Q2 2022 LifeMD Inc Earnings Call
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Please standby.
Did they thank you for joining us today to discuss the results for life in the second quarter ended June 30th 2022.
Joining the call today are Jeffrey Schreiber, Chairman and Chief Executive Officer, and Mark Dennison, Chief Financial Officer of Lifeblood M D.
Following managements prepared remarks, we will open the call for a question and answer session.
I'd like to remind everyone that today's call is being hosted via webcast and the recording will be they 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'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.
Within other filings that life M. D may make with the SEC from time to time.
Forward looking statements made during this call are based on current information available to the company as of today August 11 2022.
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 are important in evaluating like MBS 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'd 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 M. D. C E O Justin driver. Please go ahead.
Thank you and good afternoon, everyone today after the market close license, we issued a press release containing our second quarter results.
Additionally for the first time ever we've also made available a Q2 supplemental investor highlights presentation, which is available on the license the IR site.
I would encourage everyone to download and review this summarizes why our second quarter was really what I believe to be a pivotal period in the 2022 transformation of life M D.
[laughter].
During the second quarter licensed <unk> made significant progress on several important strategic initiatives to position the company for its next phase of growth we.
We believe that our growing profitability and expanding margins will be key to our continued transformation from a seller a prescription and OTC products into a rapidly growing and highly profitable telehealth services company.
There are a few key accomplishments I'd like to highlight for Q2 first in the second quarter, we began nationwide direct direct to patient marketing for our virtual primary care platform.
It's been extremely successful.
We're seeing some of the best acquisition costs, we've ever seen in our technology platform and clinical operations are working beautifully.
Also proven that we can cross sell them to our indication specific patient base, which is a very big deal.
I'm more confident than ever that this platform will be a very big growth driver in the years to come.
Second we introduced several new telehealth treatment categories to complement our primary care and existing treatment offerings, which we believe has significant growth potential.
Third we drove meaningful improvements in our margin performance and profitability and lastly, we are streamlining our overall company and do a telehealth only business grew the impending divestiture of work simply.
Given our intense focus on profitability growth of new telehealth offerings and enhancing long term scalability, we expect a short term slowing of sequential growth for the next two quarters after which we will resume a more aggressive growth trajectory at substantially higher levels of profitability.
What excites me most about our second quarter is the strong traction we are beginning to see with our virtual primary care platform.
Launching in late Q1, we now address over 200 of the most common medical conditions across all 50 states.
Built a highly differentiated and now proven technology platform that is staffed by some of the best doctors nurse practitioners medical assistance and operations personnel in the country.
What's even more amazing to me is the differences platform and our affiliated physicians and the entire medical team are making in the lives of our patients every single day.
While still very early on in the growth of this platform patient feedback about their experience their experience with our virtual primary care platform.
Our affiliated physician network has been tremendous it's been better than any product. This company has ever offered.
During the second quarter, we saw 1500% growth versus the prior quarter and our BPC patient count currently we have over 1200 active patients on the platform and we are adding about another 20% to 30, new patients per day net of attrition.
I expect this number to grow very very quickly.
Retention is strong with early attrition rate in the low single digit percentages.
We continue to believe that the DPC platform is one of the most significant if not the most significant launch the company has done to date.
And will be a key driver of both top and bottom line growth going forward.
We also introduced several new treatment areas during the quarter that have been well received by our new and existing patient populations. These offerings include a proprietary topical pain management treatment called per Taryn.
Felipe treatment and over the counter dermatology treatments that complement our existing Arctic offer.
These additions enhanced our revenue mix with 38% of new patient order volumes coming from non erectile dysfunction treatment during the second quarter of 2022.
Which compares to 22% during the same period last year.
We remain on track to achieve consolidated adjusted EBITDA profitability by the fourth quarter of this year.
As an important stepping stone towards profitability, we continued to drive improved unit economics through higher gross margins and improved returns on our ad spend.
As noted in our press release, we achieved record gross margins in the second quarter on both a consolidated and telehealth only basis.
I'll also driving an 8% improvement in the blended first your LTV to CAC for our telehealth platform.
Finally, I am proud to report that we have made solid progress in the process to streamline our overall company.
The only business through the impending divestiture of work simply.
Despite challenging market conditions, we have received significant interest in work simply from a broad range of buyers.
We believe we remain on track to consummate a transaction prior to 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 afternoon, everyone as Justin mentioned, the second quarter of 2022 was a pivotal quarter for the entire company as we executed upon the early phases of several key strategic initiatives.
While the focus on this critical long term areas of growth and profitability will mean, our sequential growth will slow for the balance of 2022, our continued execution will position us for heightened growth in the year ahead with strong underlying profitability and be in the best interest of creating long term value for our shareholders.
<unk>.
While we continue to reiterate our previous guidance on adjusted EBITDA and consolidated profitability by the fourth quarter of 2022.
We are revising our revenue guidance to be in the range of $122 million 228 million to reflect solid growth in the back half of the year as we focus on these critical long term strategies, followed by a return to elevated growth with.
<unk> consolidated profitability in 2023.
Now turning to the results for the second quarter of 2022.
Revenue in the second quarter totaled a record $30 5 million up 37% as compared to the same quarter a year ago, 93% of total revenues in the second quarter, we generated by recurring subscriptions.
Hello Health net revenues grew by 41% to 22 point Brian .
While work simply net revenues grew by 26% to $8 10 billion.
Simply revenues grew 27% sequentially as compared to the first quarter. Following the execution of several key strategic initiatives. We've previously discussed.
Accordingly work simply achieve EBITDA margins during the quarter of mid teens for the first time in its history, we expect works simply grow rifle and profitability to continue at a rapid pace.
On the telehealth side of the business, we increased our active subscriber base by 63% versus prior year to end the quarter with over 168000 active subscribers.
More importantly, we continue to transition more of the patient base for longer term subscriptions with 71% of active patient subscribers on multi month subscription plans as of June 32022.
While this pause some impact to the timing of <unk> this quarter as well as the next one to two quarters multi month subscribers drive faster payback on significantly higher unit economics, as well as stronger retention.
By being able to lengthen data with detailed analytics on patient acquisition marketing efficiency attention and proud of all we are driving record performance in our unit economics. This is already playing out with an 8% increase in first year I'll keep the cash in the second quarter versus the same year ago period.
Gross margins for the second quarter reached record levels at 85% of rehab.
300 basis points versus prior year with our telehealth only gross margin, reaching 80% for the first time.
Gross profit for the quarter.
<unk> totaled $25 8 million, an increase of 42% from the same year ago period.
Operating expenses for the second quarter totaled $41 5 million, an increase of $7 $1 million versus a year ago period.
Our second quarter 2022 operating expenses included $7 8 million of noncash expenses associated with stock based compensation and the revaluation of the earn out related to the clearer cleared acquisition and depreciation and amortization expenses.
Net of noncash expenses operating expenses decreased as a percentage of company net revenue by 2200 basis points.
Equally as important we reduced our marketing expense as a percentage of revenue to 72% versus 100% of revenue in the same year ago period and improved leverage in this key spend area by 300 basis points versus the prior quarter.
Our GAAP net loss attributable to common stockholders for the second quarter totaled $13 8 million or a loss of 45 per share. This compares to a net loss attributable to common stockholders of $16 8 million or <unk> 64 per share in the second quarter of 2021.
Adjusted EPS are non-GAAP financial measures that exclude noncash expenses preferred stock dividend litigation expense severance and M&A expenses totaled a loss of 22 per share as compared to 46.
Loss of 46 cents per share in the same year ago period.
Adjusted EPS improved 12% sequentially versus the prior quarter.
Adjusted EBITDA non-GAAP financial measure excluding the same account categories as noted in the adjusted EPS totaled a loss of $6 9 million in the second quarter of 2022. This compares to an adjusted EBITDA loss of $12 2 million in the same year ago quarter.
Now turning to the balance sheet cash.
Cash totaled $11 7 million as of June 32022.
Importantly, and as noted in our second quarter Investor highlights presentation through many of the efforts highlighted earlier on this call we reduced our adjusted EBITDA loss and cash burn to under $1 million in the month of June and expect meaningful improvement in our balance of the year cash burn, including achieving consolidate.
Adjusted EBITDA profitability by the fourth quarter.
Additionally, as Justin noted, we're seeing strong demand from prospective buyers awards simply.
So expect to consummate a divestiture transaction of the business prior to year end 2022.
We believe the combination of lights on the crossing into profitability plus estimated proceeds from the potential divestiture of well capitalized lights on the extremely while strategically positioning us for the company's next leg of growth and margin expansion.
Wraps up our financial results I would now like to turn the call back over to Justin.
Thanks Mark.
In summary, while we expect more moderated growth for the balance of the year in our core telecom business I'm extremely excited about the future life of D and the role that our company will play in the rapidly evolving telehealth marketplace.
The key initiatives that we executed against in the second quarter include.
Nationally launching marketing and beginning to scale, our virtual primary care business diversifying our telehealth revenue driving meaningful margin and economics and profitability improvements across all of our existing <unk> categories.
And taking steps to streamline our company into a leading telehealth only business through the impending work simply divestiture.
Continued execution against these critical initiatives will cement our future as a leader in telehealth with profitable operations tremendous organic growth prospects and a strong non dilutive capital base post a potential work simply divestiture to support future investment as we transform from a telehealth product provider.
To a differentiated full suite telehealth services company.
In closing I would like to thank our entire team, especially our doctors that are treating patients every single day on our platforms for.
For their tireless efforts as we continue to transform the base of medicine, and make amazing health care more accessible affordable and convenient for our patients.
That I would like to open the call for Q&A.
Thank you.
Like to ask a question. Please signal by pressing star one on your telephone keypad if.
If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Again press Star one to ask a question and we'll pause for just a moment.
And our first question will come from Mark Weisenberger with B Riley Securities.
Thank you and good afternoon.
Thanks for taking the questions and appreciate all the additional detailed information, it's a lot to chew on here, but.
Looking at the supplemental chart showing the progression of adjusted EBITDA can you talk about the dynamics going from April to June and then some of those puts and takes going from June into the third quarter.
Yes, Mark this is mark.
So the biggest thing starts with advertising, we expect a considerable amount of time in the second quarter. After we completed an upgrade of our data analytics infrastructure, which gave us a lot more insight and so frankly every campaign down to every single product subscription liked them pretty much any variable.
That you'd want to look at being able to really refine a lot of our strategies, obviously I can't get it better.
By the way because all the secret behind but we.
Exceptionally refined it and we're seeing record levels of return on AD investment now in doing so what happened was we just need some additional dollars towards scaling some new verticals, which is.
Some of the top of the band display flawlessly BPC.
Also driving a lot more longer term subscription livestock in turn causes a little bit about short term impact on revenue, but really position the company for accelerated growth and much more profitable economics with quicker.
Payback so that was the biggest step the second one is.
We're at a point now where we've said this all along I'm going all the way back.
Middle of last year, when we said we were going to walk through our EBITDA sequentially. Each quarter, we have the infrastructure the scale of the business I mean, we've had that for some time now and we're really continuing to see the benefits of the fact that we've.
We've had that they're actually going to see some further benefits in our capital expenditures in the coming quarter. After we've gotten past that initial lift to finish building out the DPC platform and enhanced set of really.
And in growth phase.
At this point, but that's where really a lot of the progress is happening on the ball side. Obviously it works simply has hit their stride and Thats continuing to grow we do obviously expect.
Divest some by the end of the year, but both of the businesses.
Setup core profitability growth with the leading reason being that we've gotten to a point, where we have very strong unit economics that are on the path, we'll continue to get better.
Very helpful. I appreciate that.
You alluded to excuse me alluded to it a little bit in the answer but maybe if you could talk about the specific factors that are contributing to maybe some of the the sequential growth that youre talking about and I guess is that primarily related to how you are actually allocating our marketing spend and with patient cohorts you're targeting.
And then I guess, what factors contribute to your confidence in the Reacceleration of growth that you talked about.
Yes so.
The first factor is <unk> plus subscription so at the end of the day, while there's obviously a benefit to us long term to get people on for six months subscription license and some cases, even 12 months subscription life. It stretches out the rebuild period. So there is a short term period, where youre trading people up in your.
You're bringing on some of those longer five subscriptions, where youre not going to have to rebuild every single quarter associated with.
Those longer term subscription who started to really make some of that transition in the first quarter we saw.
Impacts from timing in the second quarter, and we'll continue to see for the next couple of quarters related to that because then what's going to come back or positively as we rebuilt those subscription lives that.
Or a little bit longer and then the data that we've looked at we are continuing to see a higher repo rates on the pension associated with those longer term subscription life with just that we're getting full point. The building goes up much more significantly this year versus what we did at the beginning of this year at the very end of last year. So that's on <unk>.
Secondly on like the product mix piece.
BPC.
Probably.
We really hit our stride in the second quarter and the numbers are still very small obviously, we expect them to be quite as significant but.
Just directionally.
Directionally without giving exact numbers for July and the revenue in July while the numbers are still small was forex the life to date revenue for.
The numbers are still very small so the subscriber base with small, but we're really starting to see a ton of traction. After we made certain enhancements to that program launched cross sell capabilities at all really and obviously improved the overall telehealth offerings that we have there and then secondly, we know long term.
The real success to our business and frankly any company in this industry you cannot be predominantly driven by one the category. So we continue to invest in a diversified which means you are taking away. Some dollars in short term growth I'm just throwing your that your your leading area, our leading product offering in the comp.
Any which short term will be in a little bit slower growth, but we're seeing tremendous traction in building up some of these new categories that we highlighted on the call, which we think theyre going to start to get a very reasonable scale by the end of the year as well as <unk>, which will empower snowball.
Make an impact in 2020, both on top and bottom line.
Got it very helpful. Can you talk about how we should think about I guess the unit.
In light of hauling out how the business has kind of been shifting away from.
E D.
How did those unit economics compare to kind of some of the other indications.
As that mix continues I guess, how do we think about that impacting the business.
So it's clear we are not sure yet.
Yes.
Yeah, Mark I'd love to comment on that this is Justin.
I think that what we're seeing with the early data from the DPC platform, but it's.
It's a big enough sample size to draw some.
Early conclusions from.
We're seeing.
Extremely low churn, which is something I've always communicated to you and to shareholders.
When you give somebody an amazing doctor, it's the stickiest service on the planet right. So that's very encouraging even with we're even seeing low churn with people that are that are joining on the lower priced.
$15, a month memberships and coming in for say like an initial prescription for something like <unk> like even among those patient populations, we're seeing we're seeing low churn.
Our churn should be if you, Google like where should churn being a great SaaS business or if you look at what that number should be that's where we're at right single digits.
And I think I think that I.
I think that you might see a little bit longer.
Payback on your initial investment and acquisition.
I'm really confident we still have a lot to learn there, but I'm really confident that we'll be able to see you know a dollar that we spend on acquisitions back in our bank account.
Then within six months.
Which I think is really really good but again, it's still a little bit too early we also need to figure out.
Can you just figure out.
How what percentage of the population that's on for instance, the $15 a month.
Subscription that we can move up to.
$99 or maybe a $49 a month subscription. These are just things that we're going to learn as we continue to build build the business. We're also working on.
We're also working on a lot of highly differentiated offerings.
Their service offerings that we're building around chronic condition.
So a great example, could be diabetes right. Another example could be.
Treating GERD.
Another example could be even something like longevity right. So there's we're working on a lot of these different like offerings, where you can find a doctor or prescription medications if appropriate over the counter product.
And they are designed for patients in the population that have different chronic conditions or or health care goals right that we can treat using the platform and we think over time that these offerings will be really attractive to.
Yes to patients that they come in for episodic or urgent treatment until they can be.
Got it very helpful and since you were touching on the <unk> patient cohorts.
It's been the mix, thus far and how has it evolved in terms of the lower tier versus the upper tier offering.
The mix has been.
At least 90% I would say $15 $15 a month platform subscribers.
You are paying Ala carte.
Per console with a doctor.
But some of the some of the markets just because that's where we put a lot of our energy initially.
And we have some we have some really amazing initiatives that are underway right now to really kind of refine and build out the $99 a month offering.
We're really close to launching our prescription drug discount program, which again, we didnt Didnt Didnt mentioned in the call but.
Other great revenue stream for life and D and that's gonna make low cost drugs like really accessible to a lot of those Americans that are on high deductible health plans are uninsured.
So I'm really excited about that and we're adding like this month, we're taking we're going to be launching the symptom checker that we've been working on for over a year, which I mean, it's just going to be an awesome product to offer to patients and so we're having a lot of these features.
Rich just took taken longer than we thought to get life, but they are highly differentiating for our platform.
And I think that I think theyre going to be important to like really growing the $90 million subscriber base.
Got it and then I'll just ask one more and ill jump back in if you could just talk about I guess the overall.
AD market in the second quarter, what Youre seeing thus far into the third quarter and how do you expect that to play out in <unk> and the rest of the year and then <unk>.
<unk> tier AD spend efficiency. Thank you.
Well I can start and maybe I'll, let mark chime in as well, but.
And we Havent see a lot of fluctuation in overall advertising costs.
It's still we still see.
Very competitive environment online, we've seen some reduction in CPM online, but nothing drastic.
And we expect like the third quarter to be strong and obviously like in prior years.
Come towards the end of the year at Christmas.
We typically slow down our ad spend.
More because because the environment gets a lot more difficult.
Mark I don't know if you want to add anything to that.
No I think that that's very accurate.
Yeah.
Okay. Appreciate it thank you very much.
And we will take our next question from David Larsen with BTG.
Hi.
So can you just provide a little more color around I think quite like white product revenue I think declined on a sequential basis and I think.
Telehealth net orders declined on a sequential basis was that.
Was that sort of an intentional strategy to focus on higher margin product sales.
Yes.
As Mark it was exactly what I outlined before FERC.
A lot of it has to do with longer subscription lags focused on products that are.
Sorry subscribers that are a higher margin with that we have more space styled rebuilding we started focus earlier on in the year. We intensified the focus there was a movement for the second quarter, we're going to continue to see some impact comes out for the next couple of quarters as we buildup.
More critical mass in some of these longer subscription E six and 12 months.
Solids, then those begin to start rebuilding next year, but that wasn't the intention all thing secondly, we shifted more focus for launch not just launching but also scaling a lot of these new indications so pain.
Sleep virtual primary care, which is also off to a great start.
All of those added up to what you were seeing added up to what we called out in the <unk>.
Elyse as well.
Our call today regarding what we expect to see relatively more modest.
Sequential growth over the next couple of quarters, and then obviously rebounding to more aggressive growth, but much more profitable growth going forward next year.
Okay. So if you have more lives convert to a subscription model or a longer term subscription model I guess I'm a little unclear on why that would result in a sequential decline in revenue.
Yes.
So what happens as long we rebuilt some bombs.
Well recognize 100%.
Revenue at that time.
We have rebuilt if you're on a one off.
Great Mark when you got to rebuild that remodel.
Or every single.
Every three months, we're getting it more effectively we could be getting anywhere from one to three rebuilds next quarter from you if you're on a six months or 12 months, but we're not going to get any of your thoughts from you.
Next quarter, but we're going to get a lot larger or higher soft dollar.
We have got from the next year. So there's some timing as it relates to that which is what contributes to some of that and Paul.
Okay, and then for PDF simply subscribers I think that there was a pretty good pop sequentially from <unk>.
Is that correct it looks like revenue pick up pretty significantly that's correct.
Almost all of the work simply subscribers.
On 0.2.
Two plans that month to month when there are annual all most people are month to month, so their revenue growth.
Pretty closely linked with our subscriber growth.
Okay, and then how is the sale process progressing and any color you can provide around potential strategic acquirers.
Just any mhm.
That's what I was.
Alright, very good we're highly optimistic about closing it.
Transaction.
Before the end of the year.
Give us the specifics because we're active.
Actively in the wrong place.
We've got where we're at.
A lot of interest we'll leave it at that.
And both ourselves and our bankers feel very good about it.
Very strong demand for them.
Can't get into specifics the rapidly.
In the process.
Okay, and then for CAC, how did that trend in the quarter like from <unk> in year over year.
Yes, it was.
Down slightly year on year on a blended basis.
Essentially flat.
Around quarter not much change.
Okay, and then assuming like if there is a recession through 2022 and into $1 23, how would you expect that to impact the business if at all.
I don't think it's going to impact demand for our products and services if anything it could drive balanced CPM is more so we could see some benefit on the back side of the business.
We don't really expect that.
<unk>.
And for the company's products and services.
Yes, David Thanks, very much Jeff.
To add to just to add to Mark's comments, it's Justin.
I think if you.
You look at most of the conditions that we treat I mean, there are things that need to be treated.
And a great economic environment or a terrible economic environment. So.
Even if you did see more price sensitivity or some decreases in demand.
This is something we spend a lot of time looking at we believe that we believe that that.
That's possible, but we believe that that would also likely be offset by reductions in.
And advertising costs, and we continue to diversify the business to which I think that was one of the most important things for me is that.
We continue to diversify the business like the primary care business as the ultimate diversification.
And.
Think of it in a more difficult economic environment that that's a big plus for life.
Okay, great. Thanks very much.
And that will conclude today's question and answer session I will turn the conference back over to Mr. Shreiber for any additional or closing remarks.
Yeah.
I don't think we don't have any additional remarks, just wanted to thank everybody all of our shareholders for their <unk>.
With continued support.
We're really really optimistic about future flight from D and we're going to do some great things in.
You need to build a leadership position in telehealth.
Have a nice evening.
And that does conclude today's conference once again, thanks, everyone for joining US you may now disconnect.
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