's fourth quarter revenue was moderately up by 0.5% over the third quarter, amounting to $244.1 million. However, when placed in the context of the prior year, revenues depict a notable drop of 10.9%. This mixed picture signals a cautious stability in the near term while simultaneously highlighting longer-term challenges affecting revenue growth.
A closer look at the company's revenue streams paints a nuanced picture. Network-based revenues experienced an 8.1% slide, significantly impacted by adjustments within the complementary network business. In contrast, analytics-based revenues and Payment and Revenue Integrity revenues both experienced growth sequentially, hinting at burgeoning demand for data analytics and integrity services within the sector.
Operationally, the company saw an uplift in fourth quarter billed charges and identified potential savings, both showing increases of 2% and 2.3% sequentially, respectively. However, this volume growth did not translate proportionally to top-line revenue due to a decline in revenue yield by 7 basis points sequentially across the business. This indicates that while the company is effectively identifying potential savings, converting these into revenue is becoming increasingly challenging.
The financial health of a company substantially depends on its ability to manage expenses relative to earnings. Here, we see the company's adjusted EBITDA expenses rise by $7.7 million year-over-year to $87.3 million in Q4, although they have decreased sequentially from Q3 2023. Despite these pressures, adjusted EBITDA margin improved in Q4 2023 to 64.2%, albeit lower than the 67% margin of Q4 2022, showcasing the company's underlying efficiency and margin resilience amidst challenging conditions.
Looking ahead, the company forecasts 2024 revenues to be between $1.0 billion and $1.03 billion, suggesting a growth of approximately 4% to 7% from the full year 2023. This is bolstered by anticipated contributions from various business segments. The projected adjusted EBITDA margin is poised to remain strong at 63% to 64%, reflecting the company's ongoing efficiency measures and operational leverage.
Strategic capital investment is a pivotal component for growth. The company plans to invest in IT, infrastructure, and support growth plans, possibly reducing margins by 200 basis points but harnessing benefits from operational leverage. Moreover, capital expenditures for 2024 are expected to increase from the previous year, signifying robust investment in the company's platform and new products aligned with its growth initiatives.
For Q1 2024, the company's revenue and adjusted EBITDA projections are at $235 million to $250 million and $150 million to $160 million, respectively, relatively flat compared to Q4 2023. These estimates suggest typical first-quarter seasonal slowness but does not account for any potential impacts from a recent industry-wide cyber incident. The company has taken actions to safeguard its data and is closely monitoring the situation, demonstrating its proactive approach to operational risk management.
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Hello, everyone, and welcome to the MultiPlan Corporation Fourth Quarter 2023 Earnings Conference Call. My name is Bruno and I'll be operating your call today. I will now hand.
Over to your host, Shawna Gasik, AVP of Investor Relations. Shawna, please go ahead.
Thank you, Bruno. Good morning, and welcome to MultiPlan's Fourth Quarter 2023 Earnings Call. Our speakers today are Dale White, Chief Executive Officer; and Jim Head, Chief Financial Officer. Also joining us today is our incoming Chief Executive Officer, Travis Dalton. The call is being webcast and can be accessed through the Investor Relations section of our website at multiplan.com.
During our call, we will refer to the supplemental slide deck that is available on the Investor Relations portion of our website, along with the fourth quarter 2023 earnings press release issued earlier this morning.
Before we begin, just a couple of reminders. Our remarks and responses to questions today may 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 on our annual report on Form 10-K and other documents we file with the SEC. We will also be referring to several non-GAAP measures, which we believe provide investors with a more complete understanding of MultiPlan's underlying operating results. An explanation of these non-GAAP measures and reconciliation to the most comparable GAAP measure can be found in the earnings press release and in the supplemental slide deck.
With that, I would now like to turn the call over to our Chief Executive Officer, Dale White. Dale?
Thank you, Shawna. Good morning, everyone, and welcome. On the call with me today is our CFO, Jim Head; and our incoming CEO, Travis Dalton. As we close out 2023, I am really encouraged by the progress we have made in transforming our business. We began the year with a new growth plan in hand and a clear sense of what we needed to accomplish. Throughout the course of the year, we executed and advanced each of the initiatives under that plan. We launched several new products to enhance our core out-of-network payment integrity and value-driven health plan services through HST. We made a game-changing acquisition of a data analytics platform, Benefit Science Technologies or BST, bringing a suite of new products that accelerated the development of a new data and decision science service line and positioning us to further penetrate faster-growing market segments, including Medicare Advantage and Medicaid.
And we partnered with ECHO Health to offer a health care payment service, which enhances the competitive position of our product suite in the TPA and direct-to-employer channels, and which will add value to each of our service lines as part of a bundled service. We expect to see further benefits from these investments in 2024 and beyond as our growth accelerates. Moreover, these initiatives are just the first and a long pipeline of new products we expect to launch over the next few years. as we turn into a product-centric organization, which aims to amplify and sustain our long-term growth and diversify our revenues. In addition to executing on our growth plan, we continue to put our business on stronger footing by reducing our risk and improving our financial position.
The visibility and stability of our revenues increased following the contract renewals with our larger customers at the beginning of the year. The volume environment normalized throughout the year. Our business began growing again in the second half, and we delivered on our revenue and adjusted EBITDA expectations for the year. We have continued to be active with our capital allocation and made meaningful strides towards reducing our debt in 2023, and by repurchasing or repaying $222 million in face value of our debt, much of which was at a discount, including $25 million of our 6% convertible PIK notes in the fourth quarter. In total, we have repurchased or repaid $362 million of face value of debt over the last 5 quarters. Reducing debt remains among our highest priorities and we expect to strengthen our balance sheet and optimize our capital structure as we grow revenues and free cash flow over the next several years.
So we made a lot of progress in 2023, and we did all of that while pursuing our mission to bring affordability, efficiency and fairness to the health care system. This year identifying $22.9 billion of potential medical cost savings and helping to lower out-of-pocket costs and reduce or eliminate millions of balanced bills for health care consumers.
Turning to our fourth quarter results, as shown on Page 5 of the supplemental deck. Revenues were $244.1 million up about $1.3 million from the prior quarter or 0.5% and up 1.3% from Q4 2022 and despite a difficult year-over-year comparison given the impact of our contract renewals with our larger customers, which were not yet in our revenue run rate in fourth quarter 2022. Revenues came in just below the midpoint of our fourth quarter guidance range. This was driven by solid sequential and year-over-year growth in our identified potential savings partially offset by the cumulative impact of several adjustments that affected revenue yield from identified savings, as Jim will detail momentarily.
Adjusted EBITDA was $156.8 million, up 3% sequentially and at the end of our guidance range -- at the lower end of our guidance range for the quarter. driven largely by continued investments in the business. EBITDA was down 3% from the prior quarter. Our adjusted EBITDA margin was 64.2%, up 150 basis points from 62.7% from the prior quarter, meeting our expectations as we had said, our margin would show sequential improvement in Q4. Importantly, BST costs were slightly lower than BST revenues in the fourth quarter. Adjusted EBITDA margin declined from 67% in the prior quarter, reflecting the impact of our contract renewals with larger customers, the BST acquisition and our investments in the business.
For the full year 2023, as shown on Page 5 of the supplemental deck, revenues were $961.5 million, down 11% from the prior year, and adjusted EBITDA was $618.1 million, down about 20% from the prior year. Both revenues and adjusted EBITDA fell within our fiscal year guidance ranges. Adjusted EBITDA margin was 64.3% for fiscal year 2023, down from 71.2% for fiscal year 2022 and but within the range of 64% to 65%, that was implied by our full year 2023 revenue and adjusted EBITDA guidance. We continue to deliver strong cash flow in 2023 and generating $171.7 million of operating cash flow and free cash flow of $62.9 million. As I mentioned, we have continued to make excellent progress on our growth plan.
I'd like to spend a moment taking stock of what we achieved in 2023 and discuss the objectives and initiatives focusing on in 2024. Starting with the multiyear context, as shown on Page 10 of the supplemental deck, the growth plan is integral to our transformation and is underpinned by a set of rolling objectives and new product initiatives. As we've laid out at our Investor Day, we still expect our 2023 and 2024 initiatives to generate $200 million to $275 million of incremental annual revenues over the next several years. And we won't stop there because we've identified a long pipeline of opportunities, including a range of initiatives that will be in focus in 2023 -- 2025 and beyond. We entered 2023 with 4 key objectives on our plate. First, strategically enhance our core services to drive more savings and value for our customers. Second, expand our HST platform; third, solidify our market leadership in NSA services; and finally, expand our service offerings to include data and decision science services and a health care B2B payment service.
As shown on Page 11 of the supplemental deck, each of these initiatives and the product initiatives underneath them are on track and are expected to deliver revenue growth for 2024 and ramp up in 2025 and beyond. First, our new balance build protection product is off to a great start. Recall that we launched this product in the second quarter of last year as the first step in our objective to expand our value-driven health plan or HST platform, and we onboarded 11,000 lives for 2023. So far in 2024, we have added about another 7,500 lives, bringing the total to nearly 19,000 lives, and we expect to add additional lives throughout the year. We expect balance build protection to contribute at least $6 million of revenue in 2024 to our HST business, and we're just getting started. We're already working on launching a version of this product for our core multiplant services, which I'll get into shortly.
In advancing our objective to enhance our core services, we launched Pro Pricer in the third quarter, and in October, we onboarded a few large customers. As we mentioned last quarter, Pro Pricer is our next-generation out-of-network repricing solution, which uses machine learning and AI to apply customer rules in choosing the optimal MultiPlan solution to apply to a particular plan. Based on what we know today, we anticipate Pro Pricer to generate revenues of $8 million to $10 million in 2024. And you'll hear in a moment that enhancing the Pro Pricer suite features prominently in our 2024 growth initiatives.
Also getting strong traction is our itemized bill review service or IBR, which is a payment integrity service that reviews high-dollar inpatient facility claims during the adjudication process to identify billing errors and prevent overpayments. Recall that during the third quarter, we introduced functionality enhancements, including bundling with our advanced code adding analytics to proactively identify cases. With these enhancements, we added 5 customers generating annualized revenues of about $5 million. As a result, we expect IBR will contribute nicely to the solid growth we are anticipating in payment revenue integrity services in 2024.
No surprises at compliance remains a significant focus in 2023, and we advanced our objective of solidifying our market leadership by building an NSA Insights portal and creating rules-based claims processing capability. We believe customer and claim-specific rules bring huge value to payers because not all surprise bills are the same. Our rules-based processing engine allows our customers to recognize and leverage the unique conditions of each claim including the likely outcome of dispute resolution. And we have seen increased success rates in pre-IDR postpaid negotiation by applying rules that allow greater flexibility in negotiating settlements.
We are also creating machine learning and other tools to enhance our success in negotiating settlements and improving our customers' chances of winning IDR cases. Continuing with the initiatives on Page 11 and turning to our new data and decision science service line, as we mentioned last quarter, we released PlanOptix search in July and the first version of Plan Optics intelligence in October, and I'm pleased with our pipeline. Recall that PlanOptix is a software suite that provides health care cost analysis and critical market insights by leveraging machine readable files of payer price transparency data. The software will help our customers prepare and execute strategic contract negotiations with providers, understand competitive position to drive market expansion, sales and retention strategies, improved stop-loss premiums and optimize provider networks. Also within the BST family of products, we had a number of wins with our supplemental insurance services and BenInsights.
Now moving on to our 2024 growth plan. As you can see on Page 12, the 4 objectives driving our strategies are to lead the next generation of claims processing to advance our HST employer solution in a box platform to deepen the value proposition of our core services and to enhance and expand the data and decision science service line. I'm very excited about the first objective. We know from our 2023 launches of balance bill protection and Pro Pricer that we are well positioned to bend the health care cost curve by applying technology, data and decision science in the management of medical cost. MultiPlan has all of the tools to make this happen.
In 2024, we expect to meet the strong interest of our customers have expressed in a configuration that bundles balance bill protection with Pro Pricer. We are also making significant enhancements to the Pro Pricer engine this year and next which not only will further enhance the flexibility we offer to our customers and increase the savings we deliver but will also generate dramatic operational cost savings for MultiPlan.
But we aren't stopping with out-of-network claims. You may recall 1 of our 2023 objectives was to develop the next generation of our provider network asset. In 2024, we are working on an exciting intelligence hub concept that will enable MultiPlan and our customers to curate provider networks for specific populations. We believe the future of networks is curation and our net -- and our unique combination of data, decision science and network development assets along with our over 40 years of experience working with providers and payers uniquely positions multiplant to lead the way.
The next objective is to advance the employer solution and box platform of HST. We are already near completion with enhanced reporting as well as predictive and prescriptive analytics, leveraging BSTs, BenInsights, risk management platform. We are also working with care navigation companies on a strategy to integrate concierge service options enriched with our risk models and the new member engagement programs they enable. Finally, we continue to consider ways to tie in a pharmacy option.
Next is our objective to deepen the value proposition of all of our core service lines. The initiatives listed on Slide 12 are over and above the work we do every day to improve the performance of our products. Within our analytics-based services, our focus in 2024 and is to fully launch the NSA portal and rules-based processing enhancements that I mentioned earlier. And we also have growing interest from our customers with fully insured business and services that aid in meeting state surprise bill requirements. And it's not shown here but we are also monitoring the regulatory rule-making involving QPA administration and advanced explanation of benefits which subject to timing, could very well lead to additional product development in 2024. In addition to NSA services, we are introducing a new reference-based pricing option that considers meeting rates in the market, capitalizing on the capabilities we've developed for NSA compliance. We are introducing more comprehensive claim editing, which features service level tiers for first pass subsequent past and post payment needs, and we will drive adoption of our new B2B payment service through product bundling, sales and marketing. Our final objective is to enhance and expand the data and decision science service line we introduced in mid-2023.
Efforts are underway across all of the products in this line, but our highest priorities our clinical risk models and PlanOptix. Our risk models are unique in their [indiscernible], which means we not only score risk but we provide the dominant factors that comprise the score, so our customers can take more immediate action. In 2024, we are introducing additional models focused on high-cost claimants to better inform stop-loss coverages and on the senior population to add value for Medicare Advantage plans. We are also advancing the product road map for planned optics to further enrich the data and to add feature function to our software suite. Notably, we are also in the ideation stages of a planned optics like solution for providers which will be a significant 2025 focus and open a new market vertical.
As I reflect on the significant progress we made during 2023 and as I look forward to 2024 and beyond, I am confident that the company is on sound footing. Our growth has begun to accelerate, and the transformation of our business is on track. With our growth plan well underway, I have decided now is the right time to transition the leadership of MultiPlan to our new CEO, Travis Dalton. Travis is precisely the right individual to guide the company through this exciting next chapter. His extensive experience driving new product innovation to scale, the success he has demonstrated expanding into new markets, his commitment to delivering customer value and his outstanding leadership capabilities will be critical to steering us from the early stages of our growth plan to the realization of our strategic vision. Travis' first official day as CEO is tomorrow. So this is a perfect moment to introduce him to all of you. So I'm going to pass the call to him to say a few words. Travis, welcome.
Thank you, Dale, and hello to everyone on the call. Let me start by saying how excited I am to be joining MultiPlan. As I considered the opportunity to lead this company, I reached 3 conclusions that persuaded me that this was exactly the company where I can make a difference and where I want it to be.
First, MultiPlan has great customers, a world-class team solutions that add value and an important mission to bend the cost curve in health care. I can get behind that. Second, we have industry-leading technology and data assets that will enable us to significantly expand and accelerate revenue growth by launching new products and services that are natural extensions of the baseline product suite we provide to our existing customers and which prepare us to further expand innovative products in new vertical markets. Finally, it's clear to me that we have a strategy and the opportunity to position the company for accelerating growth by leveraging these considerable assets. It's my attention to build upon these successes. I'm confident that my experience, scaling complex health care and technology environments while leveraging products and data to drive top line growth will be a strong asset as we seek to fortify and expand from our core, look at new markets and pursue data and decision science solutions that add value to our customers and the members that they serve.
So for me, joining MultiPlan is about my commitment to this important mission. It's about my passion for improving the quality, cost and access to health care in our nation and it's about leading a great team as we seek to achieve maximum impact in the coming quarters to increase clarity of purpose, enhanced alignment of our resources and focus on world-class operations. This will allow us to get fit for growth by expanding our operating and product development capabilities, intensifying our focus on the product-led go-to-market strategies and attacking top line growth through our sales engagements and new markets.
As you've heard Dale say, execution is critical, and I'm here to drive that. It's where considerable energy will be focused in 2024. You will also hear more from me about an expanded strategic vision. I strongly believe we can set our sights higher, even higher for '25 and 2026 sort of more expansive opportunity set as we followed through on our objective of leveraging our platform to penetrate new market verticals and deliver platform-based data and analytics.
Health care is at an inflection point with consumer demands provider and payer challenges and increasing regulation and market pressures, all of which has created an impetus for change unlike any I have seen in more than 2 decades in this industry. I believe data will be at the forefront of that transformation in health care and ultimately, for consumers of care, which includes all of us. And I believe MultiPlan is uniquely positioned to bring data intelligence, innovation, and value to our customers in the industry. In summary, I see an incredible opportunity to follow through our transformation from a great private company to a world-class public company that's fit for growth. I look forward to meeting all of you in person in the coming quarter.
And with that, I'll turn the call back over to Dale.
Travis, thank you. We are thrilled that you are on board. I want to remind everyone that I will still be around. I will remain active as Executive Chair of the company, and I'm glad to have additional time and capacity to devote to supporting and deepening our key customer relationships and leveraging those relationships to help Travis drive our transformation for.
With that, I'd like to turn the call over to Jim to take you through the financial results. Jim?
Thanks, Dale, and good morning, everyone. Before I begin, let me join Dale in welcoming Travis to the MultiPlan team and share with you how excited the senior leadership team is to partner with Travis for the next chapter in our transformation. This being Dale's last earnings call, I want to thank him for his vision and leadership and wish him well in his new role at the company. Today, I'll walk through the financial results for the fourth quarter and full year '23. Then I'll turn to our outlook for 2024, and and I'll close with a review of our balance sheet and our plans for capital allocation.
As shown on Page 5 of the supplemental deck, fourth quarter revenue was $244.1 million, an increase of 0.5% over Q3 and in line with our Q4 guidance. Compared to the prior year's fourth quarter, revenue increased 1.3% despite a difficult comparison given the impact of contract renewals with our larger customers, which were not yet in our run rate in Q4 2022. For the full year '23, total revenues were $961.5 million within the narrowed range of guidance provided on our Q3 earnings call and down 10.9% from the prior year.
Turning to revenues by service line, as shown on Page 6 of the supplemental deck. Relative to Q3 '23, network-based revenues declined 8.1% or $4.6 million, driven largely by our complementary network business, which had some customer adjustments, which I will discuss in a moment. Our analytics-based revenues grew 3.2% sequentially attributed to strong volumes in data eyesight and NSA services. Our Payment and Revenue Integrity revenues increased 3.2% sequentially from strength in our Discovery Health lines of business like revenue integrity and itemized bill review. Versus the prior year quarter, network-based revenues declined 4% and analytics-based revenues grew 1.9% and Payment and Revenue Integrity revenues grew 8%. Excluding a $3.8 million contribution to revenues from BST, which is reported in our analytics-based revenues, Fourth quarter consolidated revenues were $240.3 million, up slightly from the prior quarter. For full year '23, network-based revenues declined 8.9% and analytics-based revenues declined 12.3% and payment and Revenue Integrity revenues declined 6.9%. These year-over-year declines are largely attributed to the impact of the contract renewals with larger customers in the beginning of '23, and and also due to a sharp decline in COVID-related claims savings, which had spiked during the first half of 2022 and dropped off significantly in the first half of 2023. Excluding a $9.5 million contribution to revenues from nearly 8 months of owning BST, full year '23 revenues were $952.0 million, down 11.8%.
The fourth quarter was characterized by further normalization of volumes with broad-based strength across categories. As shown on Page 7 of the supplemental deck, total fourth quarter billed charges increased 2% sequentially to $43.4 billion, and identified potential savings increased 2.3% sequentially to $5.9 billion. In our core commercial health plan segment, billed charges were up 5% sequentially to $19.4 billion and identified potential savings increased 2.2% sequentially to $5.6 billion. This sequential growth in volumes was broad-based across both physician and facilities claims and factoring in our typical claims [ leg ] was relatively consistent with the trends in the third and fourth quarters that were reported by some of the publicly traded payers and hospital operators. Also, we have seen strong NSA volumes through our platform in Q4, exclusive of the downstream IDR volumes, which also increased significantly in the second half of the year.
The strength of our volumes was offset by a decline in revenues as a percentage of our identified savings or revenue yield. As shown on Page 9 of the supplemental deck, our, revenue yield declined 7 basis points sequentially for the overall business, which includes both PSAV and PEPM. In our core percentage of savings revenue model, which is approximately 90% of our revenues, our revenue yield fell 15 basis points. So let's break down this decline.
About 6 basis points of the decline was related to mix effects and yield normalization, and about 9 basis points of the decline was related to various customer credits and adjustments that are nonrecurring and will abate. Importantly, none of the decline in our PSA revenue yield was related to contract changes with our customers, none of it. Instead, there were more idiosyncratic programmatic adjustments in the quarter than any typical quarter, most of which will disappear in Q1.
Going forward, our expectation is that our PSAV revenue yield is likely to hover around the 5% range with some modest fluctuation driven by product and customer mix.
Turning to expenses. Fourth quarter adjusted EBITDA expenses were $87.3 million, up $7.7 million from $79.6 million in the prior quarter, but down $3.2 million from Q3 2023. The increase of $7.7 million over last year's fourth quarter was driven by the combination of the acquisition of BST, structural cost increases and investments in the business. For the sequential comparison, the decline in adjusted EBITDA expenses reflected the moderation of upfront costs related to the BST integration and tight expense controls. Our adjusted EBITDA expenses for the full year 2023 were $343.5 million and include approximately 8 months of BST costs. Adjusted EBITDA was $156.8 million in Q4 of 2023, down 2.9% from $161.5 million in the prior year quarter but up 3% from $152.3 million in Q3 '23. Our Q4 adjusted EBITDA was closer to the lower end of our guidance for the fourth quarter due to continued investments in the business. Adjusted EBITDA margin improved in Q4 '23 to 64.2%, up 150 basis points from the prior quarter and down from 67% in Q4 2022. Excluding the impact of BST, the margin in our core business was above our consolidated margin for Q4, and BST revenues less costs were slightly better than breakeven for the first time since the acquisition closed in May of 2023. Full year adjusted EBITDA of $618 million was down 19.6% from $768.7 million the prior year. Our full year '23 adjusted EBITDA margin was 64.3%, down from 70.2% for the full year '22, reflecting the combination of the lower revenue and higher adjusted EBITDA expense dynamics previously discussed. Excluding the impact of BST, the margin in our core business was above our consolidated margin for the year.
Turning to 2024 guidance, which is presented on Page 13 of the supplemental deck. We anticipate 2024 revenues of $1.0 billion to $1.03 billion, growing approximately 4% to 7% from full year 2023. The revenue bridge on Page 14 of the supplemental deck illustrates the key components and assumptions in our guidance. First, we expect our core out-of-network business to contribute approximately 150 to 300 basis points to the consolidated overall growth. This includes new sales growth initiatives and modest increases in utilization and health care inflation as well as the effect of program changes in customer attrition.
Moving across the revenue bridge, we expect an -- our Payment and Revenue Integrity business to contribute 50 to 75 basis points of growth for fiscal 2024. We expect our value-driven health plans, our HST platform to contribute 100 to 150 basis points, driven by the combination of member growth and our growth initiatives, including our balanced build protection service. We expect our data and decision science service line to contribute 100 to 150 basis points and our B2B health care payment service to contribute 10 to 25 basis points. Importantly, these last 2 service offerings expansions are still nascent, and we expect the contributions to growth from each to accelerate in 2025 and beyond.
As shown on the adjusted EBITDA margin bridge on Page 15 of the supplemental deck, we expect to continue to deliver an adjusted EBITDA margin of 63% to 64% in 2024, slightly lower than our full year 2023 margin but stable industry-leading and within striking distance of our longer-term margin expectations in the mid-60s range. Bridging from Q4 '23 run rate of 64.2% to our 2024 margin guidance, we expect roughly 80 basis points of margin contraction for full year 2024. Within that 80 basis points, we expect 25 basis points of contraction related to net structural cost increases. More than offsetting that cost increase is about 140 basis points of expected margin lift driven by higher expected revenues in 2024 on a largely fixed cost base of our core business. Offsetting this lift is 125 basis points of margin contraction from investments to support our platform, which includes investments in IT and infrastructure and about 75 basis points of contraction from investments to support our growth plan. In short, you are seeing us use the benefits of operating leverage to fund our growth investments, which is that balancing act that we are pursuing to enable our growth plan.
Returning to Page 13. Our revenue and cost expectations imply a forecast of $630 million to $650 million for adjusted EBITDA of $24 million. Page 13 also shows other guidance related to our P&L and cash flow to help you estimate free cash flow generation for the year. We expect interest expense of $320 million to $330 million in 2024 and versus $332 million in 2023, reflecting lower debt levels as well as the benefit from our fixed rate hedge that we placed on a portion of our term loan B. We are forecasting capital expenditures of $120 million to $130 million in 2024 and up from about $109 million in 2023. We will continue to make capital investments in our platform in BST and in new products related to our growth plan. We expect depreciation of $80 million to $90 million and a tax rate between 25% and 28%.
Finally, we anticipate operating cash flow to be between $170 million and $200 million in 2024 and versus $171.1 million for full year 2023, driven primarily by higher adjusted EBITDA and lower interest expense. Before I can turn to Q1 guidance, as you're aware, MultiPlan established a long-term incentive and retention program for the BST transaction to retain the management team and to align to future revenue targets. Our 2024 guidance does not include any impact of the incentive payments, of which the first ARR milestone is at 12/31 24. These ARR targets were deliberately ambitious and will require performance beyond what is assumed in our current guidance. We should have a better line of sight, if any incentives are expected by the time we provide our typical guidance update for the second half.
As outlined on Page 16 of the supplemental deck and in the press release this morning, for Q1 '24, we anticipate revenues of $235 million to $250 million and adjusted EBITDA of $150 million to $160 million. These projections are largely flat versus from Q4 '23 and reflect typical Q1 seasonal softness. As with 2023, we expect sequential growth in revenues and adjusted EBITDA as we move through successive quarters in 2024 as we realize additional gains from our growth initiatives. As you are all aware, there's been some disruption in the industry related to the Change Healthcare cyber incident. We have taken preventative actions to protect our systems and data and continue to monitor the situation closely with our customers. We believe this is causing delays in claims submissions upstream from our services, but it's too early to determine what impact, if any, this could have on our volumes and revenues downstream over the course of the quarter. As a result, our Q1 2024 guidance does not reflect any potential impact related to this incident.
Turning to the balance sheet and capital allocation. Our operating cash flow was $27.7 million in the fourth quarter and levered free cash flow was negative $3.6 million. As a reminder, second and fourth quarters are lower quarters for cash flow given the timing of our interest and tax payments. As Dale reported, for full year 2023, operating cash flow totaled $171.7 million and free cash flow was $62.9 million despite absorbing a $23.7 million litigation settlement $7 million of onetime transaction costs for our BST acquisition and approximately $13.5 million in additional cash taxes paid on the cancellation of our debt.
As shown on Page 19 of the supplemental deck, we ended the year with $72 million of unrestricted cash. Net of cash, our total and operating leverage ratios were 7.3x and 5.3x, respectively. We continue to be active and disciplined in allocating our capital. As shown on Page 17 of the supplemental deck, during the fourth quarter, we used $17.6 million to repurchase $25 million face value of our 6% convertible -- senior convertible PIK notes as well as $2 million towards the repurchase of our shares. This brings total capital deployment for full year $23 million to $322 million, including $166 million of capital and debt repurchases and mandatory repayment that reduced our debt $222 million face value, $141 million on M&A and $15 million on share repurchases. Our long-term capital priorities remain consistent. The highest priority remains investing in the business to drive growth and long-term value. You're seeing this in terms of our investments in the P&L and also our capital expenditures, which are -- have grown above our revenue growth rate in the short term to fund investments in the business. These investments are a series of small bets, which have attractive risk return characteristics.
With our remaining cash flow, we'll primarily focus on debt reduction. Notably, we've reduced the face value of our debt by $362 million over the last 5 quarters. While our long-term priorities have not changed following the acquisition of BST, in the near term, we are likely to emphasize organic investments and debt reduction and deemphasize M&A as we've consistently mentioned. RECONNECT And you should expect the bulk of our incremental capital generation to be allocated towards debt retirement. We'll continue to adjust share repurchase. And as we've consistently said, that will continue to be a small allocation of our overall capital generation.
Before I end, let me summarize the broader landscape. We said 2023 would be a pivotal year for MultiPlan and pivot is precisely what we did. We put our contract renewals in the rearview mirror, we set our new growth plan in motion, and we've positioned the company well to deliver growth in 2024 and to accelerate that growth in 2025 and beyond. We've managed the delicate balance of ramping up investments in the business to drive growth while maintaining our industry-leading margins. And we used our free cash flow to aggressively reduce our debt and expect our capacity for debt reduction to expand as we grow revenues and cash flow over the next several years. In short, our transformation is underway, and I want to thank all of our MultiPlan colleagues and especially Dale, for working tirelessly to keep it on track.
That brings me to the end of my comments. I'll turn it back over to Dale.
Jim, thanks. To our employees, let me echo Jim's note of thanks for your tremendous efforts this year and for every 1 of the 20-plus years I have been with the company a work with you. to deliver on our important mission, and I'm enormously proud of what we have built together. Let me also say how important it was for me that our next CEO and be as passionate about health care affordability as MultiPlan has always been. Travis brings innovation, experience and energy that will drive our mission even further. And I couldn't be more excited for what the future brings under his leadership. I am confident that MultiPlan is in a great position and in capable hands.
And now I'll turn the call back to Bruno. Bruno, please open the call for any questions. Thank you.
[Operator Instructions] Our first question comes from Joshua Raskin from Nephron Research.
So the chart on the 2024 revenue bridge was very helpful. It looks like your core out-of-network processing is still the biggest growth driver, call it, $15 million or $30 million -- $15 million to $30 million of growth. Can you tell us what the Ad Network segment impact was in 2023 in terms of how much of a detractor that was? And then were any other buckets net negative in '23?
Well, I think in '23, Josh, if you kind of go back to what we did a year ago, 1 of the biggest overarching headwinds was the contract renewals that was about a 9% headwind if memory serves. And that washed across all of our products, which are essentially in the core and then payment integrity for the most part. So the compare is a little bit different. I think what you might say is in our core out-of-network business against the core base, it's about closer to 200 to 400 basis points of growth, which is a little bit below our ambition we put out at Investor Day, but pretty consistent. And so we've got a clean compare this year. I would kind of look at it that way, Josh. And then what we've got is a series of layers of some of the new growth drivers like HST and data and decision science that are going to add to that.
Okay. All right. I think I got that. And then I know you mentioned a little bit of this on the call, but the current period appears to you're seeing some pressure on utilization more so in the senior market, maybe more MA than fee-for-service. But are you seeing more demand on the Medicare side for cost containment products or some of your newly acquired products that we're focused a little bit more on that market. Are those resonating better at this point?
Yes, Josh, it's Dale. Yes, look, obviously, there -- you've seen all the changes that are happening within Medicare Advantage from CMS. And the pressure around price and risk is heightening. So we feel our data and decision sciences line of business is tailored to meet that demand. So we're doing a lot -- we've done a lot of work in 2023, and we'll continue to do that work in 2024 around tailoring our risk models to -- for the senior population. And we're excited about that opportunity as we move forward throughout 2024. .
Okay. And then just last one for me, Dale. You mentioned curated networks as a potential future opportunity. And I'm curious, if you could just give us some examples or maybe a little bit more of what that means. Is that geographically based? Is that sort of segment based? Is that a specific type of customer or chronic disease? I'm just curious what curated networks look like.
Yes. I think that -- it's a great question. The curated network concept, right, is focused on bringing the best providers to the table from a cost and quality perspective. and managing the utilization through that provider. It's not necessarily based by clinical specialty, Josh. It's more based on looking at that instead of having a large all-inclusive network, it's really zeroing in on those providers who can deliver on cost and on quality and provide the best clinical outcomes for employers and the best cost outcomes for employers. That's our plan. It is geographic specific, meaning we're going to target certain markets as opposed to doing something nationally, but we're going to zero in on those markets where we believe there's opportunity and demand and interest for a network like that.
[Operator Instructions] our next question comes from Luismario Higuera Iger from Citigroup.
This is Luis on for Daniel Grosslight. I just had a question on your [ Corpus ] guide. You mentioned back in your Investor Day that you're making about like 4% to 5% medical cost inflation annually. How does this year's guide compared to? And how should we think about that?
I think we have been longer -- I think we think about the longer term as kind of 4% to 5%. I think near term, we're not even expecting that inside our guide. And one of the reasons why it just lags, there's a big set of renewals coming up in the -- throughout the health care ecosystem over the course of the next year where things have started to tick upwards, but we haven't seen the full effect of that. So I would say we're conservative on health care inflation. We're also conservative on utilization.
I would just comment on the utilization front. And pretty consistently, we saw an uptick in the first half and continued normalization throughout the year kind of to a new level. We did not bake in our guidance any material upswing in utilization. And I think that's consistent with what we're seeing from the hospitals, et cetera, which is some good year-over-year compares, but don't -- I'm not sure from a labor perspective, from a capacity perspective, they have room for another dramatic uptick. So I think we're being pretty conservative on both of those components.
We currently have no further questions and that concludes today's call. Ladies and gentlemen, thank you for joining. You may now disconnect your lines. Thank you.
Thank you.