Q3 2022 Marpai Inc Earnings Call
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Good day and welcome to the Marpe third quarter 2022 earnings conference. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Simon Lee who is vice president of Marpe. Please go ahead sir.
Good day and welcome.
Judy.
More pay third quarter 2022 earnings conference.
Be advised that today's conference is being recorded.
I would now like to hand, the conference over to Simon Lee, who is vice president of more pay. Please go ahead Sir.
Thanks operator welcome everyone to our third quarter 2022 call with me on the call today are marpe's chief executive officer amundo gonzalez and chief financial officer your ambivalent Before turning the call over to amundo. Please note that we'll be discussing certain non-GAAP financial measures that we believe are important
Thanks, Operator, welcome everyone. Our third quarter 2022 call with me on the call today are Mark Baker, Chief Executive Officer, and window, Gonzales and Chief Financial Officer.
Before turning the call over to a window, where you can do.
That will be discussing certain non-GAAP financial measures that we believe are important when evaluating our pes performance details on the relationship between these non-GAAP measures to the most comparable GAAP measures and the reconciliations thereof can be found in the press release that is posted on our website.
Details on the relationship between these non-GAAP measures, the most comparable GAAP measures, and the reconciliation thereof can be found in the press release that is posted on our website.
Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Security Litigation Reform Act of 1995.
So please note that certain statements made during this call will be forward looking statements as defined by the private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results for Marpe to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available at marpehealth.com.
Forward looking statements are subject to risks uncertainties and other factors that could cause the actual results were more pay to differ materially from those expressed or implied on this call for additional information. Please refer to our cautionary statement in our press release and our filings with the SEC all of which are available at <unk> Dot com.
And with that, I will turn the call over to Marpe's CEO , Emundo Gonzalez. Emundo?
I will turn the call over to Mark <unk>, CEO and wound up in Dallas and window.
Thank you, Simon. Good morning, everyone, and thank you for joining us. It's a pleasure to be here to discuss our Q3 2022 results.
Thank you Simon and good morning, everyone and thank you for joining us.
Measure to be here to discuss our Q3 2022 results I will also spend some time upfront discussing our recently announced acquisition of Maestro.
I will also spend some time up front discussing a recently announced acquisition of Maestro Health.
Now for investors and analysts joining us for the first time, I would like to welcome you and briefly state what do we do to generate value.
Now for investors and analysts joining us for the first time I would like to welcome you and briefly state.
What do we do to generate value.
Marpey is a technology company. We save employers money on their healthcare spending. We do this in multiple ways, not least of which is helping the covered employees get the right healthcare early. Healthier employee populations cost less. That's what we do.
Our pace of technology company, we save employers money on their health care spending we do this in multiple ways, not least of which is helping but covered employees get the right health care early.
Healthier employee population caused less that's what we did.
As you know, we closed our acquisition of Maestro Health on October 31st. I would like to discuss how we plan to integrate this bismuth into ours and what it means for our company.
As you know.
We closed our acquisition of Maestro health on October 31.
I would like to discuss how we plan to integrate this business into ours and what it means for our company.
As we close this transformational acquisition on October 31st, our Q3 results do not capture any effect of this transaction.
As we close this transformational acquisition on October 31st our Q3 results do not capture any effect of this transaction.
I mentioned in our previous earnings call that Maestro is a well-known and high-quality third-party administrator. The company has long-term customers, some dating back over a decade.
I mentioned in our previous earnings call that Maestro is a well known and high quality third party administrator.
The company has long term customers some dating back over a decade.
Maestro also serves self-insured employers in the lower middle market.
Maestro also serves self insured employers in the lower middle market.
These clients are companies and local government agencies like towns and school districts that have chosen not to buy traditional health insurance for their employees but rather to self-insure. That is they pay for medical claims as their employees go to the doctor or use hospital services as they come.
These clients are companies and local government agencies like talents in school districts that have chosen not to buy traditional health insurance for their employees, but rather to self insure.
That is they pay for medical claims as their employees go to the Doctor are used hospital services.
Oh.
Maestro, like Marpe, runs all of those healthcare benefits for self-insured clients.
Maestro Likewise pay runs all of those health care benefits for self insured clients.
Typically, these clients, both Maestro and Morpe, have employees in the hundreds or low single-digit thousands.
Typically these clients for both maestro edmar pay have employees in the hundreds or low single digit thousands.
Maestro's current clients represent approximately 25,000 employee lives across about 80 clients.
<unk> current clients represent approximately 25000 employee lives across about 80 80 clients.
And jointly, Marpe and Maestro have over 41,000 employee lives now.
Joining me more pay and maestro have over 41000 employee lives now.
Our revenue is largely based on fees which are paid per employee per month. But the number of employee lives under management is a key metric for our business.
Our revenue is largely based on fees, which are paid per employee per month. So the number of employee lives under management is a key metric for our business.
The Legacy Marpe business has a per-employee per month average revenue, excluding pass-through revenue to vendors and partners, of approximately $33.
The legacy market business has the per employee per month average revenue excluding pass through revenue to vendors and partners of approximately $33 <unk> per employee per month average also including pass throughs is approximately $57.
while Maestro's per employee per month average, also including pass-throughs, is approximately $57.
Why are these so different?
Why are these so different.
Well, the answer lies in the fact that Maestro has two suites of products that are systematically sold into their client base.
The answer lies in the fact that maestro has two suites of products that are systematically sold into their client base. These include care management and also a suite of cost containment solutions.
These include care management and also a suite of cost containment solutions.
When clients come to either company, the base service that both companies provide is paying and managing all the medical claims on behalf of our self-insured employer clients.
Clients come to either company the base service at both companies provide is paying and managing all the medical claims on behalf of our self insured employer clients.
This is the basic service of any third-party administrative.
This is the basic service of any third party administrator.
Now above these fees, we make money from added products and services, and from our share of vendor fees which integrate into our solutions.
Above these fee, we make money from added products and services and from our share of vendor fees, which integrate into our solutions.
Although both companies are very similar in their core administration fees, Maestro has more internal products which expand its unit economics.
Although both companies are very similar in their core administration fees Maestro has more internal products, which expand its unit economics.
Our revenue synergies from this deal, which we will aggressively mine, include the upselling of these Maestro products into the legacy Marque base.
The revenue synergies from this deal, which we will aggressively mine include the Upselling of these mice stroke products into the legacy Bard paid base.
This means that our per-employee per month revenue may expand over time as some of our legacy Marpe clients buy into our now wholly owned care management and cost containment tools.
This means that our per employee per month revenue may expand over time as some of our legacy <unk> clients buy into our now wholly owned care management and cost containment tools.
In terms of cost energies, we are committed to making our joint business operate as one, as quickly as possible.
In terms of cost synergies, we are committed to making our joint business operate as one as quickly as possible.
We have spent the last months developing a plan of integration with the help of EY's Technology M&A Practice.
We have spent the last months developing a plan of integration with the help of E Y technology M&A practice.
We have multiple work streams, each with clear objectives, which will yield operational efficiencies in the months to come.
We have multiple work streams, each with clear objectives, which will yield the operational efficiencies in the months to come.
Part of our strategy with this acquisition is to reach scale faster and thus leverage our operating model much more across much more revenue.
Part of our strategy with this acquisition is to reach scale faster and thus.
Leverage of our operating model much more across much more revenue.
In the months to come, our cost per employee life we serve may decline as these synergies are realized.
In the months to come our cost per employee life, we serve may decline as the synergies are realized.
We are working hard to make our TPA business reach breakeven by the end of 2023, even with our current book of business.
We are working hard to make our tpa business reach breakeven by the end of 2023, even with our current book of business.
As we integrate the businesses, we expect to resume guidance for Q1 of 2023.
As we integrate the businesses, we expect to resume guidance.
For Q1 of 2023.
Now also, during Q3, we launched Marpe RX. This is the pharmacy benefit manager, which manages all the prescription drug benefit for employers.
Now also during Q3, we launched <unk>. This is a pharmacy benefit manager, which manages all the prescription drug benefit for employers.
Prescription drugs represent over 20% of overall health care costs for many of our clients. There is crossover from medical claims to RX claims, that is prescription drug claims, and we need it to be in this space for really three reasons.
Prescription drugs represent over 20% of overall health care costs for many of our clients. There is crossover for medical claims to Rx claims that is prescription drug claims as we need it and we needed to be in this space for really three reasons first we want to provide.
First, we want to provide our clients with a transparent solution that manages all their health care, not just medical claims. Second, we believe that an integrated approach, meaning one app, one portal, for both medical and Rx needs is good for our members.
Our clients with a transparent solution that manages all of their health care not just medical claims.
We believe that an integrated approach, meaning one app one portal for both medical and Rx needs is good for our members and third there is a natural expansion in our per employee per month revenue by adding this valuable additional products to our portfolio.
And third, there is a natural expansion in our per employee per month revenue by adding this valuable additional product to our portfolio.
Moving on to the next quarter.
Moving on to the next quarter.
Excuse me, moving on to the third quarter. Again, I want to stress that none of these numbers include MAESTRO as we close the acquisition after the end of Q3.
Excuse me moving on to the third quarter again, I want to stress that none of these numbers include maestro as we closed the acquisition after the end of Q3.
Our revenues came in at $4.9 million.
Our revenues came in at $4 9 billion.
As we mentioned in the previous call, we expected a decline in Q3 versus Q2 when revenues were $5.6 million due to our decision to terminate a large client who we believed was failing to fulfil its contractual obligation.
As we mentioned in the previous call we expected a decline in Q3 versus Q2 with revenues were $5 6 million due to our decision to terminate a large client who we believed was failure to fulfill its contractual obligations.
We want to stress that we are continuing to focus on organic growth as a strategic priority for us, and we believe that a bigger and stronger post-deal Marpe with additional in-house products will contribute to stronger organic growth in the long run.
We want to stress that we are continuing to focus on organic growth as a strategic priority for us and we believe that a bigger and stronger post deal <unk> PE with additional in house products will contribute to stronger organic growth in the long run.
And now let me hand it over to our CFO , Yoram Bibring. Yoram?
And now let me hand, it over to our CFO Europe <unk> Europe .
Thank you, Edmundo, and good morning, everyone.
Thank you, it's mondo and good morning, everyone.
I'd like to start by reiterating that our results in the third quarter do not reflect the NYSTRO acquisition, which closed on October 31st. This means that our balance sheet and income statements will change dramatically starting in the fourth quarter, which will include two months of NYSTRO operating results, namely November and December . For more information, visit NYSTRO.com
I'd like to start the reiterating that our results in the third quarter do not reflect the maestro acquisition, which closed on October 10 ships. This means that our balance sheet and income statements will change dramatically starting in the fourth quarter, which will include two months of Masco operating results in the November and December .
Moving on to the third quarter results.
Moving on to the third quarter results.
Our revenues for the third quarter of 2022 were approximately $4.9 million, compared to approximately $5.6 million in the second quarter, and revenues of $6.2 million for the first quarter of 2022.
Our revenues for the third quarter of 2022 were approximately $4 9 million compared to approximately $5 6 million in the second quarter and revenues of $6 2 million for the first quarter of 2020.
As Montel mentioned before, and as we told you in the second quarter call, the main reason for the decline in the quarterly revenues was us terminating a contract with a large customer who was not meeting its contractual obligations. By the way, the issue was not the payment of our fees. Those were paid in full.
And as Michael mentioned before and as we told you in the second quarter call. The main reason for the decline in quarterly revenues was us terminating a contract with a large customer who was not meeting its contractual obligations by the way the issue was not the payment of our fees those real estates those will cadence.
Reflecting the termination of this large customer, we finished the third quarter with 16,357 glory lives, compared to 21,074 on June 30th and 21,139 on March 30th, 2022.
Reflecting the termination of this large customer we finished the third quarter with 16367 employee lives.
21000, or 74 at June 30th.
21139 as of March 31, 2022.
Again, these numbers do not include the Maestro employee lives. We currently expect to have more than 40,000 employee lives in the combined company on January 1, 2023.
Again these numbers do not include the maestro can the lives and currently expect to have more than 40000 employee lives in the combined company on January 1st.
2023.
Moving on to expenses, I will be comparing third quarter 2022 expenses to the second quarter 2022 expenses.
Moving onto expenses I will be comparing third quarter 2022 expenses for the second quarter 2022 expenses.
Cost of revenues include our cost of processing and adjudicating claims, our customer service costs, and the amount charged by third-party vendors for their services that we resell to our customers.
Revenues include our cost of processing, the dedicated claims and customer service costs and the amounts charged by third party vendors. So there are services that we sell to our customers.
The cost of revenues for the third quarter, excluded depreciation and animalization, were approximately $3.6 million, 74% of revenues.
Cost of revenues for the third quarter, excluding depreciation and amortization were approximately $3 6 million 74% of revenues.
versus $4.2 million of 75% of revenues in the second quarter.
Versus $4 2 million, a 75% of revenues in the second quarter.
A gross profit was therefore 1.3 million, or 26% of revenues, in the third quarter versus 1.4 million, or 25% of revenues, in the second quarter.
Our gross profit was therefore, $1 3 million or 26% of revenues in the third quarter versus $1 4 million or 25% percent of revenues in the second quarter.
The recent decrease in the gross profit was the lower Q3 revenue.
The reason for the decrease in the gross profit was the lower Q3, Q3 revenues and the reason for the increase in the gross margin was that the customer that caused the decline in revenues and associated associated lower coastal revenues generated a lower than average gross margins.
And the reason for the increase in the gross margin was that the current customer that calls to declining revenues and associated lower cost of revenues.
generated a lower than average cost margin.
Third quarter operating expenses not including coastal revenues Depreciation and the modernization and still base compensation were five point six million the decrease of approximately five hundred thousand compared to the second quarter when these expenses amounted to six point one million dollars
Our third quarter operating expenses, not including cost of revenues depreciation and amortization and stock based compensation were $5 6 million a decrease of approximately 500000 compared to the second quarter. When these expenses amounted to $6 1 million.
The $500,000 decrease was due to decreased marketing costs, mostly because of our annual broker conference which was held in the second quarter, as well as other one-time expenses that occurred in the second quarter.
The $500000 decrease.
Due to decreased marketing costs, mostly because of our annual broker conference, which was held in the second quarter as well as other one time expenses that occurred in the second quarter.
Operating loss for the third quarter was $5.8 million, down from $6.7 million operating loss for the second quarter.
Operating loss for the third quarter was $5 8 million down from $6 7 million operating loss for the second quarter.
Net loss for the third quarter was approximately 5.8 million or 28 cents per share down from a net loss of 6.7 million or 34 cents per share for the second quarter
Net loss for the third quarter was approximately $5 8 million or <unk> 26 per share down from a net loss of $6 7 million 74 per share for the second quarter.
Excluding stock-based compensation expenses of $699,000 and depreciation and abortization expenses of $842,000, adjusted DB DA for the third quarter was a negative of approximately $4.3 million, down from negative $4.7 million for the second quarter.
Excluding stock based compensation expenses of 697000, and depreciation and amortization expense expenses 842000, <unk> adjusted EBITDA for the third quarter was a negative of approximately $4 3 million down from negative $4 7 million for the second quarter.
In terms of guidance, as I told you, we're not providing Q4 revenue guidance due to the master acquisition. We expect to resume quarterly revenue guidance on our next earnings call.
In terms of guidance is it more of a told you we're not providing Q4 revenue guidance due to the Maestro acquisition, we expect to resume our quarterly revenue guidance on our next earnings call.
And with that, we will open the call for questions. Operator?
With that we will open the call for questions operator.
Thank you, sir. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Please state your name before posing your question. Again, that is star 1 to ask a question.
Thank you Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
This prompts on the phone line will indicate when your line is open. Please state your name before posing your question again that is star one to ask a question.
That is Star one to ask a question.
And our first question comes from Mr. Alan Key. Mr. Key, your line is open. Please go ahead.
And our first question comes from Mr. Alan Keyes Mr. Qi. Your line is open. Please go ahead.
Good morning, and congratulations on the closing of what appears to be a transformational deal. This is Alan Cleave from Maxon. I just wanted to start out to understand a little bit of something you talked about on the prior call was your broker conference and the impact that had on proposals, requests for proposals for renewals. Any update on that?
Oh, good morning, and congratulations on the closing of what appears to be a transformational deal. This this is Allen klee from Maxim.
Just wanted to start out understand a little bit of.
Something you talked about on the prior call was your broker conference and the impact that had on.
Proposals request for proposals for renewals.
Any update on.
One on that.
So, hey, Alan, how are you? This is Ed Mundo. So, thanks for the question. So, look, we are, as we mentioned, we're on a process here, which we see as a multiyear process, basically transforming our distribution channel. So, the first company we purchased in Florida in 2021 basically sold pretty haphazardly, you know, through a whole bunch of brokers. We've elevated that channel to really focus on some of the largest entities out there. That focus...
So hey, Alan how are you.
Thanks for the question. So we are as we mentioned we're on.
On a process here, which which we see as a multi year process.
Basically.
Transforming our distribution channel so the first company we purchased.
Florida in 2021.
Basically sold pretty haphazardly through a whole bunch of brokers.
Elevated that channel to really focus on some of the largest.
Entities out there.
That focus on our on our market. So these are.
on our market. So these are very, very large players like Lockton and Gallagher that have hundreds of offices around the country and really cater to them. So the book that we are now winning and bidding on is very much focused on business from these brokers. The strategic reason behind this, Alan, is that we don't want to get business because we know this guy or that guy. As a tech company, we have a superior product.
Very very large players like locked in Gallagher that have hundreds of offices around the country and really cater to them. So.
The book that we are now.
Winning in bidding.
Is very much focused on.
Business from these brokers.
The strategic reason behind this Alan is that we don't want to get business, because we know this guy or that guy.
Tech company, we have a superior product and we want to be part of the machine right. So these huge entities.
part of the machine, right? So these huge entities have an RFP machine, if you will. So we want to be one of the five, six that are regular recipients of these RFPs. Will we win them all? No. But certainly we need to be in that flow, which we are on right now. I will tell you that the activity, even by the end of Q3, did far surpass all of the activity that we had in all of last year. And again, without, we are not giving guidance, and we are very hopeful here for a solid beginning of the year, one to one. As our participants will maybe know, a lot of our business is heavily weighted on January 1.
That RFP machine, if you will.
We wanted to be one of the five or six that are regular recipients of these rfps, where we win them all note, but certainly.
We need to be in that slow, which we are on right now.
I will tell you that.
The.
Activity.
<unk> bin.
At the end of.
By the end of Q3.
Did far surpassed far far surpassed.
All of the activity that we had.
In all of last year.
And again the good.
We are not giving guidance but.
And we are very hopeful here for a solid beginning of the year of one one.
Our participants will.
No.
A lot of our business is heavily weighted on January one because thats, what our clients really switch.
that's when our clients really switch.
The health plans.
That's great. Thank you. And then you talked about the launch of MarPayRx. Can you give us a sense of what the impact that could potentially have on revenues per employee lives per month? And is this something you can roll out across?
That's great. Thank you and then you talked about the launch of more pay or X can you give us a sense of what the impact that could potentially have on revenues.
Per employee lives per month.
And is this something you can roll out across.
all your customers on an opt-out basis? Or how should we think about that? Thank you. Yeah, definitely the goal is to have this as part of our operating system.
All of them.
All your customers on a.
Opt out basis, or how should we think about that thank you.
Yes.
Definitely the goal is to have this as part of our offering.
for all new customers, so new RFPs, new wins. We are obviously including Mark Pay RX. For the customer base, for sure, there is a huge opportunity for us to upsell that. I will say that the customers that are in-house and have been in-house, meaning just the normal renewals, they all have a solution, right? So our job here, and I think we're doing this really well, our job is really to analyze all of their historical data and basically see how Mark Pay RX can save them money. That's basically it. As you know, Alan, the pills are exactly the same, the drugs are exactly the same. This particular product, the differentiation is around savings. So that's what we're doing methodically, literally with data, customer by customer. And in terms of the revenue impact here, we wanna make sure that our clients have transparency. This is a segment of the industry, and you've seen this in the press, where there is still a lot of lack of transparency. This has to do a lot because of rebates, rebates that flow from big pharma to the PBMs. We are committed to have a fully transparent PBMs. So in the case that we would keep, say, 20% of the rebates, this is known. And it's known because we're offsetting fees, for example. And that's unusual in the entire market. And we think it's really a winning proposition. In terms of actual fees here, we're assuming this is in the single digits in terms of a bump per employee per month. And that's great, because that's additional margin for us. This is net of all of the operating expenses of running the PBM are actually done by our partner, MetOne. So I'm talking only about our share of that fee, which would be pure margin for us. So it's exciting. And of course, the secondary effect here is data, data, data, right? We wanna make sure that this RX data is flowing in our pipes because it does help our assistance to members. It does help us also understand what health journeys of those members are all.
For all new customers, so new new.
Rfps new wins.
We are obviously, including <unk> or the customer base for sure. There is a huge opportunity for us to upsell that I will say that the customers that are.
In House <unk> house, meaning just the normal renewals.
Is there.
They all have a solution right. So our job here and I think we're doing this really well our job is really to analyze all of their historical date.
Data and basically see how <unk>.
Can save them money.
Basically as you know outlet.
The pills are exactly the same the drug stores I can say this is this particular product.
The differentiation is around.
Savings so that's what we're doing and methodically literally with data customer by customer.
And in terms of the revenue impact here.
We wanted to make sure that our clients have transparency. This is a segment of the industry and you've seen this in the press.
There is still a lot of lack of transparency. This has to do a lot because.
Rebates rebates lead flow from Big pharma.
To the.
Two the PBS.
We're committed to have a fully transparent pbms. So is the case that we would keep say 20% of the rebates. This is known there and then it's.
None because were offsetting feeds for example.
And thats unusual in the entire market and we think it's really a winning a winning proposition.
In terms of the actual fees here.
We're assuming this is in the single digits in terms of the bulk.
Per employee per month.
And that's great because that's additional margin for us right.
All of the net of.
All of the operating expenses of running the the ppm or actually done by our partner <unk> one.
So I'm talking only about our share of that of that fee, which would be pure margin for us.
So it's exciting and of course.
The secondary effect here is data data data right, we want to make sure that this rx data is slowing.
Our pipes because it does help our.
Assistance to members. It does help US also understand what health journeys.
Those numbers are all.
Okay got it that sounds great.
Got it. That sounds great. So then for MAESTRO, and I do understand you haven't given any guidance, so you may not be able to answer any of my questions, but I'll ask them anyway. You said there's similar size to yourselves and relatively...
And then for Maestro and I do understand you haven't given any guidance or you may not be able to answer any of my questions, but I'll ask them anyway.
As you said there are similar size to yourselves.
Relatively.
roughly double the company.
Roughly double the company.
Is there a way to think about though, like their bottom line, kind of their expense structure of like where it's starting? Is their bottom line like more of a loss than yours or similar or is there a way to think about that or can you comment at all or not really?
Is there a way to think about though like their bottom line kind of their expense structure of like where it's starting.
Is there a bottomline like more of a loss figures are similar or reserve weighted to think about that or can you comment at all or not really.
Yoram. Hey, how are you? So
Hey, Alan how are you so I think.
Almost want to say that there the bottom line right now the two companies is Not going to stay the way it will be because we're combining into one country
I almost want to say that they're there.
Bottom line right now with two companies is not going to stay the way it will be because we are combining into one company.
So looking at Maestro's standalone right now doesn't really give anything. What we need to do is, we're doing that, we're planning and we're executing, combining two companies into one, and then we'll be able to say something which will be helpful to you in terms of our cost structure and everything else. But looking at the two, either company has a standalone basis right now, probably doesn't give any indication of the future.
So looking at managed Standalone right now it doesn't really give anything we need to do it.
Goodbye.
Doing that we are planning and executing combining two companies into one and then we'll be able to say something which.
It will be helpful to you in terms of our cost structure and everything else, but looking at the two.
The company as a standalone basis, right now probably doesn't give any indication of the future.
May I just also say, Alan, I know we've been giving guidance a little tough sometimes, but we'll try to work through this. And basically, remember, our mission here is to create one from two. So there will be tremendous synergies here. These will be visible, obviously, to everyone as we publish our guidance for Q1 and for 23.
Yes.
I would just also say Alan.
I know.
Giving guidance because a little a little tough, sometimes but we'll try to work through this so.
<unk>.
Basically remember where.
We our mission here is to create one from two so there will be tremendous synergies here.
These will be <unk>.
<unk>, obviously to everyone as.
As we publish our guidance for Q1 and for 'twenty three.
I will also just remind everyone that the acquisition did come with almost $16 million of cash. That amount of cash, that's an accident, right? This was part of the deal structure in order to fund some of these important integration activities that are not free, but are definitely needed and yield some of these synergies. So all of that, that art plan, essentially, of integration is...
I will also just remind everyone that the acquisition.
Did comp with almost $16 million of cash.
That amount of cash Thats had an accident right.
Part of the deal structure.
In order to fund.
Some of these important integration activities that are not free but are definitely needed.
And yield.
Some of these synergies so all of that that are planned to essentially of integration is funded.
Okay, and just so make sure I heard correctly on some things. I'm not sure if I heard two different things. In terms of your pro forma lives, did you say over 40 or over 41? And then in terms of the break even, the goal, I thought it was originally 18 months, but then I thought I might have heard you say on the call by year end 23, which would be shorter than that.
Okay, and just so make sure I heard correctly on some things.
Okay.
I'm not sure if I heard two different things in terms of your pro forma lives did you say over 40 or over 41.
And then in terms of the the breakeven.
The goal I thought it was originally 18 months, but then I thought I might have heard you say on the call by year end.
'twenty, three which would be shorter than that could you just clarify those two thanks.
Could you just clarify those two? Thanks. Yeah, yeah. So what is among us for that right now is today and the two companies together you get 41,000. And then I said that as of January 1st we expect the number to be...
Yes so.
What I'd want to say that right now as of today and the two companies together and you get it.
41000, and then I said that.
As of January 1st we expect the number to be extra support events.
Okay.
Excess of what? I'm sorry, of 40... Forty, four zeros, yeah, 40,000. So today it's 41 and I said, as of January 1st we're expecting to exceed 40,000.
Excess of what I'm, sorry of 40, 44 zeros 40000, So today's 41 and I said as of January 1st we expect expected to exceed 40000.
But that's one of the stables.
Okay.
Just wanted to say.
Yes.
With respect to the break-even point, what I mentioned and what we're working towards, I mentioned specifically our TPA business. We are working very hard even within 23 to make that break-even. Now, we're talking about the TPA. Okay, note that. We're talking about the TPA business.
With respect to the <unk>.
Breakeven point with what I had mentioned, what we're working towards I mentioned, specifically, our tpa business.
We are working very hard.
Within within 23.
To make that breakeven.
Now we're talking about the Tpa note that we're talking about the Tpa business.
not necessarily consolidated because we have investments in technology and other things that we do. And that's not part of this. So we're talking about the TPA as a standalone business reaching break even hopefully by the end of next year.
No necessarily consolidated because we have investments in technology and other things that we do.
That's not part of us so we're talking about the tpa as a standalone business, reaching breakeven hopefully by the end of next year.
Could you explain what you mean by the other things outside of the TPA? Yes, we are developing different products as you know to enhance the long term value and different things that we are selling to the analytics, the AI, and all that stuff.
Could you explain what you mean by the other things outside of the Tpa Yeah, we are developing different products as you know.
Has the long term value and different things that we sell into the analytics and AI and all that stuff.
And that is not part of what we say. We deliberately said that TPA will break even, which means it does not include the investments in technology.
And that is not part of that when we say.
We deliberately said the tpa will break EBIT, which means it does not include the investments in technology.
which are not inherent to the, you know, it's something that effectively we're not getting the fruits of these investments in Q4 next year. So it's not part of it.
Inherent to the <unk>.
It's something that effectively without getting the fruits of these investments in Q4 next year. So it's not part of it.
Some of it, by the way, we capitalize too, so it wouldn't be part of it. But in general, when we said that, that's what we meant. We're talking about this pure TPA without investment in the technology, R&D.
Some of it by the way we capitalized two so it wouldn't be part of it but in general.
We don't when we said that's what we meant we've told me about the pure Tpa.
The investment in the technology.
R&D.
Okay, that makes sense.
Okay that makes sense.
And then...
And then.
Okay, maybe the last question I have in terms of
Okay.
The last question I have is in terms of.
Uh huh.
maestros
Maestro is.
<unk>.
cost containment and clinical care offering.
Cost containment and clinical care offerings.
If you had to guess, how long does it take to try to integrate them into Marpe's legacy business?
If you had to guess how long does it take to try to integrate them into.
<unk> legacy business.
So the beautiful part of these two items, and we're already educating our customer base, and obviously including all of these in RFPs for brand new customers, the beautiful part of both of these items is that they really are plug and play, right? So theoretically, Alan, we're not doing this quite yet, but theoretically you can sell those programs to anyone, even non-TPA clients, right? Now our strategy, our channel...
So the beautiful part of these two items and we're already educating our customer base and obviously, including all of these in.
Rfps for brand new customers.
Beautiful part of both of these items.
Is that they really are plug and play right. So.
Theoretically Alan we're not we're not doing this quite yet, but theoretically you could sell those programs to anyone even even non tpa.
Clients right now our strategy our channel is focused on.
is focused on, you know, employers that are moving their health plans to our management, right? So, so TPA clients, but those businesses work kind of alongside any, any TPA, which is very attractive. I will tell you that the, the penetration of these products into the legacy maestro base is very high. And obviously our goal is to get to those levels as well. Why it's, it's, it's, you know, very much.
Employers to her.
Moving their health plans to our management rights, so tpa clients, but those businesses work.
Kind of along side.
Any any tpa, which is very attractive.
I will tell you that the penetration of these products into the legacy Maestro base is very high and obviously our goal is to get to those levels as well why.
It's very.
sharing this with the site, these are the revenue synergies. And we really believe the uplift of revenue on a PEPM basis can be achieved by integrating these programs. And also, by the way, they mean a lot to clients. I would just remind you that we do trust containment. We do care management. The only thing is we do it by partners and vendors, right? So when I remember...
Very much staring us in the face of these are the revenue synergies.
And we really believe the uplift.
Revenue on a p/e basis can be achieved.
By integrating these programs and also by the way they they mean a lot to clients I would just remind you that we do cost contained we do care management. The only thing is we do it by our partners and vendors right. So when I.
We only started the company in 2019, so I didn't have a chance to build everything. But we right now outsource these functions, which are key to our clients, and we make a little slice of revenue. Now we'll make all the revenue, obviously, because we own the product outright.
Remember, we only started the company in 2019, so it didn't have a chance to build everything.
Yeah.
We right now outsource these functions, which are key to our clients and we make a little slice of revenue now will make all of the revenue, obviously, because we own the product right.
Maybe one other question. Are there other things like this?
Maybe one other question are there other things.
Things like this.
that neither of you offer today that maybe in the long-term future you could also add?
Neither of you offered today that maybe in the long term future could you could also add.
Are you talking about maestro or?
Are you talking about <unk>.
Something that neither Maestro or Marpe have today, but like would be value added to your customers that maybe you could create and was offered by others.
Something that neither maestro or more pay have today, but like.
Would be value added to your.
Customers that maybe you could create an <unk>.
Resolved others yeah.
Well, for sure, for sure. So look, first and foremost, and this is obviously all, you know, released, but in our, you know, currently filed presentation, but we really see ourselves again as a technology company, we are able to match make. So we are in the process of creating a huge vendor ecosystem, which basically delivers members that are not only showing a certain disease state or condition, but are also willing to enter into a program. Now, you know, this, you know, Alan covering this space.
Well for sure for sure. So look first and foremost and this is this is obviously all.
We released it but.
And in our in our.
Currently filed presentation, but we really see ourselves together as a technology company, we are able to match stake.
So we are in the process of creating a huge vendor ecosystem, which basically.
Delivers members that are not only.
As showing a certain disease state or condition, but are also.
Willing to enter into a program now.
Alan covering this space for a long time, there have been billions of dollars spent on a lot of amazing population.
for a long time, there have been billions of dollars spent on a lot of amazing population health tools, from diabetes to cardiovascular, MSK, et cetera. And these have clinical validation, they have all kinds of studies, all the right people. They still have a lot of money. The issue is they can't get members, right? So where do we come in? We see ourselves as that matchmaker because we have...
Population health tools, Brent diabetes, cardiovascular SK et cetera, and these have.
Clinical validation they have all kinds of studies on the right people.
They still have a lot of money.
The issue is they can't get members right. So they where do we come in we see ourselves as that matchmaker because we have the members. That's why we bought the first EPA that's why we bought <unk>.
the members. That's why we bought the first tPA, that's why we bought Maestro. We want the members. We run all of the pipes, right? And in doing that we are able to understand our members' journeys and match them to the right clinical solutions. Now obviously that's not free, so that monetizes in a few ways, right? It monetizes most obviously from revenue shares that these providers pay.
We want the members we run all of the pipes right and in doing that we are able to understand.
Our members' journey.
And match them to the right.
Clinical solutions now, obviously, that's not free so that monetize it.
In a few ways right and monetize the most obviously from revenue shares that the providers.
for essentially lowering their cost of acquisition. So let me give you an example. Instead of sending a postcard which no one will read to, you know, my 40,000 employees now, right, employee lives that we manage, they can save that and save the aggravation and time and everything. And we literally will deliver them a disposed list, you know, and that member will be waiting for their call and then ready to engage.
Pay us for essentially.
Lowering their cost of acquisition. So let me give you. An example, instead of sending a postcard, which no one will read to.
Mike 40000 employees now right.
He lives that we manage.
They can save that save the aggravation and time and everything.
Literally will deliver them, but.
<unk> list.
Remember, we will be waiting for the call and then ready to.
Ready to engage that's a very transformational for a lot of these.
very transformational for a lot of these groups. So that's the future and that's a lot of what we're building here.
Groups. So that's the future and that's that's a lot of what we're building here.
That's fantastic. Okay, congratulations. Thank you so much.
That's fantastic Okay. Congratulations thank you so much.
Thanks, Ellen.
Thanks Alan.
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No, so I would like to thank everyone for joining. Thank you, Alan, as well for the coverage and all of your questions. We really appreciate that. So thanks, everyone. Have a great day and please keep us on your screen. I'm sure there will be more news forthcoming, obviously. Thank you, everyone, and have a great day.
So I would like to thank everyone for joining me.
Thank you Alan as well for for the coverage and all of your questions.
We really appreciate that so.
So thanks, everyone have a great day and please.
Keep us on your screen.
Sure.
There will be.
More news sports coming obviously, but thank you everyone and have a great day.
This concludes today's conference.
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you
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Yes.