Q2 2021 LifeMD Inc Earnings Call
Did you have your one youre standing by for the life and the second quarter 'twenty 'twenty. One conference call. We are still assembling today's audience and plan to bend away here momentarily. We appreciate your patience and ask could you. Please remain on the line.
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Good afternoon, and thank you for joining us today to discuss the results for life N. The second quarter of 'twenty 'twenty. One ended June 30th 2021, joining the call today are Joseph <unk>, Chairman and Chief Executive Officer, and Mark <unk>, and Chief Financial Officer of Life M. D. Following management's prepared remarks, we will open the call.
For our question and answer session I would like to remind everyone that today's call is being hosted via webcast and a recording will be made available via the link in todays press release, which is available in the Investor Relations section of the company's website.
Before we begin I would like to remind everyone that during this call. The company will make a number of forward looking statements, which are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from those projected these risks and uncertainties are described in the company's 10-K, and 10-Q filings and within other filings that life M.
They make with S E C from time to time.
Forward looking statements made during this call are based on current information available to the company as of today.
The company assumes no obligation to update or revise any forward looking statements after today's call except as required by law.
Also please note that management will be discussing certain non-GAAP financial measures that the company believes it is important to evaluating life Mat M. DS performance details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release issued earlier today.
Finally, I would like to remind everyone that today's call is being recorded and will be available for replay in the Investor Relations section of the company's website now I'd like to turn the call over to life in D. C E O. Justin driver. Please go ahead.
Thank you operator, and good afternoon, everyone. Thank you for joining us today to discuss our second quarter 2021 results.
Our strong top line performance continued this quarter building on top of the incredible momentum we saw from the start of this fiscal year, even with pandemic restrictions restrictions being largely loved it we continue to see record demand for our tele health products and services.
Orders were up 155% over the same quarter last year.
Our subscription based patient customer numbers also continues to grow with a record 93% of revenue being generated by recurring subscriptions patient retention across all brands remained at record levels.
All of this added up to life MD, producing record revenues of $22.3 million up 145% from the year ago period.
Perhaps most impressive was the despite a significant 20% increase in media rates across our core digital channels. Our acquisition team was able to drive an 8% sequential decrease in customer acquisition costs.
This optimization allowed us to double down on our discretionary marketing investment to drive an 11% sequential increase.
New patient acquisitions per day, incomparable brands and further increase our market share.
During the quarter, we also began marketing our newest teller dermatology.
All the dermatology brand Nava M D.
Early results have been promising with strong reception from patients rather than the customer acquisition cost has so far been extremely favorable with an estimated payback on investment of two to four months. As we've said previously we believe that novel M. D will be a very meaningful top line and profitable contributor over the long term.
Organizationally, we made several important key strategic hires, especially with our new President Alex Mirror at all.
Alex brings to us over 20 years of experience in business development mergers and acquisitions and corporate strategy as well as extensive experience in the pharmaceutical industry.
This includes leading transaction in the fourth leading transactions in the pharma space totaling over $5 billion.
His expertise will allow us to broaden and deepen our telehealth brands and product offerings in areas, where we believe we can continue to disrupt and demonstrate our industry leadership and the direct to consumer healthcare market.
We continued to place a strong emphasis on our digital health technology platform, which is enabling a robust patient care process that provides unlimited expand ability across a multitude of indications and healthcare services.
To highlight this expand ability expand ability, we recently announced three exciting partnerships that will enable us to augment our upcoming launch of the life in the primary care platform.
These transformational partnerships include a world class provider of laboratory services and axle health, a leading provider of at home diagnostic services.
In combination these new partners will provide patients of our telehealth platform access to over 150, commonly ordered laboratory test a wide range of in home diagnostic services and access to over 2000 National Laboratory locations, all our preferred pricing.
Next we also announced a partnership with particle health, a leading provider of HIPAA compliant electronic medical records data that will transform the way that our affiliated medical providers and their patients access and utilize real time medical data to personalize their care.
All of these partnerships have positioned us very well for the launch of our primary care platform life M. D. This fall, which we expect to rapidly disrupt the primary care market.
In summary, we had a great second quarter marked by the successful launch of the Nava M. D brand tremendous performance of our acquisition marketing platform elevation of our technology infrastructure and the consummation of several differentiating partnerships.
Looking ahead, we're more confident than ever in our ability to be a market leader in the direct to patient tell out industry.
With that I will now turn the call over to our CFO, Mark <unk>, who will provide a summary of this quarter's financial results Mark.
Thank you Justin and good afternoon, everyone as Justin mentioned during the quarter, we continued to execute with strong top line and operational performance. We grew our offerings expanded our existing brands launched new business lines and capabilities and improved our efficiencies all while maintaining a high.
Level of service a key factor driving our strong performance. This quarter was how we were able to drive improving unit economics by further optimizing our media strategy to drive an 8% sequential decrease in our CAC. This wasn't a remarkable achievement given how at the same time digital media rates.
Ross our channels increased by more than 20% adjusting for the sizable rate increase our team was actually able to drive an approximate 30% improvement in our media efficiency on a sequential basis, while also acquiring new patient customers that occurred day rates that was 11% higher than the previous.
This quarter.
Leveraging this performance and our strong unit economics, which payback in two to four months, we made the conscious decision to efficiently increase our total discretionary acquisition marketing spend during the quarter to capture market share.
Taking a closer look at our results revenue in the second quarter of 2021 totaled a record $22.3 million up 145% as compared to the same quarter, a year ago and up 23% sequentially and this was largely recurring revenue with 93%.
Of our revenue generated by recurring subscriptions in the second quarter of 2021, which was just 56% on the same year ago period.
And our retention on these new subscribers remains very strong in fact, 60% of our revenue. This quarter came from billings of already existing subscribers as compared to just 22% of our revenue in the same year ago quarter.
Hello Health net revenues grew over 100% to $15.8 million.
Our legal simply subsidiary contributed net revenue of $6.5 million up 434% from the year ago quarter.
Hello Health order volume grew a 155% versus the year ago period to 199674 orders.
Following this continued excellent performance we are reiterating our previously raised full year 2021 revenue guidance of $90 million to $100 million, reflecting annual growth in 2021 of between 141 and 168% versus 2020.
Gross profit in the second quarter increased 145% to $18.1 million compared to $7.4 million in the same year ago quarter.
Gross profit as a percentage of revenue in the second quarter of 2021 was 81, 2% compared to 81, 4% in the same year ago quarter.
Starting this quarter, we commenced reporting platform contribution a non-GAAP financial measure defined as GAAP operating loss before general and administrative expenses, excluding payment processing fees, selling and marketing expenses and other operating expenses, we consider platform contribution.
<unk> to be an important non-GAAP financial measure, which monitors are performance based on the direct cost of delivering the products and services. We saw across our brands. We believe platform contribution is useful to measure how we are controlling our direct variable cost and how effectively we retain our providers patients and customers.
<unk> subscribers.
Additionally platform contribution as a good leading indicator of profitability for our company.
Platform contribution in the second quarter totaled $16.5 million compared to $6.7 million in the same year ago quarter, an increase of 145%.
Now turning to operating expenses.
Operating expense in the second quarter of 2021 was $34.2 million up from $10.6 million in the same year ago quarter. The increase was primarily due to increases of discretionary growth selling and marketing expenses were 14 million general and administrative expenses of $8.6 million.
Other operating expenses of 715000 and customer service expenses of 384000 development costs decreased by $47000 G&A expenses for the second quarter of 2021 also included noncash expenses for stock based comp and amortization.
<unk> expenses of $3.3 million.
The increase in operating expenses compared to the year ago period was associated with investments made to scale, our infrastructure to support a rapidly growing diversified telehealth business offering treatment for a range of chronic conditions and primary care, we expect to leverage these investments starting in 2022.
And gradually reduced quarterly EBITDA losses in 2022, as we scale the business the EBIT breakeven by the end of 2022.
Our GAAP net loss attributable to common stockholders for the second quarter totaled $16.8 million or <unk> 64 per share.
This compares to a net loss attributable to common stockholders of $3.4 million or 27 per share in the second quarter of 2020.
Adjusted EPS is a non-GAAP measure that excludes $2.5 million in noncash stock based compensation expense and 946000 of nonrecurring financing transaction expenses.
This figure totaled a loss of 51 cents per share for the second quarter as compared to a loss of 24 cents in the same year ago period.
Adjusted EBITDA, a non-GAAP financial measure, which factors out noncash stock based compensation depreciation and amortization expenses financing transaction expenses litigation costs and interest expenses totaled a loss of $12 million in the second quarter of 2021.
This compares to an adjusted EBITDA loss of $2.1 million in the same year ago quarter.
Now turning to our balance sheet cash totaled $17.4 million as of June 32021, as compared to $9.2 million as of December 31, 2020.
As we continue to scale and invest in the rapid expansion of our business with strong unit economics, we remain focused on building our balance sheet with the interest of shareholders in mind to this end, we expect to complete an additional non or minimally dilutive capital raise this year to further strengthen our balance sheet.
This wraps up our financial results I'd now like to turn the call back over to Justin Justin.
Okay.
Thanks, Mark overall, it was a tremendous second quarter.
We elevated our infrastructure with the appointment of an exceptional president consummated three transformational partnerships immediately after the quarter end.
Drove outstanding acquisition marketing performance, despite significant cost headwinds in the media market.
Launch novel M D and laid the foundation for what we expect to be a very successful upcoming launch of our primary care platform life M D.
The strong performance in the second quarter has carried into the current quarter, we're continuing to see very strong demand for our products and services. Just recently, we've set our new single day record for new patient acquisitions.
In closing our numbers speak for themselves and with each passing day, our vision of disrupting healthcare by building the leading telehealth business is coming to fruition.
Our continued growth will depend on the strength of our team technology and operations to support our men vision and efforts we have strengthened our foundation significantly in the last quarter setting up the continued growth of our existing businesses and the launch of new brands and offerings such as our primary care platform.
While remaining on track to reach profitability by the end of 2022, barring any significant investments in new brands or verticals.
We still have a lot of things to accomplish in healthcare and we remain focused on continuing to build our position as a leader in direct to patient telehealth will do this by delivering unparalleled care through our affiliated providers as we continue to disrupt traditional healthcare.
So thanks, again to our providers and their patients our team and our shareholders wouldn't be possible to do what we do without everyone's support.
With that I would like to open the call for Q&A.
Thank you and everyone to ask a question. Please press Star then one on your telephone keypad. Please note that if you're on a speaker phone. Please pickup your handset or de press your mute function before asking your question and that is star one to ask a question and we will go first to Andrew <unk> of B Riley Securities.
Hi, good afternoon, Thanks for taking my questions and really congrats on all the progress.
A few quick ones for me.
Firstly, given that does vaccination.
Progress and then loosened restrictions during the second quarter.
Can you talk around retention and what you saw from a stickiness standpoint.
And is it fair to assume the trends are holding through into the summer.
Yeah. Thanks, Andy I can tell you that in the second quarter, our retention was comparable to what it was in the first quarter continued to remain very high across our prescription products within the first billing cycle, we continue to see 75% to 80% retention what's in those first three to four months after the person becomes an issue.
Initial patients and then continued strong unit economics with a payback within the first call. It two to four months and then.
To access the term in the first year or so the pandemic restrictions loosing have really had no impact on our business in fact, we.
We are actually seeing improvements in retention.
Thus far we've started the third quarter so.
Well from a new acquisition standpoint out of attention standpoint.
Really performing at record levels post a lot of restrictions being lifted.
That's really interesting.
Okay, and moving over to some strategic initiatives Youre, obviously highly focused on that.
<unk> brought on Alex is clearly driving a lot of what's going on I'm curious, how that pipeline looks and what kinds of opportunities, we should be thinking about going forward or where that business can be.
Third better and and with the recent diagnostic partnership I was curious if that position positioning you to.
Things like just thoughts around replacement therapy.
Yeah.
Andy This is Justin with regards to the Biz Dev pipeline.
You know Alex has done an exceptional.
Job in the first 90 days are definitely you know.
I think that what we expected was right on I think he has exceeded our expectations.
I would I would estimate that we have.
At least 10, you know potential pharma partnerships with pharmaceutical companies that are in the pipeline some more promising than others, but a lot of <unk>.
Very exciting stuff there, especially considering you know Alex is only 90 days in.
And then your second question I'm, sorry, I kind of missed kind of broke up.
Yes, as far as the diagnostic partnerships.
On the diagnostic partnership goes does that position you to be able to provide testosterone replacement therapy across your platform.
It could be used first an offering like testosterone replacement therapy.
We've stayed away from controlled substances, and so you're going into.
The testosterone space.
Those testosterone replacement therapies is not something that's kind of on the near term radar screen, but certainly.
Look the relationship with with Quest and axle health, you know first and foremost for for our virtual primary care offering it's it's essential.
We were able we have.
Very preferential pricing cash pay pricing on.
150, very common you know test, where our patients can walk into any of any quest location across the country and you know.
No one will avoid a diagnostics.
A lab test because of the cost I can assure you that so that was the that's really exciting for us.
And then secondly, you know actual health gives us the ability to go and send us phlebotomist to the patient's home to.
To collect blood work, if that's more convenient for them and they don't mind paying an additional fee for that so many of these conditions specific indication specific telehealth offerings will require lab work you know testosterone therapy. As one example, so we look we looked at we look at this as a really important.
Piece of the puzzle as we continue to diversify our portfolio of offerings.
Great color. Thank you.
Last thing for me should that should we expect tax or Cta to continue their careers.
And how should we manage desktop process with overall sales and marketing spend and can you also give a little context around the AD rate environment currently.
And maybe how we should think about that for the rest of the year any seasonality crowds would be useful.
Yeah.
So tax we've obviously going down the two quarters of sequential improvements in the first quarter, we improved 15% to 20%.
By brand versus the prior quarter and then this quarter, we did approve another 8% sequentially against the first quarter and actually our improvements would've been close to 25% to 30% had the media market not seen rates that increased by more than 20%.
So we were able to obviously more than offset thought I'd say going forward.
There may be some that will definitely longer term heading into next year would be some improvements and tax.
Surely turn.
As we head into Q3 and Q4.
I, certainly would expect cash levels to be pretty comparable to where we've driven them today, we've actually driven down it's a pretty a very cost effective and very cost efficient levels. In fact, most companies in the second quarter experienced massive increases in their marketing and have dialed back on the amount of growth investments on the other hand.
What our approach has been we've been able to significantly optimize our media and we believe that Thats, obviously, one of our strong suits all direct to consumer acquisition, and we redeployed capital and reinvested back into sales and marketing expense in order to go out and grab market share which is only growing.
To lead to a more significant revenue growth in the future and ultimately profitability growth. How we should think about sales and marketing expense going forward is I would expect over the next couple of quarters to see.
Sales and marketing as a percent of revenue to be fairly comparable to where we are today and possibly a little bit better in the next one to two quarters, but the reality is we have the ability to acquire new customers patients at very efficient levels that payback and a very quick period of time, we're going to invest and go after that.
The market size that we're going after is approaching the trillion dollars. So there's a tremendous amount of opportunity for us to leverage those strengths and capabilities, whereas we've definitely seen companies that have to go the other direction and certainly pull back on their advertising spend which long term Gulf catch up with you.
As far as acquiring new patients and then retaining those customers.
Thanks, Mark Thanks for taking my questions. Good luck going forward and congrats on the progress.
Okay. Thanks, Andy.
Yeah.
And our next question will come from Nick <unk> of D. P. I G.
Good afternoon, guys, just as Mikael in for David Larsen.
Thanks for all the clarifications and progress.
Just a couple of questions on my side, maybe we can start with Nava and sort of a launch I know you mentioned that the two to four month payback period.
But maybe you can just better frame how the membership volumes have been looking there you know how youre thinking about the overall market potential there and sort of a sense of your margin profile for that business.
Yes. So this is mark.
So none of our and general we launched the aggressive marketing in the second quarter, We obviously launched the business in the first quarter, but it.
Took a little bit of time to get some certification. So they started going to market around halfway through the second quarter, we saw strong patient perception, but what we've done is the initial traffic that we were running through that particular brand at least for the first couple of months and relaxed out at this point cap the amount of traffic.
So if we were seeking to acquire a certain amount of patients recapture that a percentage of that.
Per day, and every single day that we wanted to market going through that we could have easily exceeded.
Those caps, but we wanted to obviously you get a read on the rebuilds, which started to trickle in in the month of July what I can say is we've obviously seen a.
Strong initial rebuilt numbers coming out of the brand very strong patient acquisition numbers.
Digi tax were the lowest that we've seen across any brands in the portfolio.
And catch that enable us obviously to pay back in about three to four month timeframe.
Timeframe as far as going forward. This market has tremendous potential and it can be even larger than the <unk> market, which is already a multi hundred billion dollar.
Tam. So we think looking ahead over the next 12 to 24 months.
There's no reason that this business can be along the lines of the size of whatever X business can be possibly bigger, possibly a little bit smaller but.
Hard to say exactly what it will be other than we know that we have a brand that can be really big.
Got it thank you for that and maybe just on your a primary care solution launch this fall.
If you can just maybe frame some of your membership growth potential there and how youre going to be really leveraging your partnerships with the extra cost in particle health as well to really grow that business and that differentiation. So it would be helpful to get more context there.
Yeah. This is Justin I'll comment on that.
I mean anytime we launched something where we're you know we're gonna be conservative out of the gate technology.
Technology platform that we've built.
For life and D. In our subscription based primary care offering as is incredible.
Yeah, it's it's.
The best.
It's the best technology, they've ever build it to the first you know we're launching.
IOS and Android mobile apps as well.
So we're intentionally going to onboard patients.
In a conservative manner.
So I don't you know I don't know where the reps.
$25.50 patients a day initially for the first month or two but you know it's a little premature I think to give estimates on the growth, but I think what I. Okay, saying is look we're going to be you know conservative throughout the fall with putting patients on the platform we have a lot of new.
Providers that were affiliated providers that we brought onboard for our life from D offering.
A lot of these new technology partnerships, new technology of our of our own. So we're gonna be conservative with it but we're really excited that we're really excited to demonstrate this to the market. This year that hey, this is scaling and we've on boarded.
A sufficient number of patients to you know to really prove this out and you know hopefully we can show by the end of the year. This is gonna be a very big business.
Meaningful part of the life M D story moving forward.
Got it and maybe just one last one to kind of elaborate on that.
Improvement in CAC that you guys have been seeing over the last couple of quarters.
Just your thoughts on that flowing into kind of the EBITDA margins and sort of starting to see greater improvement on that front and maybe when you sort of expect that you might hit breakeven as well on that front.
Yeah, Mark so.
I've.
Indicators on the call, we expect to be hitting EBITDA breakeven by the end of 2022 and starting to see some leverage improvements in 2022 as far as the CAC improvements flowing within the EBITDA margin over the next one to two quarters, we do not expect to see improvements in EBITDA margin.
And over the next quarter with some slight improvements in the.
The fourth quarter of this year and the reason for that is while we were able to improve Jackson will significantly increase our efficiency as I think we showed in the second quarter, we're able to do that and also acquire more new customers that we were able to retain very well and earn terrific unit economics on so in the short term we are going through.
Reinvest redeploy.
Capital towards continuing to grow aggressively grow our market share, which we think will.
Return over the long term.
<unk> really starting to Pan out next year.
A much more significant growth than if we started taking all of that.
The bottom line and flowing through to improve EBITDA margin in the short term at the expense of the next call. It 12, 24.36 months.
Thank you guys very much I appreciate all the updates and congrats on all the progress.
Okay.
Thank you and with that everyone.
And with that everyone that does conclude today's question and answer session I would like to turn things back to Justin's Shreiber CEO for final comments.
No final comments just thanks, thanks, Thank you to everyone.
For participating this call appreciate everybody's support.
And look forward to giving you even more positive update next quarter.
Yeah.
And with that everyone that does conclude today's call we'd like to thank you again for your participation you may now disconnect.
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