Q1 2022 LifeMD Inc Earnings Call
Okay.
Good morning.
Thank you for joining us today to discuss the results for life M D as first quarter and it <unk>.
March 31, 2022.
Joining the call today are Justin Shriver, Chairman and Chief Executive Officer, and Mark Anderson.
Chief Financial Officer of life M D.
Following managements prepared remarks, we will open the call for questions and answer session.
Yeah.
I'd like to remind everyone that today's call is being hosted by a webcast and the recording will be 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'd 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 other filings.
But life M D. You may take.
Where do you see from time to time.
Forward looking statements made during this call are based on current information available to the company as of the date.
As of today May 13 2022.
The company assumes no obligation to update or revise any forward looking statements after todays call.
Except as required by law.
Also please note that management will be discussing certain non-GAAP financial measures.
That the company believes are important in evaluating <unk> 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 live M. D is CEO Justin Schreiber.
Sir Please go ahead.
Thank you operator, and good morning, everyone. Thank you for joining us today to discuss our first quarter 2022 results and.
In the first quarter of 2022 life M. D posted its 13th consecutive quarter of sequential revenue growth and a 14% sequential improvement in bottom line profitability.
The first quarter was impacted due to a onetime deferral of approximately $1 million and rebuilding robin out to the second quarter. Following a pharmacy related technology upgrade and short term headwinds in the advertising market, we've been adapting to that.
That being said, we still remain on track to deliver on our full year adjusted EBITDA guidance and our previously guided adjusted EBITDA profitability by the fourth quarter.
In the first quarter we.
We successfully closed two acquisitions executed the launch of our virtual primary care platform.
And continuing to improve our telehealth marketing and technology infrastructure.
Our improvement is reflected in the 13% sequential improvement in average order value versus the fourth quarter of 2021.
Like somebody announced our first ever acquisition clear technologies in January of this year.
<unk> is a nationwide allergy asthma and immunology telehealth platform with both direct to consumer and business to business capabilities. We're now in the process of integrating cleared and the licensees tell all platform, which we expect to complete by Q3 of this year.
We're extremely excited about this acquisition for two reasons, one the tremendous white space opportunity, we see in the allergy and asthma telehealth market.
Two we see cleared as a vehicle for pharma and other health care products company partnerships that leverage <unk>, president and growing tell all marketing and patient adherence capabilities.
In a short period of time since closing the acquisition, we have a math to be to be partnerships and develop a sizable pipeline of additional companies that we believe we will contract with you in the coming quarters.
Okay.
We followed up the clear deal with the acquisition of resumes build by our subsidiary work simply in February of 2022.
Resume billed as the worldwide leader in the digital resume space.
And like work simply the unit economics of the business are very strong.
The work simply team is already off to a great start with this new platform and expects to amass over 10000 subscribers in this segment alone before the end of the second quarter.
This acquisition further empowers work simply its transformation into a multifaceted work and document services platform for consumers and small businesses.
As stated before license he is in the early stages of seeking to divest work simply and we believe that works simply as acquisition of resume build will be highly accretive to its valuation.
Having launched our virtual primary care platform. This quarter moving forward, we believe that it will be an important cross sell to our growing patient population and a big driver of overall lifetime value.
Due to some technology related delays our cross sell capability went live this month.
Still a bit too early to share patient count data.
However, we are very excited to have Jeff licensed critical capability.
Also in the first quarter license, we successfully drove improvements in our customer a L. E N L T V.
Our many initiatives, we introduced new subscription and cross sell opportunities across our brands contributing to license these 13%.
<unk> increases versus the prior quarter, and a L b or prescription products I.
I believe that the combination of growing strength in our core business, coupled with strategic enhancements and new lines of business. This quarter positions license D to achieve record results this year, including adjusted EBITDA profitability by year end.
With that I will now turn the call over to our CFO , Mark <unk>, who will provide a summary of our financial results Mark.
Thank you Justin and good morning, everyone.
As Justin mentioned, the first quarter of 2022 was another record revenue quarter, marking our 13th consecutive quarter of revenue growth.
In addition to this growth we remain on track to achieve our previously provided full year 2022, adjusted even the guidance, including obtaining adjusted EBITDA profitability by the fourth quarter 2022.
In conjunction with this we are revising our full year revenue guidance to be between $130 million to $138 million well without any impact to our bottom line guidance in order to reflect short term revenue impact from the first quarter, while we remain laser focused on margin expansion unit economics and growing.
<unk> ability.
We have begun the process to divest works simply including hiring and M&A advisor and remain very optimistic about this process. Furthermore work simply remains a profitable self funded business, which recently returned back to growth and is accretive to our company. This is particularly important as it were.
Enable lifetime need to ensure we are only doing a transaction that isn't the best interest of our shareholders now.
Now turning to the results for the first quarter of 2022.
Revenue in the first quarter totaled a record $29 million up 60% compared to the same quarter a year ago, 91% of the total revenues in the first quarter were generated by recurring subscriptions compared to 88% in the same year ago period.
Hello Health net revenues grew by 70% to $22 6 million, while work simply net revenues grew by 31% to $6 4 million work simply revenues did experience a onetime decline in sequential revenues. Following some initial challenges related to the integration of their resume ball back position.
And some new product enhancements, but rebounded strongly in March 2022, what works simply adding a monthly record 13000, plus net new subscribers in the month alone.
Simply is expected to return back to sequential growth from the second quarter and on a go forward basis.
Gross profit totaled $23 8 million, an increase of 15, 9% from the same year ago period gross profit as a percentage of revenue was 82% for both the quarter ended March 31, 2022 and 2021.
Operating expenses for the first quarter totaled $36 9 million, an increase of $10 million versus a year ago period.
This increase was predominantly driven by a $5 3 million dollar increase in general and administrative expenses.
I have $3.3 million increase in selling and marketing expenses versus the year ago period.
Operating expenses as a percentage of revenue improved by 2400 basis points, driven by a 2700 basis point improvement in selling and marketing expenses as a percentage of revenue versus the year ago period.
Our GAAP net loss attributable to common stockholders for the first quarter totaled $14 1 million or 46 cents per share. This compares to a net loss attributable to common stockholders of $11 6 million or 47 cents per share in the first quarter of 2021.
Adjusted EPS is a non-GAAP measure that excludes four and a half million in non cash stock based compensation expense.
52000, and financing transactions expense 531000 in depreciation and amortization expense 168000 in interest expense of 393000, and nonrecurring charges and 776000 in preferred stock dividends. This figure totaled the law.
So 25 cents per share for the first quarter as compared to a loss of 37 cents per share in the same year ago period, adjusted EPS also improved 14% sequentially versus the prior quarter.
Adjusted EBITDA, non-GAAP measure, which excludes noncash stock based compensation.
Depreciation and amortization expenses financing transaction expenses inventory adjustments preferred stock dividends nonrecurring charges and interest expenses totaled to a loss of $7 6 million in the first quarter of 2022.
This compares to an adjusted EBITDA loss of 9 million in the same year ago quarter.
Now turning to the balance sheet cash totaled $25 1 million as of March 31, 2022, and included the impact of $7 million of one time cash outflows related to the two acquisitions, we completed in the first quarter boss related working capital we continue to believe our balance sheet.
Patient to support life I'm being.
As we scale without the need for additional capital.
This wraps up our financial results I'd now like to turn the call back over to Justin.
Thanks Mark.
In summary, while we faced a challenging macro environment that weighed somewhat on our topline results, we were able to produce our 13th consecutive quarter of sequential growth and a 14% sequential improvement in adjusted EPS. We continue to remain on track to meet or exceed our profitability goals. This.
You're leveraging our consistent growth industry, leading gross margins and optimizing our operating expenses. We believe that this formula will drive sustained and growing cash flow profitability in the coming quarters.
We remain excited for the year ahead, including our relentless pursuit of our mission to revolutionize the U S health care system with digital health care.
In closing I would like to thank our entire team for delivering record performance in life and be.
Our affiliated medical providers for the excellent care provided to their patients and our shareholders for their continued support as life and do your changes to health care.
With that I would like to open the call for Q&A.
Thank you very much.
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One moment, please while before for questions.
We have a first question from the line of.
David Larsen with B T. I G. Please go ahead.
Hi can you please talk a little bit about the million Bucks I think that you said pushed from one <unk> to Q, what exactly was that.
And then with the reduced revenue guide for the year.
Can you give a little more color around that what is what is driving it.
Was that intentional or not because you're trying to get more profitable revenue in the door.
And how is Nava and also the virtual primary care business ramping relative to expectations. Thanks.
Hey, David This is mark so first to address the $1 million. So during the quarter, we actually did a pretty significant upgrade to the company's pharmacy infrastructure and related technology to handle sort of the next leg of growth over the next several years for the company and doing so tore.
At the end of the quarter it pushed out.
Similarly, $1 million of rebuilt shipments from the first quarter to the second quarter. We only recognize revenue once the product is shipped that revenue is not lost they were just moving into the second quarter from the first quarter. So that's what that related.
Related to regarding the revenue guidance the revenue guidance I'll take down was intentional.
Couple of reasons, one we are very focused on maximizing LTV of our patients and bringing in the most.
Profitable revenue with a high return on AD spend and the high return on that investment, we continue to get smarter and smarter.
By the day as we go through that so this you know take down largely reflect the Dod. We also continue to believe that there could be some bumping. This in the advertising market that we've been very adept at navigating but we're not going to go after just chasing it all bad revenue in some cases when we can go refined.
The revenue guidance, a bit, but maintaining our profitability impossible, even surprised to the upside on the bottom line and then on novel novel is actually continuing to scale very well, we've actually seen since the fourth quarter of last year that business is really contained.
Pick up heading into the fourth quarter of last year. They were onboarding approximately 2030, new patients a day today that number is in excess of 100, and we'll probably get to 150, plus new patients. They pretty soon so we're excited about where that business is going and where it should be in another 12 months.
Okay.
With novel, how much revenue do you expect that add in 'twenty, two and then what could that grow to in 'twenty three.
And then any thoughts on Uncleared has.
Any revenue had been generated there yet or or not and.
It was it was sort of my understanding that if you were going to have a positive revenue surprise for the year. It would come from these new product launches.
Yeah. So on the Nat this is mark on the Nava question for this year and Novelis has gone up probably generate a little bit south of $5 million for the year in revenue.
A lot of that is because it's a business where there's an initial purchase and then they're they're rebuilding that take place over a 60 day period people are typically on a two month subscription length. So it takes a little bit of time for that to build up next year I would envision that that business is definitely going to be north of 10 million.
And annual revenue exactly what it is we haven't set an extra as planned but it wont be north of a $10 million on the cleared piece, yes. We did agenda. We did generate a couple of hundred thousand of initial revenue in the first quarter, we're still going through the direct.
Direct to consumer integration with their technology, but began to generate initial b to b revenues through a couple of agreements that we have in place with our.
Pharma partners and expect that revenue to continue to grow.
Nicely throughout the year, but as we stated early on when we did the acquisition for the year, we expect clear to be in the range of about $3 million to $4 million of revenue for the year.
EBITDA neutral to slightly accretive and then begin to see that jump up pretty significantly next year with the business getting to 10 million plus.
Sure. David This is Justin I'll, just add I'll, just add on the cleared side that.
You know the the B to B pipeline continues to grow both you know direct partnerships with health care product and pharmaceutical companies, but you know also we have some other really promising partnerships in the works with.
You know larger health care service companies that really could enable us to go to a lot of their entire portfolio of customers at once so you know I think it's important like we're very very optimistic on everything Alex is doing and you.
You know, we we still kind of maintain or our forecast that we're going to build and really start to show a lot of traction. This year on the b to B side of things hopefully, we'll have a lot more to talk about on that honor.
On our next earnings call.
And when you talk about partnerships with large healthcare service organizations have those discussions already occurred.
And when you say, a large organization I'm thinking like a national health plan.
With well over 10 million lives as membership in the U S.
Or large hospital systems can certain cities are those the kinds of partnerships you're talking about neither so one so one is I would say they're there they're companies that are you know have service offerings.
I, just I don't want to be I don't want to be Super.
Don't Wanna be don't want to be Super specific but there you. There just companies that did have you know very respected companies in the in the health care World that have a large client base.
Could could benefit from life and DS D to C telehealth platform.
And you know with with you know two of these scripts in particular, you know, there's there's mutual interest in moving forward and kind of co marketing our services to their client base.
And so we're we're very excited about and in addition to the large pipeline that Alex and the team have built you know what themselves.
Okay. That's helpful. Thank you very much and then with regards to your customer acquisition costs, and you know cost of online advertising and.
On your G&A costs I mean, how is how is CAC trending in the quarter.
Relative to <unk> and your expectations and then how is it trending in April and May for two Q3 Q.
Any color there would be helpful.
Yeah. So in the first quarter costs were pretty much flat with the prior period, both sequentially as well as year on year. The main Delta obviously is.
Probably all heard across in all the market obviously there was some.
Some tightness in the media market, particularly in the beginning of the quarter and at the end of the quarter was the main delta being that on some of those periods and they made the conscious decision to acquire patients new patients that is at a slightly lower daily rate them are you know we would've during some other periods where.
The market was a little bit of loss type of the CAC itself was very much consistent with what it's been before and it was also very much controllable by.
By us as far as Q2, we are seeing some slight and isolate I mean, you know low to mid single digit percentage improvement in tax in the second quarter versus the first quarter the market hasn't changed that much but we had some learnings in the first quarter with some new strategies that we undertook that.
Actually I have proven to be really successful I don't want to get into the specifics of although for competitive reasons, but they've proven to be very successful third quarter. I mean, it's a little bit hard to obviously predict that far out, but we're confident we're going to continue to be able to navigate the environment. That's what we've done in the past.
Okay. Okay. So I think what I heard was advertising costs were actually up in the quarter, but you were able to keep your tax relatively flat is that right.
The other the odd costs were up there are costs are pretty much like it was the number of new patients that we brought on was slightly down versus the prior quarter, while we're able to do that with about a flat amount of spend so slightly less efficient.
Okay, and then just the last one for me the the G&A costs looked a little bit high relative to our model.
Any any thoughts there and it might be stock comp stock comp yet.
It was stock comp stock comp came in for the quarter at about four and a half million a little bit under that all which was higher than the model that we have and the reason for that was we actually elected to proactively began to recognize portions.
<unk> of stock based compensation associated with certain performance awards that were granted in the past that were geared towards the company attaining $100 million of telehealth revenues this year as well as obtaining adjusted EBITDA profitability.
This year because there is some probability and we think a very high probability of those awards are being achieved this year rather than take a lump sum hit in one quarter, we pulled forward and amortize.
That expense over the expected period between now and when that will be our that was the main.
Otherwise our core cash G&A expenses were in line to slightly better than.
You know what was expected.
Okay I'll hop back in the queue. Thank you.
Yeah.
Thank you we have next question from the line of Mark Westenberger with B Riley Securities. Please go ahead.
Yeah. Thanks, Good morning, appreciate taking the questions.
Wondering if you could talk about any changes in our patient cohort behavior Navy shifting subscription plans are or any kind of.
Levers that are being pulled within different cohorts across the brands.
Yeah. This is Marc So you know as we reported we actually saw a 13% sequential increase in <unk>.
We are in this quarter versus.
The prior quarter some of that was due to some additional cross sells the we introduced particularly within the Rx brand and then some of it was due to we've seen success introducing us.
Some longer subscription period. So we introduced the six month follow up and then very recently, a 12 month subscription and we actually saw from three to six months approximately an 18% take rate.
And those people that were offered the opportunity to upgrade and the trade off which we were very pleased with the economics on the six months' worth a three month or a you know a pretty decent amount better than obviously the payback is pretty much instantaneous on those types of subscriptions same thing with a 12 month payback.
That could be you know even greater we don't expect the majority of our.
Our subscribers to do that but we are beginning to see traction with some of those longer subscriptions, which gives us a little more flexibility on the advertising side, but also it means we can recoup that investment that much quicker.
Yeah, Mark I'll, just I'll just I'll just add in one of the thing we've we've implemented a lot of new technology over the last couple of months as well.
Which has been.
Totally transformational like for the cross sell rate for for offering people you know other treatment options, both Rx and OTC.
And something it's it's it's a very high point right now in the business and something that we think is going to continue to drive unit economics throughout this year and beyond.
Got it got it could you talk about the level of promotional activity in the quarter and maybe your thoughts on that as you are into the second and third quarter.
There was no promotional activity outside of the norm. It's a matter of fact, the some of the very low price promotions that we tested last year, we've actually discontinued because we didn't feel that the retention and long term value of those patients was high enough for our standards and what we wanted so.
You know no real additional promotional activity in fact, we're actually going the other direction. Then you know we're not raising our prices our prices have been consistent with where they.
They have been in the past, but we've been able to find ways to get people to either buy more trade off.
Our subscription standpoint.
Got it and then kind of logically moving from there and wondering if you could talk about the dynamics around it around input costs in the quarter, maybe what trends you're seeing.
Kind of into the second quarter, and then kind of how can you mitigate that in 80 pass some of that on Ah patients at all.
Yeah, we haven't seen any impact you know the biggest impacts are that we're having particularly on the over the counter stuff, where we do taken that inventory, we're having to place a purchase order or well in advance of when we normally wouldn't that procure we're taking the approach of procuring a one year supply.
Locking in low rates, a little bit more of a cash outflow initially, but it's not a material.
The change on the prescription side Theres been no impact whatsoever, and we think that's evidenced in the fact that we showed you know record level gross margins. This quarter were not seeing any you know impacts are really that's where our cogs, though at the current moment, that's more around just blending our supply chain more carefully than we have in the past.
Understood and then just two more for me. The first one you did talk about some marketing and advertising headwinds could you talk about those kind of across the respective channels and then yeah.
After that.
Yeah. It was a bigger impact in digital that offline and you know we use a pretty good mix of different strategies, we actually discovered some new strategies here that.
C P a with some of the lowest that.
We've seen in our entire business and we're going to continue to be parlaying that forward and quite frankly has it not been for some of the challenges in the market we might not have as aggressively testing. Some of those are with the successful results that we had but you know its really its been you know there's some rate increases.
In certain areas, obviously, you know the.
Ever since you know the countries reopen more obviously the market's been.
I'm, a little bit challenging, but it's nothing that we haven't.
Being able to navigate what we as a company have a philosophy that we want to achieve the $1 62 at a return on that AD spend when backing out the Cogs in the first year and we're not going to go out and do some marketing investment just for the sake of saying we have the highest.
Our revenue growth rate, that's just not a philosophy.
I appreciate that and then just the last one wondering if you could talk about the level of profitability at work simply in the quarter, how that's trended over the last couple of quarters, and then expectation moving.
Thank you yeah, so I want to be careful on that because we're in the middle of a process, where we're going to be going to market very shortly we have in the bonds or where the prep period, what what I'll say is that the level of profitability has been trending up and we think by the end of the year.
You know the business could have you know double digit EBITDA.
But the margins are by the fourth quarter of this year, giving out actual figures I want to be careful about because we are in the middle of a private process.
Understood I appreciate it thank you.
Thank you we have next question from the line of David Larsen with B T. I G. Please go ahead.
Just one more quick follow up with the with the legal simply our software business. It looks like the revenue has been pretty flat for the past four quarters.
Maybe what's what's going on there I mean, it had been growing you know in <unk> of 'twenty, one I think it was up over 260% year over year.
Just any any color there would be helpful. Thank you.
Yeah. So there's a couple of things one on initially the first quarter. So it started in the third quarter of last year, where the flooding that started we initially tested some trial offers there went back to the original mechanism and then you know in the last couple of quarters, we've been making.
Someone has meant some assignments in the marketing strategy as well as we integrated an acquisition this.
This quarter and you know what's happened with that is when the company is really realized that its roots and how they've always approach marketing is the right way to go and they've continued to refine that a little bit what you know what I will say is it returning to growth this quarter hands down.
April was a phenomenal month for it and all of them. They actually achieved a record revenue in the month of April you know as we mentioned in March most of that revenue in March is the first for the following quarter because we'd do it down to the day on these subscriptions they signed up over 13000 net new subscriber.
Which is a new sign ups less attrition, which was a record month for them. So a lot of it was just falling back into what's made the business really successful so far and getting away from E V anything from that and now they're in a position where there they have the beginnings of a platform offering which.
With an offering in the digital age our resume space the signature space P. D F space and Theres going to be additional offerings that they'll be adding in the future, which should drive that business, even more whether we own it or somebody else owns that in the future, but the the growth stuff, we're very cognizant of and.
Uh Huh, that's behind US they are returning back to growth and profitability is going to be growing each quarter are also there.
Okay.
Thanks, very much and just lastly, any sense for how much revenue the software business generated in April or what your revenue expectations are for the software business for <unk>.
Yeah for the second quarter, and I would expect to see revenue in the range of about.
Seven and a half a million is probably a reasonable range to expect for it in the second quarter.
Okay.
That's helpful. So that would be up around 20% year over year in two Q.
Yeah, but you know at this point because it was a little bit of flatness, we're looking at it more sequentially, but yeah, it would be up about 25% sequentially.
Okay. Thanks very much.
Yeah.
Thank you.
There are no other questions and I would like to turn the call back suggestion shreiber CEO for closing remarks, I'll bet you Sir.
Thanks, Thanks to everybody for participating in our earnings call today have a great weekend look for look forward to updating everybody on on more positive progress on our call next quarter. Thanks.
Thank you ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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