Claritev Corporation (CTEV) Earnings

Management highlights

### Overall Turnaround and Strategy Progress - The company confirms it is in the "year of the way up" (as defined at the March 2026 Investor Day), marking a return to sustainable growth as part of its multi-year transformation. The strategy of delivering horizontal solutions across vertical markets is delivering results, with five straight quarters of YoY revenue growth. - Adjusted EBITDA for Q2 was $155.8 million, and levered free cash flow was $0.6 million, up 49% YoY — this was the highest quarterly levered free cash flow in 15 quarters. Working capital metrics improved by more than five days for DSO and DPO. - Bookings momentum is strong: $30 million in ACV was booked in Q2 2026, bringing first-half 2026 total ACV bookings to over $70 million, already surpassing full-year 2025 total bookings of $67 million. First-half 2026 bookings are up 150% YoY, with an average deal size growth of more than 300% YoY. 16 deals over $1 million ACV have closed year-to-date, up 25% YoY. 75% of bookings come from existing client cross-sell/upsell, while 25% comes from net new logos. - Ending June 2026, the active sales pipeline is over $300 million, up 50% YoY, with greater than 3x coverage of full-year bookings targets. Win rates are improving and sales cycle times are shortening. ### Market and Macro Tailwinds - Persistent annual medical inflation of 8-10% (well above overall economic growth) and healthcare spending making up ~20% of U.S. GDP creates strong demand for Claritiv's cost reduction, affordability, and transparency solutions. - New finalized NSA IDR rules increase compliance requirements for payers and providers, increasing demand for Claritiv's scalable NSA management capabilities. The company's arbitration outcomes outperform the industry by ~8 percentage points, and existing clients are consolidating more NSA workflow onto Claritiv's platform. - Medicare Advantage is identified as a meaningful long-term growth opportunity; the company signed a new high six-figure ACV deal to build an MA network in Q2, capitalizing on plan demand for payment accuracy and network optimization. ### Technology and AI Progress - Multi-year digital transformation of technology, data architecture, and cloud migration is complete enough to position the company to deploy AI responsibly at scale, with organized data, modern cloud infrastructure, and deep healthcare domain expertise. - AI is already deployed in production across multiple use cases, most notably for NSA/IDR workflow: AI automates provider data validation, ineligibility assessments (nearly half of all IDR submissions are estimated to be ineligible), case creation, and pre-arbitration strategy optimization. These innovations reduce operating costs, speed up resolution, and improve outcomes. More than half of the company's internal code is now AI-generated, and full modernization of 400+ applications is expected to enable 4-8x more output from existing headcount. ### Capital Position and Allocation - Strong Q2 cash flow gives the company confidence to maintain elevated investment in its multi-year transformation and growth initiatives. The company's core priority is organic growth investment, followed by balance sheet deleveraging to reduce business risk.

Guidance

- Management raised full-year 2026 revenue guidance by 2 percentage points to a new range of $1 billion to $1.02 billion, representing 4% to 6% YoY growth and a return to over $1 billion in annual revenue (last achieved in 2022). - Full-year adjusted EBITDA guidance was raised to $610 million to $620 million, representing an adjusted EBITDA margin of approximately 61%. - Full-year 2026 free cash flow guidance was raised by $5 million to a new range of $5 million to $15 million. Total capital expenditure guidance is maintained at $160 million to $170 million for 2026. - Management expects at least 50% full-year ACV bookings growth in 2026, and confirms the company is on track to exceed its full-year $100 million ACV bookings stretch target. - Management suggests modeling Q3 2026 revenue as flat sequentially relative to Q2, consistent with consensus analyst estimates. For full-year 2026 second half revenue, the base case implies ~$508 million in total second half revenue (up 3% YoY and 1% sequentially from the first half), with total sequential second half growth of 1% to 3% and YoY growth of 3% to 5% between the lower and upper end of the guidance range. - The company expects adjusted cash conversion to normalize to pre-2025 levels of over 50% by the end of 2026.

Segment performance

Claritiv reports total Q2 2026 revenue of $257.5 million, up 6.6% year-over-year, marking the fifth consecutive quarter of YoY growth and the highest revenue quarter in 15 quarters. Excluding $5.4 million in one-time revenue from Q2 2025, total core growth was nearly 9% YoY. 1. Claims Intelligence (P-SAVE): This segment grew close to 14% YoY in Q2, with total P-SAVE revenue reaching $220 million, its highest level in nearly four years. Total P-SAVE revenue grew 8% sequentially and 10% YoY, driven largely by No Surprises Act (NSA) related claim volume growth. Q2 claims volume grew 11% sequentially and 3% YoY, reversing prior declines, due to lapping a multi-year residual single-client volume issue and a step-up in NSA claims volume from a large new client win. While average revenue per claim moved lower sequentially due to this mix shift, the net dollar contribution is accretive. This segment accounts for ~80% of total company revenue. 2. Third-Party Administrator (TPA): This vertical was the largest contributor to Q2 bookings, including several seven-figure deals (such as the MarPi win for payment and revenue integrity solutions). It is expected to contribute ~30% of total 2026 new bookings, the second-largest contribution after the payer segment. 3. Network: Network revenues would have been positive YoY if the $5.4 million one-time Q2 2025 revenue is excluded. Full-year 2026 network revenue is expected to be down high single digits due to lapping that one-time 2025 gain. This segment makes up less than 20% of total company revenue. 4. Payment and Revenue Integrity: This segment performed slightly above internal expectations in Q2. The Q2 consensus revenue miss for this segment was purely timing-related; management still expects the segment to grow full-year revenue versus 2025. $25 million of first-half 2026 ACV bookings came from this segment, and it is a key medium-term growth area focused on addressing payer demand for fraud, waste, and abuse reduction.

Risks & headwinds

- Forward-looking results may differ materially from current expectations due to uncertain factors including variable NSA claim volume growth after new rule implementation, variable timing of ACV to revenue conversion for new bookings, and unexpected shifts in healthcare spending and client demand. - The mix shift to higher volumes of lower average revenue per claim NSA business could persist through the second half of 2026, keeping average revenue per claim close to Q2 2026 levels, which may impact sequential revenue trends relative to investor expectations. - New vertical markets like public sector and Medicare Advantage have longer lead times for revenue conversion, so contributions from these new growth areas will take time to become material, creating near-term execution risk.

Analyst Q&A

• Q: Q2 PSAB volume growth was driven largely by NSA claims; how much of this is a one-time Q2 bolus versus structural, and what should we expect for H2 2026 volumes? /

  A: Management modeled low single-digit full-year volume declines, with ~a few million in revenue that slipped into Q2 that was originally planned for Q1. While the impact of new NSA rules on volume is still uncertain, management took a modest view of H2 volume in base modeling, and considers Q2 exit rates to be a reasonable baseline for the rest of the year. Structural NSA rule changes position the company well for long-term volume growth. (318 characters)

• Q: Has the timing of ACV booking to revenue recognition changed, and how is the multi-year digital transformation progressing? /

  A: The average timeline remains 2-4 quarters from booking to first revenue, and an additional 4 quarters to reach full annualized revenue contribution. Shorter timelines (2-3 quarters) are typical for claims intelligence and payment integrity deals, while longer timelines (3-4 quarters) apply to public sector deals. The digital transformation remains on track: most applications have been moved to cloud, with core data architecture modernization complete, positioning the company well for AI deployment. (382 characters)

• Q: Is the company on track to exceed $100 million in 2026 full-year bookings, and how does the 2027 pipeline mix differ from 2026 execution? /

  A: Management confirms the company will deliver over $100 million in 2026 bookings, with over $74 million already booked in the first half, ahead of plan. The total active pipeline is over $300 million, with one-third of opportunities in new verticals (such as public sector) that have longer lead times. 70-75% of pipeline remains core business cross-sell/upsell, with significant white space in the core payer and TPA segments, which remains the company's primary focus for near-term scale. (375 characters)

• Q: What is driving NSA revenue upside, how sticky is this revenue, and what is the incremental savings opportunity from AI initiatives? /

  A: Q2 NSA upside is mostly from one large earlier win, but the broader funnel is growing as new NSA rules increase compliance requirements. Claritiv outperforms peers by 8 points in arbitration outcomes, and over 85-90% of NSA claims are resolved before reaching IDR, making the company's end-to-end solution very sticky. The company's AI-powered ProPricer product has already identified over $1 billion in incremental client savings, with no additional detail on remaining opportunity provided for competitive reasons. (371 characters)

• Q: What drove Q2 revenue performance versus consensus across the three core segments? /

  A: The slight payment revenue integrity consensus miss was purely timing-related, and management still expects this segment to grow full-year YoY. Network revenue is expected to be down high single digits full-year due to lapping $18.5 million in 2025 one-time revenue, in line with expectations. The full-year guidance raise was driven by outperformance in claims intelligence (which includes NSA products), and this strong growth trend is expected to continue. (270 characters)