Q1 2022 Sharecare Inc Earnings Call
Good day, and thank you for standing by welcome to the share care first quarter 2022 earnings call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
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I would now like to hand, the conference over to your Speaker today, Evan Smith Senior Vice President.
<unk> and Investor Relations. Please go ahead.
Thank you.
And welcome to share curious first quarter fiscal 2022 earnings conference call and webcast all participants will be in a listen only mode. This is Evan Smith SVP of finance and Investor Relations. After today's presentation, there will be an opportunity to ask questions leading today's call are Mr. Jeff Arnold Chairman and CEO and Mr. Justice for our President and Chief Financial Officer Officer.
Today's call is being recorded and an archive of the recording will be available later today on the Investor Relations section of our website before.
Before we begin we'd like to remind you that certain statements made during this call will be forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act of 1095, which includes our second quarter and full year 2022 guidance. These forward looking statements are subject to various risks and uncertainties and reflect our current.
<unk> based on our beliefs assumptions and information currently available to us. Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that will occur after this call.
Scripps is of some of the factors that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our filings with the SEC, including the risk factors section of our Form 10-K for the year ended December 31 2021. In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important to <unk>.
<unk> performance details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in our press release that is posted on the company's website I would now like to hand, the conference call to Mr. Jeff Ronald Jeff. Please go ahead.
Thank you Evan and thank you all for joining us this morning.
A successful build year in 2021, we believe we entered fiscal 2022 in the strongest position in the Companys history across all three channels continuing to sign new clients renew and retain existing clients and build a strong pipeline several times beyond where it was one year ago.
The exceptional growth in our pipeline has benefited from our larger sales team and expanded integrated platform capabilities.
To further support growth going forward, we are continuing to expand our sales team as well as relationships with leading benefits consulting firms and channel partners to further extend our reach and increase our market penetration. In addition, we continue to have strong client retention of over 95% across all.
Channels, including securing a three year renewal with our largest client, which I mentioned on our last call.
In the first quarter, we exceeded our guidance delivering revenue of $107 million.
12% ahead of the prior year and positive adjusted EBITDA, while continuing to invest in sales and marketing as well as product and technology to support accelerated growth in the second half of the year and into 2023.
With over $250 million in cash on our balance sheet to support growth across all three channels. We remain confident in our full year guidance and ability to be cash flow positive by the end of the year.
Given the strength of our performance and balance sheet and our confidence in our outlook for fiscal 'twenty, two and fiscal 'twenty three market volatility in our stock price has created attractive buying conditions at various times. Therefore, the board has approved a $50 million share repurchase program.
We'll be strategic and opportunistic to take advantage of those situations on behalf of our shareholders and.
In enterprise, we have gone to market with a single digital front door that fully and seamlessly integrates our suite of virtual care and high touch offerings, including the introduction of share care plus our advocacy solution.
<unk> enabled home care offering with <unk>.
A library of clinically accredited digital therapeutics and now virtual primary care as part of our solution set.
Further by integrating data from share cares community wellbeing index into our engagement platform. We are uniquely positioned to consider the impact of social determinants of health.
Which account for up to 80% of differences in health outcomes between individuals' health.
<unk> equity has increasingly become a critical component of how clients are looking at more effectively addressing their diverse populations and the communities in which they work live and play.
So let me take a moment to refresh everyone on the value of our community Wellbeing index.
Index as a benchmark of our nation's health that enables states and communities to understand health risks and opportunities across physical and financial resilience, social and community context and everyday purpose. Our index is based on surveys from every community in the U S and brings together more than 600 proven health risk factors.
And to a single measure combining both individual and social factors by leveraging a combination of social risk and clinical informatics, we can inform our enterprise clients on the best solutions to address their populations highest health risk, including those represented in their clinical profile and the social determinant of health.
Find their environment and surroundings, we are confident that our comprehensive data driven platform places share care in a strong position compared to those who are more narrowly focused on digital or high touch point solutions.
Delivering a seamless digital front door that addresses the needs of each member of an entire client population, we not only improve each individual's experience and health outcomes, but also reduce the administrative burden and cost associated with managing a litany of solutions.
Our platform and value, we are creating is driving new business wins and pipeline of opportunities across the enterprise channel.
We had approximately 11 million eligible lives on the platform in the first quarter with additional growth expected as we launch new programs and onboard new clients in the second half of the year.
In addition to the 70000 eligible lives for share care plus that will go live in 2023, we discussed in the last earnings call. We now have more than 10 mid sized and large employers in late stage contracting and additional opportunities in the pipeline.
Yes.
In addition care lengths are tech enabled homecare solution continued to expand during the quarter and is exceeding our initial growth targets with an NPS score of 95% clearly demonstrating its high quality service <unk> added new business with existing payer customers, one new payer clients and expanded pipeline.
<unk> across its service offering.
These wins and opportunities will support growth in fiscal 2022 and 2023.
By expanding our reach into virtual primary care with hydrogen health joint venture with anthem Cahill from Blackstone. We showcase. Another example of the versatility of our approach as well as our strong partnership with anthem share cares interoperable platform enables us to quickly add new capabilities that are important to our clients, whether we build buy or partner to us.
<unk>.
And in turn retain our focus on enhancing engagement navigation and tech enabled capabilities that drive value across the entire patient journey. This approach will also drive higher <unk> engagements and increased cross selling and up selling opportunities.
As a result of our new wins partnerships and continued innovation, we remain confident and increased momentum for enterprise as we move towards the second half of fiscal 'twenty, two and into fiscal 2023.
Now, let's move on to the provider business during the quarter, we delivered strong year over year growth primary primarily reflecting increased record retrieval results, which are expected to sequentially improve as we move through the year.
We remain on plan to achieve our target of 6 million Medical records retrieved for the year growth in this area supported by increased penetration of existing clients solid client retention and securing new business during the quarter. We on boarded over 100, new client sites and continue to see upward growth trends with a significant increase.
And the average deal size and nearly double the opportunities in our pipeline, including those with additional large payers. The underlying market trends remained strong for record retrieval and ROI with increased demand for audits Medicare and commercial risk adjustment Thetis and demand for improved revenues revenue cycle management to review and expedite claims.
Our address denied claims and.
In addition, due to the cares act recent regulation and increased interest in fast healthcare interoperability resources or fire. We are seeing an increasing number of interoperability solutions that we can apply to our offering which will drive new use cases and expand our market opportunity.
Move to digitize the release of information process and record retrieval business will reduce the manual administration oversight and make it easier to facilitate the request information quickly and compliant Lee for patients providers payers and insurance companies and other clients when combined with the implementation of robotic process automation automation.
<unk>, we believe we can deliver even higher performance for our customers as well as improve our margins going forward.
And in life Sciences, we continue to grow our top 10 existing client contracts as well as secure new opportunities for our digital patient engagement solutions on behalf of leading pharmaceutical brands during the quarter, we conducted a customer feedback survey, which demonstrated over 90% client satisfaction, highlighting our knowledge of each customer's subs.
<unk> matter.
This level and campaign performance as well as our likelihood to recommend us. This underscores why we see solid metrics of the business, including a nearly 100% renewal rate in the quarter and new client wins consistent with the prior quarter, we have strong visibility into both our contracted and pipeline opportunities with a double digit increase in new opera.
<unk> compared with the same time last year, the strength of our content first person data and our personalized Omnichannel approach continues to drive program execution and competitive advantage.
Check your digital platform simplifies the health journey for every person providing one place to go for all your wellbeing health care and benefits related needs and empowers each individuals to better understand and manage their health everyday addressing rising cost and diverse healthcare and wellness needs. It also empowers our payor employer and provide.
Our clients to provide a single digital front door to their populations driving increased engagement, while enhancing our productivity and retention and simultaneously delivering improved cost and outcomes. In addition, as a comprehensive navigation and advocacy platform, we help uncover gaps in care across the entire patient journey.
Helping to drive care to optimal and lower cost settings, including virtual or in home care.
In closing in 2021, we established a stronger foundation for success.
Adding Doc AI to drive innovation and product development.
Partnering with anthem to build a digital first payer agnostic advocacy solution.
Expanding our sales team and enabling us to increase our reach with existing and new clients.
Extending our presence into the home by acquiring <unk> and going public which enabled us to strengthen our balance sheet to support future growth. In 2022, we are building on a stronger foundation, focusing on selling larger engagements, creating more opportunities for cross selling and continuing to invest in efforts that deliver.
More value and product innovation to support our clients and.
In addition by expanding with strategic partners and investing internally to improve automation and operational efficiency. We believe we will drive accelerated top and bottom line growth in 2023 and going forward to this end our objectives remain unchanged increased the number of covered lives on our digital platform.
Continue to integrate new tech enabled capabilities, whether wholly owned or through partnerships and drive engagement improve access enhanced outcomes and lower costs.
Now, let me turn the call over to Justin who will review our financial results for the quarter and the fiscal year and share our financial outlook and assumptions for fiscal 2022.
Jefferies.
Thanks, Jeff and thanks to everyone on the call for your interest in share care.
Jeff indicated we delivered strong results for the first quarter of 2022 for both revenue and adjusted EBITDA.
Our first quarter revenue grew 12% to $100 7 million from.
From $90 2 million a year ago exceeding the top end of our guidance.
Growth in the quarter was positively impacted by year over year increases in eligible lives on the platform and an increased number of records retrieved.
Year over year growth also was impacted by our previously disclosed decision to sunset certain businesses, which had revenue of approximately $11 million in the prior year period.
Adjusted EBITDA for the quarter was 150000 positive from $7 1 million for the prior year slight.
Slightly ahead of our breakeven guidance adjusted EBITDA was driven by the same factors as revenue as well as incremental public company expenses and increased investments in product and technology and sales force expansion to support growth.
We expect these investments to support our long term growth and drive additional operating leverage in the second half of the year as we gained greater traction for the share care digital platform expand our record retrieval and execute in our life Sciences channel with existing and new customers.
Our free cash flow, which included $7 5 million of nonrecurring items related to transaction and integration costs came in better than expected, placing us in a good position to be free cash flow breakeven by year end.
We remain in a strong financial position ending the quarter with $253 million in cash on our balance sheet.
I'll now turn to our guidance for the second quarter and full year 2022.
To reiterate what we disclosed last quarter guidance reflects the actions, we disclosed for our health security portfolio and our patient center medical home business.
Our Q2 guidance for revenue was $101 million to $103 million in.
An increase of approximately 4% over fiscal 'twenty, one using the midpoint of the range note. The businesses that were sunset represented approximately $13 million in revenue in the prior year period.
When combined with our first quarter performance revenue for the first half of the year is expected to be slightly better than the assumptions. We provided on our year end call and which we stated that 40% of our revenue would occur in the first half of the year.
In addition, adjusted EBITDA is expected to be approximately between one and $2 million positive.
Our full year guidance remains unchanged for the full year revenue guidance is $470 million to $500 million, an increase of approximately 15% to 20% over fiscal 2021, and adjusted EBITDA is expected to be 30 million to $36 million or 22% year over year growth at the midpoint.
While we continue to invest in the platform expand our sales force and support the rollout of share care plus we anticipate adjusted EBITDA margins in line with or better than 2021, because of the inherent operating leverage.
Please refer to our press release for our full year guidance assumptions, which also remain unchanged.
We remain confident in 2022, delivering strong year over year revenue growth and solid adjusted EBITDA performance, while building a strong runway for fiscal 'twenty three.
With that we will move to Q&A.
Thank you as a reminder to ask a question.
I'll need to press star one of your telephone to.
I'll draw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from Richard close with Canaccord. Your line is open.
Yes, thanks for the questions congratulations on the quarter.
Justin maybe just walk us through the guidance a little bit more in terms of the confidence obviously.
Theres, a big ramp in the second half of the year, but.
Maybe go over some of the building blocks to get there.
Yeah. Thanks.
Thanks for the question Richard.
So it's in line with expectations as we pointed out in the first or the year end call that we would do 40% in the first half and 60% in the second half and that comes from a number of areas.
One is on the provider business, we have strong sequential growth over the course of the year.
On the consumer business I think youll remember that we have seasonality in that business in the second half, especially fourth quarter is always the highest quarter of the year typically 35% give or take for the entire year and then on the enterprise side, we have a robust pipeline and we are on <unk>.
<unk>.
New customers that began in.
And Q3.
And feel very confident in the growth there as well so it's really a similar cadence to last year.
Okay. Thanks, that's helpful. Jeff maybe talk a little bit about the pipeline and moving customers from pipeline to actually sign contracts.
Some other companies have talked about strong pipelines, but.
Maybe delays in getting deals completed.
Can you just talk a little bit about what youre seeing in the marketplace. Please.
Sure.
Well I think first of all we have a really robust capabilities in our platform. So we have lots of products to sell to enterprise.
Which is helping us retain our clients and win new logos.
And we're starting to really see the benefits of the investment that we've made with the sales team and.
So we brought on a new sales leader last year from sales force. We've added 15 more salespeople since the last time, we spoke.
And the pipeline is buybacks when it was at this time last year.
And so.
So yes.
So it gives us confidence in this year and next year and.
Obviously, it's a competitive space, but we feel like we have a differentiated offering and.
And we're seeing it with our renewals and we're seeing it in our pipeline growth and it doesn't feel to me like anything has slowed down.
Okay. That's helpful and my final question is on the hydrogen health and.
How do you guys play in.
In that virtual primary care.
Are you an actual.
Part owner.
That was new to me.
Yes, so so you might be familiar that hydrogen health as a joint venture between K health anthem, and Blackstone and as part of US building out our differentiated share care plus advocacy solution.
We wanted to add a virtual primary care solution and so we've added that to share care plus as a partner similar to some of our other digital therapeutics that we have so so think about <unk> distribution for <unk> health.
Okay. That's helpful. Thank you I'll jump back in the queue. Okay.
Okay. Thank you. Thank you. Our next question comes from David Larsen with <unk>. Your line is open.
Hi can you please talk about the selling momentum on the enterprise side.
How are things progressing with the advocacy business itself.
What broadly is driving that the plans want to engage members more aggressively and any color on.
The relationship with anthem as well as Carolina. Thank you.
Sure.
So we're going to market with share care, plus and multiple ways. So one is we have a large current book of business. So as you know we have many health plans in many employers that utilize share care. We've now added share care plus and so through our account management team were in aggressively selling share.
Kerr plus as an add on to what <unk> already bought from share care. So that's number one.
And we as we announced on our last quarter, we have already signed up 70000 lives.
Through that channel direct.
In addition to that.
We signed a national collaboration agreement with anthem further national accounts team and so anthem has in many of their.
Large rfps has written share care, plus and as as part of that RFP and so we've been pitching clients in conjunction with them and has brought us into a lot of opportunities that we haven't had before and then and then lastly, we've got just a much bigger sales team than we did a year ago and we've invested a lot of time.
And haven't heavy presence is at the conferences like we are at the Blues Conference last week Conference Board yesterday, and so we're getting a lot more rfps in a lot more at bats, and then lastly, we've invested a lot more time with the brokers maybe something that we are under invested in in the past and so working with the large.
<unk>.
<unk> started to bring us into new Rfps as well. So it's a combination of take all of those clients that we have on share care currently and upsell them sure care plus <unk>.
Work with anthem, where they where its multi payer big national accounts and embed us in to the RFP and then get our sales force train and get us as many at bats as possible and.
And we're finding that when we get to the final stage that we've got a really good.
Closing hit rate.
Okay. That's very helpful. Thank you and then for the patient Center medical home business and advocacy business are those costs off your books or will they roll off your books.
Soon or will they convert to more variable cost businesses.
Yes.
So Dave. Thank you for the question that those costs are still on our books.
The quarter would have been.
About $1 million five higher on EBITDA, and we expect those to roll off through the year.
So yes.
Yes.
Okay, Great. That's really helpful and just one last one how high can you P. M. P. M and then I'll hop back in the queue. Thank you.
Well I mean, we've seen a pretty dramatic increase over the 70000 lives that we've contracted for I'd say on average it's gone up five times RPM pm.
But.
I think there is still a much higher ceiling for it as we add virtual primary care and other services like that so I've seen some recent RFP has gone out but it was an $18 <unk> range.
This time last year it was around $2.
So we've increased pretty dramatically by adding advocacy, adding care lengths now, adding virtual primary care.
Okay, great. Thanks, very much congrats on a good quarter.
Thanks, Dave.
Our next question comes from Cindy Motz with Goldman Sachs. Your line is open.
Hi, Thanks, I have a couple of questions. So can you provide the breakout between the businesses I think you usually do that the enterprise provider.
And then consumer.
Sort of Rush and then just on that P. M. P. M question in terms of the overall average is it still around $2 or.
I mean, because again I know maybe potentially it could be $18, but that's obviously not the average and then I had a question also on the.
The add back to the EBITDA is about $7 3 million.
Thats, obviously, some transaction cost of $2 million, but then there's like re org and.
Other non operating is that something we're going to see throughout the year. Just curious if that's in your guidance. Thanks.
Okay. So I'll take the sandy thank you for the questions Justin So on the first.
Question It was breaking out the revenue.
And yes, so the consumer business came in around $16 million.
The provider business came in almost at $25 million.
And our enterprise business was almost $60 million.
So for $107 million total.
And then on the <unk> answer is.
I think our average is around $2, but every deal that we're pitching now is eight plus dollars yes.
There's been a lot of conversations around.
Pricing pressure on the on the <unk>.
When you kind of have seen that for a while and which is why our strategy has always been a platform, where we have bring more diversified products to the market and we can bundle and we're actually moving up the food chain on PM Pms from just straight digital and engagement to now benefits navigation to home health.
So we see our we see our <unk> expanding over time.
Yes, I guess when I calculated like when I look at last quarter. If you went to $11 million, but I guess it depends on the cadence of how that came in.
It looked like it was less than last.
Fourth quarter like maybe there was a little pressure, but maybe its how the people came in you were 97 million lives at the end of the fourth quarter until your $11 million, but maybe that came in late in the quarter I'm just guessing.
Yes.
Yes, it depends on also which lives what type of lives come in and so ultimately if its benefits navigation lives more heavily weighted than it'll be higher <unk>, we had a significant onboarding around our home health area, which is a slightly lower <unk>.
It's really just mix, but we expect our over the course of the year to be in that $2 <unk> range.
And what I was referring to on the on the share care Plusses all for 2023 sales.
Okay and that does include care lengths, though as well like around I'm going to guess around $7 5 million or so.
Whenever we can follow up offline on the specifics, but then just the EBITDA question would be good as well.
Okay. What was the EBITDA question again, I apologize sorry, So you had an add back of about $7 4 million.
Yeah.
One five and adjusted EBITDA and I know part of it's transaction costs.
I would assume from Carolina, but there is another non recurring $3 2 million and $2 $2 million.
I'm just curious those are cash costs are they going to continue into the like the rest of the year or we're not going to see that anymore as a onetime thing.
Yes, Phil.
Yeah.
We've built in to have.
Some of these cost and for the rest of the year when we've talked about our when we guided to our cash burn.
But this is a systems integration.
As we integrate the care lengths in other areas.
This is.
Re org integration cost right. Some of that is severance and then there's acquisition related costs, which is.
Earn outs were active in the M&A market. So.
There'll be some of these costs in there, but it won't be we don't believe at this level and that that will start to come down.
Okay. Thanks.
Our next question comes from Eric Percher with Nephron Research Your line is open.
Thank you Mike.
I'd like to start with the share repurchase authorization or maybe capital deployment more broadly it seems like you're indicating here what you think of the stock price.
The cash flow positive goal.
I'd be interested to hear about that but also your thoughts on the M&A environment, and whether youre seeing a decline in valuations or whether it's taking time for valley.
Evaluations.
To react to the marketplace.
Well, maybe I'll start on the buyback.
We are going to be judicious with it but clearly.
We believe we have a unique company, we're going to grow 15% to 20% this year.
Adjusted EBITDA positive.
We're on a path to be cash flow breakeven.
By the end of the year, we have a strong balance sheet.
No debt, we have a diversified business model.
And trading at these levels.
We just believe we are undervalued in.
We're going to be opportunistic.
If it if this is what continues.
Yes.
And as it relates to your second question on the M&A front, obviously, we've seen a big pullback.
On public companies in our space.
I think on the private side.
That pullback hasn't caught up yet as much as on the public companies, but we expect it to.
And we're constantly evaluating opportunities and we will.
Look for tuck ins that we think are a good value for the company and our shareholders.
Okay.
And maybe tangential to that.
Little therapeutic side, the hydrogen condition is offering is interesting.
Love to hear about how you think that plugged.
Plugged into the total offering and also does that enable potentially other digital therapeutics.
Need to have a virtual component or do you think of these each individual it maintain individual.
Well, we see we see because we are a platform approach.
Have this idea of.
What do we build what do we partner for and what do we buy and on the on the virtual primary care side.
We wanted to add that to share care, plus and so as we were selling our advocacy solution virtual primary care would be an add on and.
Anthem, having the relationship with <unk> health was kind of a logical choice for us and so we've integrated that.
An example of building as we operate Dean oranges program for.
For reversing heart disease and other chronic conditions.
That's reimbursed at $9000 a patient from Medicare.
We're virtualized that program right now.
During COVID-19.
CMS come out and said they would now reimbursed for virtual sessions and so we're building like our virtual version of that in house right now as an example of one that capability that we're building out ourselves and then and then we're looking at all of these other various chronic conditions in and doing the similar analysis.
Have that whole portfolio of products that we owned with mine Sciences, where we have our weight loss programs are smoking programs on our anxiety programs.
We're green lighting the development of many more every ranging from hypertension to addiction all of those will have a virtual component.
Gotcha.
And last question you commented on the various channels for share count plus and I think it was 10 incremental clients could you speak to the timing when it comes to.
Clothing sales.
Where you think you have the earliest opportunities versus later and when you talk to 10 clients would that also include clients that are accessed via anthem or do you consider anthem one client.
Those are.
Considering anthem is one client, but I know how many rfps, we're in and it's greater than 10, but I consider them as one client and then those 10 that I was referring to were direct sales.
And we are hopeful that some of those will start in January of 2023.
But we're still selling for 'twenty, three and all of them. It's just when do they start there.
We haven't started the 24 sales cycle yet.
Okay.
And then more of those channels for 'twenty, three which are the ones, where you expect the quickest return our generation of new client.
I think it is going to be a healthy mix of both.
We expect to have wins through our partnership with anthem, and we expect to close sales ourselves and so I think it will be a healthy mix of both.
Alright, thank you.
Sure.
Thank you as a reminder to ask a question at this time. Please press Star then one our next question comes from Richard close with Canaccord. Your line is open.
Yes.
Thanks. My question was answered it was the share repurchase and cash flow.
Thank you and I'm currently showing no further questions at this time I'd like to turn the call back over to Jeff Arnold for closing remarks.
Okay, great well. Thank you everybody for your time this morning, and your interest in share care.
We know the market has been very volatile, but we believe in our plan.
We're reaffirming guidance for the year, we're launching a $50 million stock repurchase program, we're going to continue to be active on the M&A front, we're going to continue to invest in sales and we're committed to get cash flow positive and 2022.
So have a great day and thanks again for your interest.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Yes.
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