Q1 2021 LifeMD Inc Earnings Call
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Good afternoon. Thank you for joining us today to discuss like N. The first quarter fiscal 'twenty.
A bunch of one of adults for the three months ended March 31st 2021, joining us today is the chairman and Chief Executive Officer of life M D.
Justin true bar and the company's Chief Financial Officer, Mark Burnett, then I'd like to remind everyone that today's call is being hosted by a webcast and the recording.
We made available via the link in todays press release, which is available in the Investor Relations section of the company's website before we conclude today's call I will provide.
It's an important cautions regarding forward looking statements made by management during the call I'd like to remind everyone that today's call is being recorded I won't be.
Available for webcast replay.
Instructions in today's press release, which is available in the best of our relations section of the company's website.
I'd like to turn the call over to life M. D. CEO Justin Sherbet. Please go ahead. Thank you operator, and good afternoon, everyone. Thanks for joining us.
Thank you for our first earnings call of 2021.
I hope that everyone on the call and their loved ones are safe and hope for in the new year now the COVID-19 vaccinations of started.
As we enter a new phase of the pandemic curve the management team would like to give thanks to all of the frontline workers, who have helped us get to this point and we'll continue the selflessly assist others before themselves.
We are now well into the new fiscal year and lifetime is off to a strong start both operationally and financially.
Having served over 300000 customers and patients since our inception, we continue to pioneer the future of health care, providing greater access to high quality convenient and affordable care in 49 states, while converting more and more people to the possibility of the telehealth as evidenced by our growing patient enrolls.
While the country continues to emerge from the COVID-19 pandemic, which frankly helped accelerate our industry and our business I am very pleased to report the life of Mt's growth and acceleration showed no signs of slowing down.
Indeed demand continues to build to record levels.
<unk> for the broader tectonic shift is happening that will radically change the way of health care is delivered to and experienced by millions of Americans.
We are excited to be of part of it and we are committed to our mission of increasing access to health care through direct to patient telemedicine license.
<unk> stands at the Vanguard of the health care Revolution.
I can say without hesitation that our explosive growth and strong patient conversion rates to our subscription based models have done nothing for trend positively in 2021, and our fantastic results stand as evidenced of the trend.
In the first quarter of 2021, we grew revenue by over 300% as compared to the same year ago period, and up 41% sequentially from the prior quarter.
In addition to this phenomenal growth we have also begun to see the early results of beginning to optimize and scale aggressively.
Better leveraging our cost structure, while planting the seeds for building, a leading telehealth business with profitability in mind.
In the first quarter of 2021, we saw an approximate 15% to 20% improvement in customer acquisition costs versus the prior quarter and record level gross margins exceeding 80%.
This coupled with the fact that 92% of our revenue currently comes from recurring subscriptions is laying a very strong foundation for predictable growth over the long term, while also paving our pathway to profitability.
At <unk>, our core domain is in technology and marketing more specifically, our direct response marketing expertise.
And in our ability to scale businesses on our holistic digital health platform quickly and efficiently.
That said, we have a bigger mission in mind and are primarily primary goal has been to support the new permanence of patient centric care through <unk>.
The global pandemic shortly accelerated the mass adoption of telehealth in 2020, and we use that as an opportunity to really entrench our customer base in products and services that have made a positive difference in the lives of our patients.
Should propel our narrative as pioneers in digital health. We also want to remind investors who are new to our story the life of deep predates COVID-19 and will endure long past the pandemic retreat. We of build a platform that has the ability to support tens if not hundreds of direct to patient telemedicine offerings.
And seeing the value of our offerings, our patients are overwhelmingly choosing subscription based products and services, which have been fueling our significant sequential growth.
In fact for the first time in company history more than 50% of our telehealth revenue came from the rebuilding of already existing patient subscribers.
As an industry leader in telehealth customer acquisition, our growth potential remains massive we are operating an open white space of the nascent industry with a total addressable market of nearly a trillion dollars to get to where we are now we placed the strong emphasis on a few strategic imperatives that of really transformed.
Life of <unk> potential.
First we have built a robust patient care process via our digital health platform with unlimited expand ability across other indications.
In the last week of the quarter, we launched novel of MD, a direct to patient clinical tell of dermatology services brand for women, which added further diversification to our growing portfolio of companies Nava M D. As our third launch and for years and we look forward to further developing the brand.
In addition, as I have spoken about before we continue to anticipate launching our namesake license of the primary care platform later this summer.
We believe this launch coupled with our very successful current and future condition specific telemedicine brands will provide life of D with a powerful and differentiated end to end direct to patient tell all the platform.
Second in order to support our rapid revenue growth and brand expansion, we have strengthened our management team with leaderships debt to play a pivotal role in managing our growth.
This includes rounding out of our executive team with the hires of a chief Digital Officer, a chief Medical Officer, and Chief Financial Officer.
These hires coupled with the previous hires to our executive team have given life of a formidable leadership team with significant direct to consumer health care and regulatory experience in scaling high growth businesses.
In summary, our first quarter of 2021 was not only marked by record topline performance. It also saw us make significant strides in solidifying the infrastructure, which will enable life indeed to scale efficiently towards longer term profitability.
And with that I would like to turn the call over to our CFO, Mark <unk>, who will discuss the period's financials Mark.
Thank you Justin and good afternoon, everyone.
Justin mentioned, we've had a fantastic start for fiscal 2021, thus far our products and services have been well received by our patients have overwhelmingly made the act of choice of converting their accounts of subscription based plans given the high level of service, we provide and the recurring maintenance indications we treat.
We continue to see strong unit economics, with our LTV to CAC ratios on recurring subscriptions at or approaching two acts on the 12 month basis and the potential to wall exceeds three acts on the three year basis.
As of the first quarter of 2021, 92% of our revenue is non recurring subscription base.
To get into the quarter's results revenue in the first quarter of 2021 total the record $18 2 million up 323% as compared to the same comparable year ago period, and up 41% from the fourth quarter of 2020, the growth was driven largely by of 349%.
Increase in telehealth net revenues of $13 3 million or.
Our legal simply subsidiary contributed net revenue of $4 9 million up 264% from the year ago quarter.
Including $1 3 million in deferred revenue associated with recurring subscriptions total adjusted revenue on the non-GAAP basis would've been $19 5 million for first quarter of 2021.
Telehealth of order volume grew 373% versus a year ago period, or 41% sequentially to 164452 others.
This increase was driven by a 252% increase of new patients plus strong retention of existing patients.
As a result of the significant performance we had in Q1 and our continued momentum we are raising our full year of 2021 revenue guidance to $90 million to $100 million from the previously given guidance of 85 from $95 million, reflecting annual growth in 2021 of between 141 and <unk>.
268% versus 2020.
As of the current reporting quarter, we're running on an annualized revenue run rate of $72 8 million calculated by the current reporting period revenues times for.
Gross profit in the first quarter increased 403% for $14 9 million compared to $3 million in the same in the year ago quarter.
Gross profit as a percentage of revenue in the first quarter of 2020 increased to 82% from 69% from the same year ago quarter.
The increase of 13% and gross profit was principally attributable to lower product cost growth of our prescription business and more stringent inventory management.
Operating expense in the first quarter of 2021 was $26 8 million up from $4 7 million in the same year ago quarter.
The increase was primarily due to increases of discretionary growth selling and marketing expenses of $15 9 million.
General and admin expenses of $5 3 million other operating expenses of 737000 customer service expenses of 127000.
And development cost of 114000.
The increase in general and admin costs was primarily due to $2 3 million of noncash stock based compensation expense. The majority of the stock based compensation was related to the appointment of several executive team and board members.
The increase in operating expense as compared to the year ago period was associated with investments made to solidify the long term rapid and scalable growth of life on these infrastructure, which we expect the leverage these costs as the company continues to grow.
Our GAAP net loss attributable to common stockholders for the first quarter of a total of $11 6 million or <unk> 47 per share. This compares to a net loss attributable to common stockholders of $2 4 million or <unk> 23 per share in the first quarter of 2020.
Adjusted EPS is a non-GAAP measure, which excludes the $2 3 million and noncash stock based compensation expense. This figure of totaled the loss of <unk> 38 per share for the first quarter as compared to a loss of 22 per share in the same year ago period.
In addition to stock based compensation expense, our net loss for the first quarter of 2021 included other noncash of financing related charges such as interest expense of 139000, combined amortization expenses of 152000 and financing transaction expense of 126000.
Adjusted EBITDA, a non-GAAP term, which factors out of these terms totaled the loss of $8 9 million in the first quarter of 2021. This compares to an adjusted EBITDA loss of 556000 of the same year ago quarter.
Now turning to our balance sheet cash totaled $13 4 million at March 31, 2021, as compared to $9 2 million at December 31, 2020. The increase was primarily due to a private placement with net proceeds of $13 5 million in the period completed in February of 2021.
As mentioned in our press release earlier today, we have started to the significant work to own in our economics and Kpis and as a result on a go forward basis have reduced our cash burn by approximately 30% at current revenue levels.
We believe our current cash position and available funds provide the company with ample liquidity to meet our current needs and plans for growth. We also continue to make progress in securing the additional financing to further augment our balance sheet position.
This wraps up our financial results I would now like to turn the call back over the adjustment.
Thanks Mark.
So we're off to a really strong start in 2021.
But the best is yet to come we elevated our infrastructure with key executive appointments continue to optimize and improve our patient acquisition and patient care teams transitioned over 90% of our patients to recurring subscriptions launched novel of empty and laid the infrastructure the supportive business poised for multiples of.
Growth.
All of this led to as Mark mentioned earlier life MD, raising our current fiscal year 2021 revenue guidance to $90 million to $100 million, reflecting upwards of 168% growth versus 2020.
We believe that the platform. We've built supported by more than 150 full time and contract employees and over five years of technological development will facilitate aggressive growth and even stronger unit economics in the years to come.
Our focus remains on building innovative and differentiated telemedicine brands with improved access to medical treatment brands that are condition specific and allow for equal focus on customer acquisition and most importantly, the delivery of amazing health care and doing so we will continue to transform the way of Florida.
Bulk and accessible health care is delivered to patients with that I would like to open the call for Q&A.
Thank you, ladies and gentlemen, if you would like to ask a question today. Please signal.
Pressing star one on your telephone keypad.
Please ensure that the mute function on your telephone is switched off.
I guess take notes of the chocolate.
Again to ask the question over the telephone please take note of by pressing star one.
Pause for just the moment to allow everyone. An opportunity can you just take note of for question. We will take our first question today from David Larsen from <unk>. Please go ahead.
Hey, guys congratulations on a very good quarter and the increase in the guidance.
I was hoping you could just comment on what youre seeing in terms of demand from the overall market.
Obviously, there's been a lot of activity in the space.
Walmart acquired a telehealth vendor Amazon has entered into the space I mean, what are you seeing from your own customers in terms of appetite for the cash pay telehealth business.
Yeah.
Thanks, David This is Justin.
Look we've seen.
We've had we're having a very strong second quarter.
Amazon entrants are suppose to the entrance of plans to enter condition specific for you to see telemedicine.
We've had no impact on our business and as we've discussed before we don't believe that they will have a significant impact long term, we believe that Amazon entering the space.
Further raises the awareness for telemedicine and we believe we have a differentiated offering that can compete with Amazon or anybody else in the b to C telemedicine world.
With regards to Walmart's acquisition of <unk>.
That business is very b to B does not compete with us at all I'm sure that Walmart will do everything they can to aggressively grow that business, but we think it will be for the most part focused on.
A small percentage of people that actually visit of Walmart store and it's given the size of given the kind of opportunity ahead of us in D. C telemedicine.
We think that this type of M&A activity of just further demonstrates the incredible opportunity for the company and the amount of white space that exists in the space.
We're happy to see big companies entering the space and again raising the overall awareness of this transformation of how health care is delivered.
Okay, that's great and then.
Can you maybe give a little more color on like the sales and marketing spend your customer acquisition costs and.
I like to.
See that debt very significant pop in gross margin just any more color around that would be very helpful. Like longer term expectations for gross margin and expected trends in the sales and marketing and cash. Thanks.
Yes. This is mark regarding the gross margin, we expect longer term to see gross margins very similar to the gross margins that we produced this quarter a lot of it was driven by one we've seen a prescription business grow pretty significantly the Charles a slightly higher gross margin versus the OTC business.
Two we've been managing in our OTC business, our inventory a lot tighter so both of those of certainly lot of it up to very strong gross margins, which we expect to be able to maintain in the future regarding sales and marketing in CAC as was mentioned by Justin we saw a reduction of while we don't release our actual.
<unk> physical cash cost the absolute number we did see about a 15% to 20% reduction in this quarter over Q4, we've continued to tightening up since then and since that time have been able to reduce the cost by about another 15% to 20%.
In the second quarter and on the go forward basis. So we're going to continue to see on an absolute dollar basis for.
<unk> that are very similar to what youre seeing in Q1 through the remainder of the year potentially a little bit higher but only because you would.
The acquiring substantially more new patients per day, but on a cost per acquisition basis, we expect to get another 15% to 20% tighter which is where we are today and have that continue to flow through the remainder of the year and longer term, we think as our brands get bigger and bigger it does naturally of economies of scale and we'll continue to see.
The further reductions in subsequent years to our Capex, and obviously, improving LTV CAC ratios.
That's very helpful. Mark. Thanks, So much can you talk a little bit more about the nature of the sales and marketing spend like what is it actually going into is it going into TV or more sort of.
Online advertisements and mhm.
We have a mix of channels.
The significant amount of digital spend the social.
Obviously, theres television or radio, but it's pretty broadly spread across those different channels. We've tested a few other of more traditional media channels as well, but a lot of it tends to be either media enabled door digitally enabled marketing channels with 100% of are really geared towards discretionary patient.
<unk> growth to accelerate our growth from the future.
And then with regards to like say of 20% improvement in cash how do you actually get to that are the advertising costs improving given your scale or are you shifting more dollars.
Lots of above that as we've kind of built our brands I mean, one digitally theres more recognition of your pages of your positions, obviously improving too.
In our earlier days.
You know many of our brands have only so much history. So we've done a lot of testing of our.
Various marketing channels, and we've been able to refine those tests from really hone in on what works and what doesn't so that those are really the biggest ways that were getting there and look as we get more scale, we'll be able to have more buying scale as well in the future of which hasn't necessarily fully materialize, yet which is why I mentioned that we do expect.
To see further improvements in subsequent years.
Okay, that's great and just one more for me and I'll hop into the queue. How is how is now the MD tracking I know you recently launched that but any early signs of any feedback from.
The market.
I'll take that one David.
Yes. So we did recently launch it just kind of a soft launch.
We were.
Working a little bit more on just bringing on some other opinion, leading dermatologists and fine tuning some of the protocols. So the answer to your question is.
We've done a lot of different testing and optimization, we're actually seeing patients arrive at the site.
No.
Less expensive way than what we're seeing growth.
Rex or some of the other brands so we.
Very optimistic of its a great opportunity there, but we're still.
Not.
A lot of revenue right now from the brand we expect to start to see some more meaningful revenue this quarter.
Great and then just one more of what is your retention rate right now so for all of the customers that youre, bringing on board where you are.
Selling them products through telehealth orders what is your overall retention rate.
That's not a figure that we.
Necessarily put out publicly for competitive reasons, but as I mentioned we.
Put out what our direction of our LTV CAC SAR. So were seeing on average about the two to one return in the first year, we are retaining a substantial amount of those patients within the first year as you move through there was a little bit of fall off from the first month. So typically your first rebuild of youll retain somewhere around 75% to 80%.
And then after that you are looking at single digit falloff in any of subsequent drilling period and once you get to around the fourth or fifth billing period, Youre looking at really pretty minimal fall off of that.
Okay, and I think 92% of the revenue is subscription based is that correct.
Yes pretty much the essentially most if not all of the business outside of the third party marketplace sales of subscription based at this point.
Okay. Thanks, very much I'll hop into the queue now thank you.
Thank you well now go to our next question from Andrew just from the.
B Riley Securities. Please go ahead hey.
Good afternoon, and congrats on the quarter and thanks for taking my questions.
So I'm.
I'm, just a little bit curious if you could provide a little bit more granularity.
On the breakout of expenses as it relates to legal simply.
The telehealth business.
I'm, just trying to get a better understanding of.
How the how to model.
LTV to CAC as it relates to telehealth site.
Yes.
Going into the specific.
Line items, when you look at the sales and marketing expense line, which is obviously the largest line in there and what really fuels the growth of the business.
Roughly about.
13 of the half $14 million of that marketing expense was associated with the telehealth business and the remainder of that expense roughly was associated with the legal simply business. When you look at a lot of the other expense categories legal simply is a pretty.
Inexpensive business sizes of telehealth business to run from the infrastructure standpoint.
Lot of it has rigor around the sales and marketing some of the other lines Theres some payroll in the few other categories, but.
It's not too significant sales and marketing would be the most material area to look at the breakout.
Okay and that the business did very well both year over year and quarter over quarter I'm. Just curious if that was the one I understand it's highly a subscription based model, but was there anything one off that took place that resulted in that growth or is that.
Fairly strong chiller cadence of what you expected.
Yes.
Yeah, I mean, obviously youre not going to share a doubling of every single quarter of the business gets bigger, but you should expect to continue to see very significant growth from that business. A lot of it has to do with they are starting to hit critical mass there were some early.
The technical issues of marketing optimization that has to take place and those are all behind us at this point. So the business has a lot of very predictable and tremendous growth.
Should continue to expect to see that materialize throughout the year.
Okay.
And moving back over to kind of outside of the business.
Obviously, we're getting close to critical mass.
In both the hair and.
The men's health I was curious if there were any sort of tuck ins or bolt ons that youre seeing out there that makes sense for either of those brands or any of the upcoming brands.
The things like patient monitoring initiatives and stuff like that seem to be very relevant, particularly given the differentiate the platform and developing.
Yeah, Andy I'll take that one.
We're looking at a lot of different inorganic.
The opportunities and we haven't looked at anything we're pretty familiar with the patient monitoring space.
We haven't done a lot of work in that space, and that's not somewhere where I see us.
Doing something in the near term, but I mean, we're seeing all of a <unk>.
Seeing new opportunities probably wouldn't be accurate to say on a daily basis, but certainly we're seeing at least on a weekly basis interesting opportunities.
The traditional health care product world.
Even in the over the even even in the.
Proprietary.
Over the counter world as well right just stuff that could be very synergistic.
With our for an offering of things.
As we've said previously we're going to be very aggressive and pursue those with the.
That makes sense.
To drive unit economics, and revenue growth across the business.
Okay last question for me is just related to the.
The subscription prescription style model that you're building.
How much of the benefit.
Debt.
In the first quarter would you attribute to.
Things like the compounding.
The carry products that you've been introducing recently.
If those have been fruitful are you having any other.
New launches it relate to the proprietary either compounded or OTC product, that's coming out with any of the brands and we're seeing we're seeing some progress with the compiled the hair loss products.
Not as much as we would've liked to.
And there's a there's the simple reason for that.
We've just been aggressively expanding our infrastructure.
What the across the business.
Our telemedicine, the businesses and growing and especially our our men's health Rexam D line has been growing.
So aggressively.
Unfortunately, we were still the company that has to decide where we're going to kind of focus.
And with and.
We have hired.
A lot of people from creative people to developers.
The project managers brand managers.
So.
We have a lot of energy right now focused on both novel and on the telemedicine business and compounded topical drug business within the <unk> brand.
And as I said earlier, Dave like I, we believe that we're going to start to really see very strong traction with both of those.
Okay, great. Thank you very much and best of luck going for it.
Thanks, Andy.
Thank you that will conclude todays question and answer session I would now like.
Turn the conference back over to Jeff <unk> for any additional or closing remarks.
I'd just like to say thank you.
So all of our shareholders and all of our employees, who have been supportive of especially over the rather tumultuous. The 30 days we've been through.
Like I said in the beginning of the call.
The company has an extremely bright future.
Really look forward to continuing to keep everybody updated for.
Future calls like this I appreciate all your support.
Have a great evening.
Yes.
Thank you the fully.
The conclude today's call I would like to provide the company's safe Harbor statements that include important cautions for.
Starting part of these statements.
Thank you.
During today's call the information that the company has provided in this conference call includes forward looking statements within the meaning of section 27 of the Securities Act of 1933 and section 21 E of the Securities Change Act of 19 passion for other.
The mandate regarding among other things the companys plans strategies and prospects both physically.
So from financial lines of the company believes that the plans intentions and expectations for the reflected in Orange suggested by the.
These forward looking statements.
The reason of the company cannot assure you that we'll achieve our ICT plans intentions or expectations forward looking statements.
Subject to risks uncertainties and assumptions many of the forward looking statements made during this conference call may be identified by the use of <unk>.
The forward looking right that you believe expect anticipate share plans, where may intend estimate.
Okay potential among others and part of the factors that could cause actual results to differ materially from the forward looking statements made during.
This conference call include market conditions, and those set forth for documents of the company files from time to time.
Sure.
Let's take the Cherokee from Exchange Commission, all forward looking statements attributable to knife empty and competition.
Person acting on behalf.
Are expressly qualified in their entirety by this cautionary language before we end today's conference call I would like to remind.
Thanks, everyone for this call will be available for replay stocking nature of this evening. Please refer to today's earnings release for the replay instructions from the airport.
Finally at the company's website at Www Dot <unk> Dot com. Thank you for joining us today and this concludes the conference call.
You may now disconnect.
Yeah.
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Okay.