Q4 2022 Sharecare Inc Earnings Call

Speaker 1: worth it!

Speaker 2: Good day and welcome to the Sharecare fourth quarter and full year 2022 earnings call and webcast. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker 2: To ask a question, you may press star then one on your touch tone phone. To withdraw from the question queue, please press star then two. On today's call, we have Mr. Jeff Arnold, Chairman and CEO , and Mr. Justin Ferrero, President and Chief Financial Officer, as well as Mr. Jaffray Muhammad, Chief Operating Officer.

Speaker 2: regarding strategic reviews and our guidance. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes.

Speaker 2: that will occur after this call. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the risk factor section of our form 10K for the year ended December 31st, 2022. In addition, please note that the company will be discussing certain numbers.

Speaker 2: Please note this call is being recorded. I would now like to hand the conference over to Mr. Jeff Arnold. Jeff, please go ahead.

Speaker 3: Thank you for joining us today as we present ShareCare's fourth quarter and full year 2022 results. We reported revenues of 123.3 million and 442 or million respectively and adjusted EBITDA of 4.6 million and 15.8 million respectively.

Speaker 3: above our target KPI of eligible lives which falls off of 4 million.

Speaker 3: In our provider channel, which recently received a best in class distinction, we significantly grew our records processed in 2022 to 5.8 million.

Speaker 3: In August of 2022, we announced our plan to conduct a strategic review of our business and have been working extensively with financial advisors to evaluate all potential options to maximize our share of value. The process is ongoing and we have expected expanded it to include potential business combinations to complement our thrive.

Speaker 3: and government contracts as well as expanded our Medicare Advantage members.

Speaker 3: which yield yielded millions of new covered lives.

Speaker 3: Due to our investment in sales, we were able to increase the number of RFPs submitted in 2022 by 100 percent, resulting in an increase in our pipeline, which has grown 150 percent year over year.

Speaker 3: Our account management is delivering high client retention and renewal rates with existing clients, including one of our largest, CareFirst, the largest not-for-profit health plan in the mid-Atlantic region.

Speaker 3: and expanding accounts with new capabilities which increase PMPMs and improve outcomes.

Speaker 3: One example is on our corporation, one of the nation's leading homeholders. Started as a wellness-only client and has strategically added our new product offerings, including digital therapeutics, digital first advocacy, tech-enabled home care, and the Get Active VR program, creating meaningful results.

Speaker 3: Census launch, Chercare Plus has been driving new client and MPM growth, contracting for over 900,000 covered lives with co-poor and through our relationship with Caroline, which demonstrates the strength of our digital first advocacy solution that integrates AI.

Speaker 3: benefits navigation, clinical engagement, virtual care, and product case management.

Speaker 3: Enhance with our recently launched CDC approved digital therapeutic for diabetes prevention, new virtual model of our intensive cardiac rehabilitation program, Hornets Lifestyle Medicine, as well as our get active VR program. ShareCare Plus represents our innovative outcomes driven mindfulness-based approach to comprehensive health management.

Speaker 3: On the home care front, Carolics continued to exceed growth expectations by adding 1.8 million Medicare advanced lives in fiscal 2022. In addition, we expanded our home care offering to deliver tailored care management programs and traditional care to high-risk populations.

Speaker 3: which results in improved experiences, member acquisition and retention, quality ratings and cost savings.

Speaker 3: As we have seamlessly integrated care links into our digital first advocacy solution, our home care capabilities also are providing a valuable differentiator for sharecare plus.

Speaker 3: Additionally, we've identified approximately 16 million in annualized cost savings within our enterprise channel that we believe we can realize through global outsourcing and streamlining our product investments.

Speaker 3: contributing to our expectation of nearly doubling our Just City Badaw in 2023.

Speaker 3: These cost savings will be rolled out through Q2 and Q3 of this year, where we expect to realize approximately 12 million of these savings in 2023.

Speaker 3: These savings will include operating and capitalized expense reductions which support both the DAU expansion and our plan to become cashflow positive.

Speaker 3: Moreover, the strategic review confirmed that our Lifesciences channel, given its expertise in consumer-driven healthcare, is a core and valuable differentiator to our enterprise offering. Contributing advanced member targeting capabilities, a 100 million person zero party database.

Speaker 3: and an extensive library of award-winning content. In fact, Chercare was honored with a record-breaking 20 awards, the fall 2022 Digital Health Awards competition. In 2022, life sciences directly contributed $80 million in revenue and supported $258 million in our enterprise revenue.

Speaker 3: Lastly, the strategic review affirmed the value of our provider channel.

Speaker 3: The interest we received showed that on a standalone basis, provider attracts valuations equal to more than half of ShareCare's equity value based on our current trading price. Thus, we will continue to evaluate ways to unlock that value while increasing profitability through global outsourcing and growing and retaining clients.

Speaker 3: We believe that that provider channel complements our other offerings and the use of proceeds remains a key consideration for any potential transaction.

Speaker 3: The provider segment contributed 104 million in revenue in 2022. And through our previously discussed globalization efforts, we are tracking to deliver $14 million and annualized cost savings, which began in Q1.

Speaker 3: 2023 and we expect to realize approximately 10 million of operating expense reductions within the year. This is in addition to the previously mentioned cost savings of $16 million in enterprise.

Speaker 3: This in-depth strategic review has affirmed that our unique combination of enterprise assets, life science capabilities, and provider solutions aligns well with the future of value-based care and data interoperability mandates. As we focus on growth, high margins, and maintaining a strong cash balance, we are well positioned as a leading digital health platform.

Speaker 3: This approach will enable us to deliver increased value for our shareholders while ensuring continued growth and success in the evolving healthcare landscape.

Speaker 3: While Justin will walk through the specifics of our guidance for Q1 and 2023, I want to emphasize that we have built our projections for the Enterprise Channel based solely on the business currently under contract.

Speaker 3: and model growth for the provider and life sciences channel in line where they're 2022 growth rates.

Speaker 3: Our achievements in 2022 are a tribute to our passionate and talented team, and we look forward to building on this momentum in 2023 and beyond. Thank you for your ongoing support and confidence and share care. I will now turn it over to Justin.

Speaker 3: Thanks, Jeff, and everyone for joining this morning. As Jeff shared, we delivered strong results for the fourth quarter and full year 2022.

Speaker 3: I'll share the full year highlights, provide a look at the fourth quarter results, and then outline our outlook for the first quarter in full year 2023.

Speaker 4: Our full year revenue grew 7% to 442.4 million from 412.8 million a year ago and adjusted EBITDAQ was 15.8 million versus 27 million a year ago.

Speaker 4: We also ended the year in a strong financial position with 182.5 million in cash on our balance sheet and over 233 million in available cash.

Speaker 4: The year-over-year growth was impacted by Sunsetting Health Security, resulting in a revenue reduction of approximately 37 million in an adjusted EBITDA reduction of approximately 20 million over the prior year period. When normalizing for the previously announced Sunsetting Health Security,

Speaker 4: Our overall year of year growth was 18% and adjusted EVA.GROSE was over 100%.

Speaker 4: Our fourth quarter grew 4% to 123.3 million from 118.5 million a year ago.

Speaker 4: Growth in the quarter was driven by year-over-year increases and eligible lives on the platform and an increased number of records were retrieved.

Speaker 4: The Justice of the Doctor of the Quarter was 4.6 million compared to 5.4 million a year ago.

Speaker 4: The Justice Department reflects investments in sales force expansion and infrastructure around our advocacy business.

Speaker 4: One area to highlight is the infrastructure we support to deliver our advocacy solution for certain large customers, fully resides in our cost of sales, which is the reason behind the lower gross margin in the quarter.

Speaker 4: However, we believe these investments will drive long-term value to our shareholders and will reduce over time.

Speaker 4: Similar to our full year results, year-over-year growth for Q4 was also impacted by our decision to continue health security.

Speaker 4: which resulted in a revenue reduction of approximately 10 million and over 4 million in adjusted EBITDA over the prior year period.

Speaker 4: When normalizing for the discontinuation of that offering, our fourth quarter revenue growth was approximately 14 percent, and adjusted EBITDA growth was over 100 percent.

Speaker 4: As mentioned in our last call, we were resumed providing guidance with respect to our financial projections.

Speaker 4: We're establishing Q1 estimates for revenue of 111 million to 113 million, and an expected increase of approximately 11% over Q1 fiscal 2022 using the midpoint of the range, and adjusted the cost of 1 to 2 million.

Speaker 4: As a reminder, this includes the seasonality in our life sciences business, whereby the first quarter is our lowest revenue quarter and RAMP says we move through the year.

Speaker 4: Our full year 2023 revenue guidance is 450 to 460 million and adjusted EBITDA is 25 to 30 million.

Speaker 4: To unpack that, we have added over 750,000 lives to our Carillon contract. Over the course of this year, we are working with Carillon to deliver Sharecare Plus at a lower PMPM, reducing revenue but providing a higher margin solution.

Speaker 4: by leveraging Cherkir's digital capabilities. Related to EBITDAW guidance in similar 2022, we expect 80% of our adjusted EBITDAW to be generated in the second half of the year.

Speaker 4: This is a result of the optimization initiatives largely taking effect in Q3 and Q4, as well as seasonality in our life sciences and provider businesses, where we see higher growth in the second half of the year.

Speaker 4: As we continue to drive efficiency in our business throughout 2023, we expect significant improvement in our adjusted EVA-DOM margins compared to 2022.

Speaker 4: Our full-year guide into assumptions reflects the following. Increase the knowledge of a lives from 12.4 million to approximately 12.9 million by year in fiscal 2023.

Speaker 4: A 4% increase over fiscal 2022. As a reminder, the $12.4 million includes growth in lives from sharecare plus, which we will receive the benefit of a full year of contract delivery in fiscal year 2023.

Speaker 4: Increase in records, retrieved to 6.5 million records, a 12% increase of a fiscal 2022.

Speaker 4: Capital expenditures of approximately $30 million.

Speaker 4: Close up my comments, we are confident that the 2022 investments in our sales organization and new product innovation will deliver top-line growth in 2023 and beyond.

Speaker 4: At the same time, we will begin to realize the financial benefits of approximately 30 million and annualized cost savings as we progress throughout 2023.

Speaker 4: As Jeff said, we are grateful for your ongoing support and confidence in share care. Thank you all for joining us today. We'll now open the call to your questions. We will now begin the question and answer session. To ask a question, you may press star one on your touch tone phone. We will now open the call to your questions.

Speaker 2: If you are using a speaker phone, please pick up your hands up before pressing the keys. To withdraw from the question Q, please press star then two. The first question is from David Larsen of BTIG. Please go ahead.

Speaker 5: Hi, can you talk a little bit about the 1Q revenue expectations? Why would there be a significant sequential decline from 4Q to 1Q? And then can you also talk a little bit about the Caroline deal? Is the PMPM rate for those lives coming in at the range that you had expected?

Speaker 4: typically a dip in Q1 because Q4 is our strongest corridor for life sciences.

Speaker 4: And typically there's an $8 to $9 million dip going from Q4 to Q1. So that's normal. We've also factored in, as we talked about, none of this has been finalized, but we...

Speaker 4: We were fortunate to close the relationship with Carillon. And now what we're doing through the course of this year is working with them to tech enable that business and you know, there'll be trade-offs. So ultimately we think there'll be less revenue, a lower PMPM, but a higher margin business as we go through the year.

Speaker 4: So that's why we factored in a little bit of a dip and the enterprise revenue in Q1 as well.

Speaker 3: Yeah, I would just add, I mean, it's a large contract with Carillon, and the customer base is becoming broader, and some customers have less high touch services, so it's less PMPM.

Speaker 3: And then as it relates to your question on revenue guidance for the year, we made a decision to only guide to what's booked and enterprise, which is not what we've historically done. So we have taken out any new logos that we might add during the year, any upsells.

Speaker 4: any cross-cells and any upside. Yeah, and maybe I'll just add one other thing, Dave, is that just when you look year over year, it's quite positive. You know, our guide is 11% higher than where we were in Q1 of 2022.

Speaker 4: and any upside. Yeah, and maybe I'll just add one other thing Dave, is that just when you look year-over-year, it's quite positive. You know, our guide is 11% higher than where we were in Q1 of 2022.

Speaker 5: Great. And then can you talk about like growth by division, what your expectations are for 2023? I think what I heard was provider lives are expected to be up pretty nicely in 23. Did I hear 20% or provider records? Just any color on the growth rates by division would be helpful. Yeah, no, no, you heard around 12%. Socast lung cancer is up about A3.

Speaker 4: flat, just a little bit of growth. And then as Jeff just said, we're guiding on enterprise to what's booked. That is new. So we're guiding around 4% growth on the enterprise side.

Speaker 4: But that's taken a very conservative approach. You know, through the year, as you know, we've talked about in the past, we typically onboard new customers mid-year. And so there's upsells through the year. Lots of things that happen in the enterprise business.

Speaker 4: But we're going to take a conservative approach and only guide to where we're booked today.

Speaker 5: Okay, so on the consumer side, I think the whole industry is facing a slowdown. Ad revenue is under pressure. There's the risk of a recession. So belts are tightening across the board. So quite frankly, that's in line with what's going on in the market. And that makes sense to me on the provider side, looks like very healthy growth.

Speaker 5: provider records expected to increase 12% year-over-year in 23 to spite all the pressures that hospitals are under. And then on the enterprise side, it's what's booked right now. And maybe the PNPM rate on Caroline is coming in a little bit lower than expected for now. Can you talk a little bit about how many more lives there are that you could potentially sell into elevators and care?

Speaker 3: across multiple clients and we do see growth coming from that partnership and we're extremely focused on the execution of how do we improve the margin, how do we price the PMPMs the right way to the different clients.

Speaker 3: with a more digital first approach. So just to give you a little color on that, it's 500,000 plus multiple clients with different approaches to each client based on the different services that we're offering. And we believe that we're just getting started with that partnership.

Speaker 5: Okay, and then just one more for me and I'll hop back in the queue. I think you mentioned that the pipeline is up, could you say like 100% year over year and the number of RFPs are up around 100% year over year, any color on what impact sort of the volatility in the pipeline?

Speaker 5: banking sector that we're seeing is having and you know, it seems like the labor market is still very strong and but people are a bit worried about the risk of a slowdown. Is that having an impact on sales process? Just any color then timing for deals? Yep. Yeah, I think when you kind of think about our enterprise sales is, you know, one part of our strategy is we have very large clients that we're always working with to expand with.

Speaker 3: I think Caroline's a great example of that. On the MA side, we have good examples there as well. And then the second piece of our strategy is, we're investing in new salespeople. We have built an unbelievable sales team. We had a big sales meeting last week. I was with all of them. And so they're out bringing the Cokes and the Colliers on, leading with a sharecare plus.

Speaker 3: pitch and building a big pipeline and giving real confidence to us. Our core offering of the digital front door, the digital therapeutics, the advocacy, and the home care is there's a big demand for that and it's differentiated as having it all in one place. The digital front door is there's a big demand for that and it's differentiated as having it all in one place.

Speaker 3: And then you complement what I just said there and you look at our account management. They're doing an amazing job on client renewals. I mean CareFirst is our second largest client. It's tens of millions of dollars and you know, we're successfully able to renew them for multi-year. And then lastly when I look at like a Lennar Homes, it's kind of like what our dream client looks like. It's a land and expand.

Speaker 3: You know, we started off, it's a huge company, one of the largest home builders. We sell them the digital front door and we get more onboarding and engagement than they've got in the past. Then they buy digital therapeutics, then they buy Sharecare Plus, then they buy Care Links. And that's just a dream sale for us.

Speaker 3: And we're teaching our salespeople how to approach all those deals in a similar way, because some of them are complex and take a little bit more time, and some of them are straightforward, that we can come in with a digital front door and land and expand over time. But the talent there, the capabilities there.

Speaker 3: the pipelines there and they're converting and we expect a big Q1 this year for next year. And we already have some big wins under the tent that we haven't mentioned on this call.

Speaker 5: Okay, and then what kind of lift could there potentially be on the enterprise side in terms of you booking deals now in 23 that would impact 23 that isn't in the guide? Could you book another couple hundred thousand lives, 5%, 10%? Don't you have mid-year starts? Isn't that kind of normal?

Speaker 4: We do and that is all possible. But we're taking the approach that we would like to keep with our guide and that's potential upside.

Speaker 4: But yes, historically we have brought on new customers, like for example, Carillon in the latter half of last year, but we'd like to take a keep with our conservative guide and those could be upside. Yeah, and what I would say the way we think about that internally is

Speaker 3: Yes, there's the potential for new logos and we've seen that historically in the past, not in the guide. Yes, there's always potential for more upsells within current clients. That's an active conversation account management has every day with our clients. That's not in the guide. And then one of our strengths is big deals.

Speaker 3: And so what we learned last year on Carillon is that we had signed the SOW early in the year with an expected start date, and it just took longer. And so, you know, we're tracking on some other large opportunities, but we're being conservative and saying, let's think about that for 2024, but let's work on it to make it happen.

Speaker 5: upside and downside risk and you got to have technology solutions to be able to deliver that. Has there been any change in that kind of dialogue or viewpoint from their perspective that you're aware of or not?

Speaker 3: No, I mean I think shared care can play an enablement role in all those types of ideas and we're involved in many of those conversations and how we can help and participate. And Jeffrey who's in the room with us on the call leads that effort for us.

Speaker 6: So to Jeff's point, we are engaging some of the conversation on either side, and it does play a big part in what we are doing.

Speaker 5: Okay, great. And I would imagine from Elavance's point of view, in order for them to retain their existing membership and win new enterprise clients, the Sharecare solution is certainly a key consideration that a lot of their prospective clients and existing clients have. So, all right, thanks very much. I'll hop back in the queue. Okay. Thank you. The next question is from Richard Close ofpants for distributions.

Speaker 7: You guys are generating revenue on a per member per month basis.

Speaker 7: Um, why would it go down?

Speaker 4: That is all around the carillon discussion.

So we are taking a conservative approach. Nothing's been finalized, but as you know, came out in our opening remarks, that's a fantastic partner for us. And what we're working on with them is to tech enable that business.

As part of that, the conversations include potentially less revenue, but a higher margin business. And nothing's finalized, but in the theme of our guidance for this year is we want to be conservative. There's a chance that PMPM could reduce.

And so we have built that into our forecast. But at the end of the day, the number of lives aren't gonna reduce the momentum with that client hasn't reduced. We've actually added an additional health plan in Q1 with Carolon.

And so we see that relationship only expanding. However, there's a large client inside of that relationship that we're working on to tech enable, and it'll have pressure on PMPM, but ultimately we believe better gross margin. So that's why there is a little bit of pressure in Q1.

Yeah, so just to explain what we mean by tech-enabled is provide less services, physical services, high touch services with more digital services, which for that particular client would reduce the PMPM. And number 4, please continue to use the

Yeah, but I still don't understand why sequentially your revenue would go down. Was there any 1 time revenue in enterprise in the 4th quarter? Or I mean, if you have more lives, you got more revenue, right?

Because we are taking a conservative approach on that particular client. It hasn't been discounted. It wasn't discounted in Q4. We believe that the likelihood of us moving in this direction with this particular client is why we're going to guide that way. So if you have the same number of lives.

I can serve. Oh, yeah. Yeah, okay. That's fine. So, you know, I think it was at a conference early in January , you guys talked about life sciences, the selling season. Um, was pretty good. You felt pretty good on the 23, you know, the selling season at the end of 22. So I'm just curious.

we might have had our largest day ever yesterday in life sciences with our bookings. But as David mentioned, the macro environment issues in life sciences is real. I did a talk last week in New York at one of the big ad agencies and

You know, it's the topic of the day. It's kind of like, you know, what's what's the environment look like? And when's the bounce back, you know, gonna occur? Is it is it this year or not? But we have a great team. We're seeing some positive results is like I mentioned yesterday. We typically have a really great Q4.

But we thought because we're taking a conservative approach as we get through the strategic review and other things that this was the holding serve was the right way to think about it for now. Yeah. And just to reiterate some of those comments. So

When we were coming back strong on those calls you're referring to, was it's really kind of first half. That's when you're selling the selling season primarily around the first half of the year. The reason why we want to be conservative is as you know, is that about 35% of this business. Because of Covid, much of that company has a lot of tremors, it's been around for 25 years.

is realized in the fourth quarter. And so, until we have really solid view on what Q4 is gonna look like, we think the prudent approach is to be conservative until Q4. And have more visibility throughout the year. Yeah, we'll have more and more visibility on how Q4 is gonna come in.

Okay, and with respect to 11th and or the old anthem, I think, you know, back when you guys originally D SPAC, you talked about, there was a 10 million lives opportunity.

with elephants in terms of clients they had where, you know, there were multiple, you know, payers, I guess, insurers in those employers. Can you just talk to us a little bit about like that 10 million number and, you know, maybe where you guys are?

AI services to Anthem and that's going well and Jeffrey leads those efforts for us, but that's an important part of the relationship. And then the second important part of the relationship was, you know, they invested in Sharecare and we had to show them that we could take those dollars and we could build a better advocacy solution that's in the market. We think we've done that.

And why we think we have done that is Carillon moved 500,000 plus members over to our platform. And so we're going through that execution right now and that's a ton of work, but we're building confidence, you know, I think with them and us and how we can work well together. And then the next piece was, you know, how could we bring on a big important client.

like Coke Industries, and that is one of their clients, and be able to have flawless execution with a new product offering. So we launched Sharecare Plus to Coke in partnership with Anthem that would fall in that national accounts category that you're talking about.

and have done really well rolling that out starting in January . So that builds confidence. And then we're starting to get better muscle memory on how to include Sharecare into national account RFPs. We're getting better on how to think about things like deal desk, how do we approach clients separately or together.

And we expect that more business is going to come over. And it already has through Carillon. From where we started in Q4, we've already onboarded new big important clients. Justin mentioned one payer, there's others. And so we think that we're on a good path.

Okay, and then my final question, I'll turn it over. I apologize for asking too many, but. I'm care links, I just want to better understand the 1.8M. New members that. I guess you can target with care links.

How does that compare? I think when you bought it in 2021, August of 21, you said you had about 1 million MA lives in the pool. I'm not sure if it's apples or oranges, if you could just talk to us a little bit about. And then did you just.

300,000. Yeah, 300,000 MA license we bought it. It was 1.8 million ending last year. It'll be more for this year. Mm-hmm. It'll be around two and three. And yes, we exceeded that $35 million dollar number.

Okay, so essentially you went from 300,000 lives to. 1.8 million at the end of 2022.

Yeah, and it'll be over 2 million this year. Okay. All right. I'll jump back in the queue. Thanks.

Thanks. The next question is from Craig Hettenbach of Morgan Stanley . Please go ahead. Yes, thanks. Following up on the lower PMPM at Caroline, can you just talk about does this shape your view of the broader opportunity set? Do you think it's specific to them or just how you're thinking?

So, take a picture on the enterprise side in opportunity. So, what we believe is special about ShareCare Plus is it's a digital first offering. And what we mean by that is it's self-service. So anything that I could do with an advocate, I should be able to do directly within the platform myself.

there's cost constraints. We have an example within the carillon partnership where there was some cost constraints and there was the desire to get to digital first. And so yeah so that particular client were moving down the path of the the more digital offering with the less

high touch services which is going to reduce that particular client's PMPM, but it's also going to make a higher margin. We also have a big mix of clients that have the combination of both. And so you get the advocate with the care console and you get the digital first approach. And we're taking both of those approaches to market.

And so sometimes the digital first works really well, as I said, for people that might not have substantial budgets for these types of things. We like it because it's higher margin and it's easy to turn on. I mean, I think I've shown it to you in the past, literally it's like turning wifi on, a little blue button shows up and.

all the data is there. And so I see it as an advantage, in that we, as a go-to-market, that we've got both offerings. And depending on the client, we tailor the offering to fit the need.

As a follow-up, Justin, you mentioned just some infrastructure support for enterprise. Can you maybe touch on it on an intermediate to longer-term basis, where you think ultimately gross margin will shake out and what the implications are for that?

And then as a follow-up, Justin, you mentioned just some infrastructure support for enterprise. Can you maybe touch on it on an intermediate to longer-term basis, where you think ultimately gross margin will shake out and what the implications are for that? Yeah.

So we're making significant investments to support largely bringing on 900,000 lives. If you just put that in perspective, that's a massive lift between Q4 and Q1. And so we overinvested to make sure that our delivery for those customers was flawless, and it has gone extremely well.

We mentioned on the last call that we think that this business can be a mid-30s gross margin business long-term and that's what we believe. So that's ultimately how we'll model this out. In order to deliver, we had to use outsource partners, which is why it's showing up in it. So totally

percent plus gross margin business force as you look to 2024 and beyond.

Daffers, anything you'd like to add to that? No, you can look at it. I'd like to enterprise or blend it.

That's Enterprise. No, no, no. That's just our, I thought you were referring to the advocacy offering. So that's just around the ShareCare Plus, like what we've been talking about here with Caroline. So Enterprise as a whole, we believe will be a, you know, back to where we were, which is in the.

is another 50 to 55% long term. Yeah, just in your covered all one thing which I would add is the asset that we have, I mean accumulated in terms of the, any analytics and precision on the technical side that give us an ability on the pricing side of the equation.

to take more shared savings for our customers. And as Jeff said about the example of Lanard, this is where we are going in with a preposition, matching the market, getting the competition, and then adding more value to our customers who some of them are spending over $100 million in their employee benefits on the medical side.

So there are upsides on the shared saving as we bend the cost curve through Containment of an emergency room visit excessive Visit for both chronic and an episodic care. That's where the margin improvements will also come apart from what just Is yeah, so so just put it right just remember last quarter we were 47 48%

those in-house which we are planning throughout the course of this year and obviously end of 24, that will be split right. It won't all show up in the cost of sales lines. So we see in the next 12 months returning back to you know our normalized

enterprise gross margins which have been running in the, you know, that 50% range. Got it. Thanks for that, Koller. And then last question for Jeff, you mentioned or alluded to potential business combinations in enterprise. Can you touch on just maybe be it the importance of scale or capabilities like how do you take

what some of the momentum you have in enterprise and what could even elevate it further through any potential combinations? Yeah, that's a good question. We've learned a lot through this strategic review and if I had to quickly summarize it, I would say that enterprise is the core.

And what makes up the core is the digital front door, the therapeutics, the advocacy, and the home care, similar to let's say what Lenar bought. And it's really valuable and we're building pipeline and we've got great clients and we're showing renewals and we're growing our big accounts. And we're excited about that. And we see, we're not just looking at the strategic review on what are assets that we can...

on.

is two. One is how to go, how to create scale. That's the big theme of share care is how do we get the scale and how do we contribute meaningfully bit off. And so we're looking at potential business combinations that could get us there. And then the second is is you know there's also opportunities for acquisition for logo acquisitions where we think

our superior platform could replace other platforms that would drive meaningfully but die.

And so those are kind of two ends of the spectrum as it relates to the enterprise that we've been spending a lot of time on and are excited about. And the folks that we have conversations with, I think, really appreciate the capabilities that we have and the clients that are there.

And then the theme of scale, because I think digital health in general or health tech suffers from scale and subscale. And that's something that Sharecare really wants to try to lead the path on is let's get digital health to scale. And likely through a combination.

Jeff, I also had a question relative to the review and maybe to focus on your comments on provider. It sounds like there was a comment around validating strategic value. Also a comment on the potential value of a sale.

Can you remind us what your considerations are? And I know there's an element of ongoing access that is key here. What are you looking for to be able to go forward with the sale?

Well, one is we want to maximize price. So how do we maximize price? That's one consideration. The second consideration is how do we maintain data rights? And potentially if we're to sell it, are there partners to sell it to?

place it. And so those are the three. And we feel like we're getting good validation that we can get a good price. People value what we've built over the last several years. And we believe that there's partners out there that would get creative with us on data rights and data products.

And then we're looking at things within Enterprise that if we were to buy them, could we use the proceeds of provider to have less dilution or to make that acquisition happen.

That's helpful. Maybe I'll follow up there. Have you seen a significant shift in evaluations? It does feel like we're seeing quite a few digital health transactions announced over the last two months. Does it feel like sellers are... that?

That's helpful. Maybe a follow up there. Have you seen a significant shift in valuations? It does feel like we're seeing quite a few digital health transactions announced over the last two months. Does it feel like sellers are set up at markets?

I feel like there's definitely, you're starting to see both, you know, obviously first in the public markets, you know, pushing the pullback. And I think now in the private markets, and a lot of it depends on what their cash position is. And so if they're sitting on a good cash position, you know, they don't want to come off valuations.

in the first conversation. And if there's a need for cash, then that's a different conversation. But I definitely think it's a buyer's market. And then the last question on consumer, I know that was always a-

the business that you were thinking more 23 or further into 23 as the macro remains a challenge, what are your thoughts on timing for that asset?

You know, it's a really important asset for us because it, you know, like for example, when you register for Sharecare, the first thing you do is you take the RealAge test and that's one of the ways we get so many people to onboard. And so instead of doing a health risk assessment from your HR department, you come in and you learn your RealAge and we have this really great content that we then...

with cookies going away, this idea of a zero-party database, where I've got 100 million people, or I know their email, and they filled out 100 questions on RealAge, and they've given me permission to talk to them, is a huge asset. Whether we're helping our payer partners recruit members, or our hospital partners recruit patients, or us using that.

their advanced targeting to get more members to enroll in our programs. And so through this strategic review, we've had several conversations and know there's buyers of that business. And we don't think now is the right time to sell it financially because of where the market's at. But at the same time, we're also trying to understand it's not as simple as say provider will just give us the data rights.

There's a little bit more complexity here that still needs to be thought through. And we're also hopeful that it's going to bounce back. It's like, I mean, if you remember, what was 37% growth in 2020? 2021, you know, if you remember, Eric, that asset grew 36% organically. And then the market changed last year and went to essentially flat.

But we have a great team, we have a great asset. We have great optionality. And we got great optionality. So hanging on to that asset a little bit longer, we believe will only increase the value of that business. Would it be wrong to think that when you first announced this, there was a real focus on template.

and what you were just discussing around the core of enterprise. And today I'm hearing a little bit more that you want to make sure you have ways to redeploy and focus on EBITDA.

just discussing around the core of enterprise. And today I'm hearing a little bit more that you want to make sure you have ways to redeploy and focus on EBITDA. Is that a change in your view? Sure.

I don't think it's a change. I think it's an improvement. So we're basically saying that we've done this strategic review and affirm that yes, enterprises before and we're doing really well there and we need to double down there. We've affirmed that there's a market for provider.

on board or CTO. And then on life sciences, we've gone down the track to say, yes, there's buyers for that too. It's a little bit more complex to untangle it. But it's not growing right now. But we believe so much in the team in the asset we know it's going to grow in the future. And I can't do everything at once. I have the sequence things. And so if I had to prioritize what the sequence.

It would be get enterprise to scale, trade the provider asset to the right partner that not only provides money but strategic value. And then in life sciences, be in more of a position of strength by showing growth because we think that the team will achieve the growth. And if we're not getting the growth right now.

It's more macro issues than capability issue. Great color, thank you. Sure. The next question is a follow-up from Richard Close of Canaccord. Please go ahead.

Yeah, maybe just to follow up on that last set of questions. So you know, Jeff, you know, in terms of the sequence that you just mentioned. So should we think about like 2023, from a timeline perspective, you know, should we think about this being essentially a clean story as we

So basically if you think about what our goal is from today is like we wanted to convey the confidence of the topics that we've been talking about of here's where enterprise is, here's where life sciences, here's where provider is. We wanted to convey with confidence that we've got financial advisors and we have active conversations and this is a daily thing that we're working on of figuring out how do we take these.

puzzle pieces and unlock value in the best way and while that's happening is You know, there's a huge focus on profitability And so we're taking we've made big investments in sales We've made big investments in products and now we have to realize that cost savings so, you know we can improve our

our EBITDA profile and others. And so that's happening. And we've set a goal to say, hey, we're sitting here. You know, we've basically put guidance out that says we're booked. And yes, we believe that there are all kinds of good things are gonna happen throughout the year, like they always do. But this is what we're going with is what we're booked. And that we're gonna conclude this strategic review as quickly as we can.

And we're not right now if you said, well, where are you? I would say I'd say we're. Almost in the red zone. You know, like, you know, we're we're almost in the red zone and and it will definitely conclude in twenty twenty three. And we're working to give.

to finalize it so that we can give you complete clarity.

as we make progress throughout the year, but more importantly into the future.

but more importantly into the future. Okay, thank you.

This concludes our question and answer session as well as the conference. Thank you for attending today's presentation. You may now disconnect.

I.

Good day and welcome to the Sharecare fourth quarter and full year 2022 earnings call and webcast. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star then one on your touchtone phone. To withdraw from the question queue, please press star then two. On today's call, we have Mr. Jeff Arnold, Chairman and CEO , and Mr. Justin Ferriero, President and Chief Financial Officer, as well as Mr. Jaffray Muhammad, Chief Operating Officer, who will join for the question.

These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that will occur after this call.

Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the Risk Factor section of our Form 10-K for the year ended December 31, 2022.

In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures are listed in the slide below.

can be found in the press release that is posted on the company's website. Please note this call is being recorded. I would now like to hand the conference over to Mr. Jeff Arnold. Jeff, please go ahead.

Thank you for joining us today as we present Sharecare's fourth quarter and full year 2022 results. We reported revenues of $123.3 million and $442.4 million respectively, and adjusted EBITDA of $4.6 million and $15.8 million respectively. In our core enterprise business, we contracted over 900,000 new eligible lives for Sharecare Plus.

our new digital first advocacy solution, and 1.8 million new members for Care Links, our home health solution, and ended the year above our target KPI of eligible lives, which cost 4 million.

In our provider channel, which recently received a best in class distinction, we significantly grew our records processed in 2022 to 5.8 million.

In August of 2022, we announced our plan to conduct a strategic review of our business and have been working extensively with financial advisors to evaluate all potential options to maximize our share of value.

The process is ongoing and we have expected expanded it to include potential business combinations to complement our thriving enterprise channel.

which is on track to grow covered lives from 12.4 million members in 2022 to 12.9 million in 2023. In 2022, we won many new enterprise clients, including large employers, leading health systems, several payers, and government contracts, as well as expanded our Medicare Advantage members, which yielded millions of new covered lives.

Due to our investment in sales, we were able to increase the number of RFPs submitted in 2022 by 100%, resulting in an increase in our pipeline, which has grown 150% year over year.

Our account management is delivering high client retention and renewal rates with existing clients, including one of our largest CareFirst, the largest not-for-profit health plan in the Mid-Atlantic region, and expanding accounts with new capabilities which increase PMPMs and improve outcomes.

One example is on our corporation, one of the nation's leading home builders. We started as a wellness-only client and have strategically added our new product offerings, including digital therapeutics, digital-first advocacy, tech-enabled home care, and the Get Active VR program, creating meaningful results.

Since its launch, Sharecare Plus has been driving new client and PMPM growth, contracting for over 900,000 covered lives with Coke, Collier, and through our relationship with Carillon, which demonstrates the strength of our digital-first advocacy solution that integrates AI, benefits navigation, clinical engagement, virtual care, and chronic case management.

Enhance with our recently launched CDC approved digital therapeutic for diabetes prevention, new virtual model of our intensive cardiac rehabilitation program, Ornish Lifestyle Medicine, as well as our Get Active VR program. ShareCare Plus represents our innovative outcomes driven mindfulness based approach to comprehensive health management. For more information, clutter

On the home care front, Care Lakes continued to exceed growth expectations by adding 1.8 million Medicare-advantaged lives in fiscal 2022. In addition, we expanded our home care offering to deliver tailored care management programs and traditional care to high-risk populations, which result in improved experiences, member acquisition and retention, quality ratings, and cost savings.

As we have seamlessly integrated Care Links into our digital first advocacy solution, our home care capabilities also are providing a valuable differentiator for ShareCare Plus.

Additionally, we've identified approximately 16 million in annualized cost savings within our enterprise channel that we believe we can realize through global outsourcing and stream line in our product investments, contributing to our expectation of nearly doubling our just city bidot in 2023. These cost savings will be rolled out through Q2 and Q3 of this year.

where we expect to realize approximately 12 million of these savings in 2023. These savings will include operating and capitalized expense reductions, which support both the DAW expansion and our plan to become cash flow positive.

Moreover, the Strategic Review confirmed that our Life Sciences channel, given its expertise in consumer-driven healthcare, is a core and valuable differentiator to our enterprise offering, contributing advanced member targeting capabilities, a 100 million person zero party database, and an extensive library of award-winning content.

In fact, Sharecare was honored with a record-breaking 20 awards in the Fall 2022 Digital Health Awards Competition. In 2022, Life Sciences directly contributed $80 million in revenue and supported $258 million in our enterprise revenue. Lastly, the Strategic Review affirmed the value

profitability through global outsourcing and growing and retaining clients. We believe that that provider channel complements our other offerings and the use of proceeds remains a key consideration for any potential transaction.

The provider segment contributed $104 million in revenue in 2022. And through our previously discussed globalization efforts, we are tracking to deliver $14 million in annualized cost savings, which began in Q1.

2023, and we expect to realize approximately $10 million of operating expense reductions within the year. This is in addition to the previously mentioned cost savings of $16 million in Enterprise.

This in-depth strategic review has affirmed that our unique combination of enterprise assets, life science capabilities, and provider solutions aligns well with the future of value-based care and data interoperability mandates. As we focus on growth, high margins, and maintain a strong cash balance, we are well positioned as a leading digital health platform.

This approach will enable us to deliver increased value for our shareholders while ensuring continued growth and success in the evolving healthcare landscape. While Justin will walk through the specifics of our guidance for Q1 in 2023, I want to emphasize that we have built our projections for the Enterprise channel based solely on the business currently under contract.

and model growth through the provider and life sciences channel in line with their 2022 growth rates. Our achievements in 2022 are a tribute to our passionate and talented team, and we look forward to building on this momentum in 2023 and beyond. Thank you for your ongoing support and confidence in Sharecare. I will now turn it over to Justin.

Thanks, Jeff, and to everyone for joining this morning. As Jeff shared, we delivered strong results for the fourth quarter and full year 2022. All share the full year highlights, provide a look at the fourth quarter results, and then outline our outlook for the first quarter and full year 2023.

Our full year revenue grew 7% to $442.4 million from $412.8 million a year ago, and adjusted EBITDA was $15.8 million versus $27 million a year ago. We also ended the year in a strong financial position with $182.5 million in cash on our balance sheet. 21 days to go.

and over $233 million in available cash. Year-over-year growth was impacted by sunsetting health security, resulting in a revenue reduction of approximately $37 million and an adjusted EBITDA reduction of approximately $20 million over the prior year period. When normalizing for the previously announced sunsetting of health security, our overall year-over-year growth was 18%

and adjusted EVA DA growth was over 100%. Our fourth quarter grew 4% to 123.3 million from 118.5 million a year ago. Growth in the quarter was driven by year over year increases in eligible lives on the platform and an increased number of records retrieved. Adjusted EVA DA for the quarter was 4.6 million compared to 5.4 million a year.

However, we believe these investments will drive long-term value to our shareholders and will reduce over time.

Similar to our full year results, year-over-year growth for Q4 was also impacted by our decision to discontinue health security, which resulted in a revenue reduction of approximately $10 million and over $4 million in adjusted EBITDA over the prior year period. From normalizing for the discontinuation of that offering, our fourth quarter was a major

$111 million to $113 million, and an expected increase of approximately 11% over Q1 fiscal 2022 using the midpoint of the range.

to $113 million, and an expected increase of approximately 11% over Q1 fiscal 2022 using the midpoint of the range, and an adjusted EBITDA of $1 to $2 million.

As a reminder, this includes the seasonality in our life sciences business, whereby the first quarter is our lowest revenue quarter and ramps as we move through the year. Our full year 2023 revenue guidance is $450 to $460 million and adjusted EBITDA is $25 to $30 million. Our full year 2023 revenue guidance is $250 to $30 million.

To unpack that, we have added over 750,000 lives through our Carillon contract. Over the course of this year, we are working with Carillon to deliver Sharecare Plus at a lower PMPM, reducing revenue but providing a higher margin solution by leveraging Sharecare's digital capabilities. We have delivered the EBITDAG guidance in similar 2022.

we expect 80% of our adjusted EBITDA to be generated in the second half of the year. This is a result of the optimization initiatives largely taking effect in Q3 and Q4, as well as seasonality in our life sciences and provider businesses where we see higher growth in the second half of the year. As we continue to drive efficiency in our business throughout 2023,

we expect significant improvement in our adjusted EBITDA margins compared to 2022. Our full year guidance assumptions reflect the following. Increase in eligible lives from 12.4 million to approximately 12.9 million by year-end fiscal 2023, a 4% increase over fiscal 2022. As a reminder, the 12.4 million includes growth in lives from Sharecare Plus, which we will receive the benefit of a full year of contract delivery in fiscal year 2023. Increase in records retrieved to 6.5 million records.

a 12% increase over fiscal 2022, capital expenditures of approximately $30 million.

To close out my comments, we are confident that the 2022 investments in our sales organization and new product innovation will deliver top-line growth in 2023 and beyond.

At the same time, we will begin to realize the financial benefits of approximately $30 in annualized cost savings as we progress throughout 2023.

As Jeff said, we are grateful for your ongoing support and confidence in Sharecare. Thank you all for joining us today. We'll now open the call to your questions. We will now begin the question and answer session. To ask a question, you may press star 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.

To withdraw from the question queue, please press star then 2. The first question is from David Larson of BTIG. Please go ahead.

Hi, can you talk a little bit about the 1Q revenue expectations? Why would there be a significant sequential decline from 4Q to 1Q? And then can you also talk a little bit about the Caroline deal? Is the PMPM rate for those lives coming in at the range that you had expected and any color around that would be helpful?

I guess the revenue guide for 23 looks a little bit lower than what we were expecting. Maybe just talk about that on the enterprise side. Thank you. Thanks, Dave. It's Justin. So the Q1, if you remember, Q4 is typically a dip in Q1 because Q4 is our strongest.

quarter for life sciences. And typically, there's an $8 to $9 million dip going from Q4 to Q1. So that's normal. We've also factored in, as we talked about, none of this has been finalized. But we are going to show how these stability sessions. Again, I'll continue that talk really soon.

We were fortunate to close the relationship with Carillon. And now what we're doing through the course of this year is working with them to tech enable that business and you know, there'll be trade-offs. So ultimately we think there'll be less revenue, a lower PMPM, but a higher margin business as we go through the year.

So that's why we factored in a little bit of a dip in the enterprise revenue in Q1 as well. Yeah, I would just add, it's a large contract with Carillon, and the customer base is becoming broader, and some customers have less high touch services, so it's less PMPM.

And then as it relates to your question on revenue guidance for the year, we made a decision to only guide to what's booked in Enterprise, which is not what we've historically done. So we have taken out any new logos that we might add during the year, any op-sells, any license that does not

any cross cells and any upside. Yeah, and maybe I'll just add one other thing, Dave, is that just when you look year over year, it's quite positive. You know, our guide is 11% higher than where we were in Q1 of 2022.

any cross cells and any upside. Yeah, and maybe I'll just add one other thing, Dave, is that just when you look year over year, it's quite positive. Our guide is 11% higher than where we were in Q1 of 2022.

Great. And then can you talk about like growth by division, what your expectations are for 2023? I think what I heard was provider lives are expected to be up pretty nicely in 2023. Did I hear 20% or provider records? Just any color on the growth rates by division would be helpful. Yeah. No, no. You heard around 12%. So,

the provider we think will grow similar to last year which is approximately in the 10% range 10 to 12 percent. We're guiding you know if you remember life science last year all the industry had a difficult time and so we're looking at the life sciences business is really flat just a little bit of growth and then as Jeff just said we're we're guiding on enterprise to what's booked that is new

But we're going to take a conservative approach and only guide to where we're booked today.

Okay, so on the consumer side, I think the whole industry is facing a slowdown. Ad revenue is under pressure. There's the risk of a recession, so belts are tightening across the board. So quite frankly, that's in line with what's going on in the market. And that makes sense to me on the provider side, looks like very healthy growth. provider records expected to increase 12% year over year in 23, despite all the pressures that hospitals are under.

And then on the enterprise side, it's what's booked right now. Um, and maybe the PM PM rate on Carolina is coming in a little bit lower than expected for now. Can you talk a little bit about how many more lives there are that you could potentially sell into Elavance and Caroline? Um, I mean, it's great. You have a couple hundred thousand lives there, but it's my understanding that this is kind of just the beginning. Is that right? Yeah. Yeah. So we have over 500,000 covered lives at the start.

And so we're out of the gates, we think, really strong with a new offering. And that's across multiple clients. And we do see growth coming from that partnership. And we're extremely focused on the execution of how do we improve the margin, how do we price the PMPMs the right way to the different clients, leaning with a more digital-first approach.

So, just to give you a little color on that, it's 500,000 plus multiple clients with different approaches to each client based on the different services that we're offering. And we believe that we're just getting started with that partnership.

Okay, and then just one more for me and I'll hop back in the queue. I think you mentioned that the pipeline is up, could you say like 100% year over year and the number of RFPs are up around 100% year over year, any color on what impact sort of the volatility in the banking sector that we're seeing is having and

It seems like the labor market is still very strong, but people are a bit worried about the risk of a slowdown. Is that having an impact on the sales process? Just any color there and timing for deals? Yeah. Yeah. I think when you kind of think about our enterprise sales is, one part of our strategy is we have very large clients that we're always working with to expand with. I think Caroline's a great example of that. On the MA side, we have good examples there as well.

And then the second piece of our strategy is we're investing in new salespeople. We have built an unbelievable sales team. We had a big sales meeting last week. I was with all of them. And so they're out bringing the Cokes and the Colliers on, leading with a Sharecare Plus pitch and building a big pipeline and giving real confidence to us that our core offering of the digital front door, the digital therapeutics, the advocacy and the home care ismus for mobile giving.

is there's a big demand for that and it's differentiated as having it all in one place. And then you complement what I just said there and you look at our account management, they're doing an amazing job on client renewals. I mean CareFirst is our second largest client, it's tens of millions of dollars and you know we're successfully able to renew them for multi-year. And then lastly when I look at like a Lennar Homes, it's kind of like what our dream client looks like, it's a land and expand.

all those deals in a similar way because some of them are complex and take a little bit more time and some of them are straightforward that we can come in with a digital front door and land and expand over time. But the talent's there, the capability's there, the pipeline's there and they're converting. And we expect a big Q1.

this year for next year. And we're already we're already have some big wins under under the tent that we haven't that you know, we haven't mentioned mentioned on this call. Okay, and then what kind of lift could there potentially be on the enterprise side in terms of you booking deals now in 2023? That would impact 23 that isn't in the guide? Could you book another

a couple hundred thousand lives, 5%, 10%. Do we have mid-year starts? Isn't that kind of normal? We do. And that is all possible. But we're taking the approach that we would like to keep with our guide. And that's potential upside.

But yes, historically we have brought on new customers, like for example, Carillon in the latter half of last year. But we'd like to take a keep with our conservative guide and those could be upside. Yeah, and what I would say the way we think about that internally is

Yes, there's the potential for new logos and we've seen that historically in the past, not in the guide. Yes, there's always potential for more upsells within current clients. That's an active conversation account management has every day with our clients. That's not in the guide. And then one of our strengths is big deals.

And so what we learned last year on Carillon is that we had signed the SOW early in the year with an expected start date and it just took longer. And so, you know, we're we're tracking on some on some other large opportunities, but we're being conservative and saying, let's think about that for 2024, but let's work on it to make it happen in 23. Okay, and just one last question, I'm sorry, but from Elle Vance's point of view, every time I hear them speak, all I hear them talk about is digital first, expanding value based care,

expanding the number of lives in upside and downside risk. And you gotta have technology solutions to be able to deliver that. Has there been any change in that kind of dialogue or viewpoint from their perspective that you're aware of or not? No. No, I mean, I think shared care can play an enablement role in all those types of ideas. And we're involved in many of those conversations and how we can...

help and participate and Jeffrey who's in the room with us on the call leads that effort for us and You know, I don't know if you want to add any color to that. Yeah, you said it right Jeff and David The opportunity exists on both side of the business from an event standpoint the business for fully insured as well as for Capitated risk business. So to Jeff's point we are engaging some of the conversation

on either side and it does play a big part in what we are doing. Okay, great. And I would imagine from Elavance's point of view, in order for them to retain their existing membership and win new enterprise clients, the Sharecare solution is certainly a key consideration that a lot of their prospective clients and existing clients have. All right, thanks very much. I will hop back in the queue.

Okay, thank you. The next question is from Richard Close of Can I Court Genuity? Please go ahead.

Yeah, thanks for the questions. Justin, can you just clarify, I think you said Enterprise is expected to be down from fourth quarter to first quarter. So I guess I want to understand why specifically it would be down.

If you guys are generating revenue on a per member per month basis. Why would it go down?

That is all around the carillon discussion. So we are taking a conservative approach. Nothing's been finalized, but as you know, came out in our opening remarks, that's a fantastic partner for us.

And what we're working on with them is to tech enable that business. As part of that, the conversations include potentially less revenue, but a higher margin business. And nothing's finalized, but you know, in the theme of our guidance for this year is we want to be conservative.

there's a chance that that PMPM could reduce. And so we have built that into our forecast. But at the end of the day, the number of lives aren't gonna reduce. The momentum with that client hasn't reduced. We've actually added an additional

health plan in Q1 with Carillon. And so we see that relationship only expanding. However, there's a large client inside of that relationship that we're working on to tech enable, and it'll have pressure on the PMPM, but ultimately we believe better gross margins. So that's why there is a little bit of pressure in Q1.

Yeah, so just to explain what we mean by tech-enabled is provide less services, physical services, high touch services with more digital services, which for that particular client would reduce the PMPM. Yeah, but I still don't understand why sequentially your revenue would go down. Was there any one-time revenue in enterprise in the fourth quarter?

I mean if you have more lives you got more revenue, right? Because we we are taking a conservative approach on that particular client. It hasn't been discounted. It wasn't discounted in Q4, but we believe that the likelihood

of us moving in this direction with this particular client is why we're gonna guide that way. So if you have the same number of lives against a client and the PMPM is higher in Q4 than it is in Q1, that's why it reduces. You're having a price cut, essentially. OK.

And then by the way, I think that's not finalized and and so I can serve yes there. Yeah, okay, that's fine So, you know, I think it was at a conference early in in January

You guys talked about life sciences. The selling season was pretty good. You felt pretty good on the 23, the selling season at the end of 22. So I'm just curious, is it just being conservative to assume life sciences is flat for 23 because it seemed like you guys were pretty...

issues in life sciences, you know, is real. I did a talk last week in New York at one of the big ad agencies and that was the topic of the day. It was kind of like what's the environment look like and when's the bounce back going to occur? Is it this year or not? But we have a great team.

We're seeing some positive results, as like I mentioned yesterday. We typically have a really great Q4, but we thought because we're taking a conservative approach as we go through the strategic review and other things that this was the holding serve was the right way to think about it for now. Yeah. And just to reiterate some of those comments. So when we were coming back strong on those calls you were referring to.

was it's really kind of first half. You know, that's when you're selling, the selling season, primarily around the first half of the year. The reason why we want to be conservative is as you know, is that about 35% of this business is realized in the fourth quarter. And so, until we have really solid view on what.

Q4 is going to look like. We think the prudent approach is to be conservative until Q4. And have more visibility throughout. Yeah, we'll have more and more visibility on how Q4 is going to come in. Okay. With respect to 11th and or the old Anthem, I think, you know, back when you guys originally de-spacked, you talked about there was a 10 million lives opportunity with

elements in terms of clients they had where, you know, there were multiple, you know, payers, I guess, insurers in those employers. Can you just talk to us a little bit about like that 10 million number and, you know, maybe where you guys are with, you know, upselling or cross or penetrating that base? Yeah.

Sure, yeah, so I think, you know, this is an important relationship and it's multifaceted. So one part of the relationship is we provide AI services to Anthem and that's going well and Jeffrey leads those efforts for us, but that's an important part of the relationship. And then the second important part of the relationship was, you know, they invested in Sharecare and we had to show them that we could take...

you know, how could we bring on a big important client like Coke Industries and that is one of their clients and be able to have flawless execution with a new product offering. So, you know, we launched Sharecare Plus to Coke.

in partnership with Anthem that would fall in that national accounts category that you're talking about and have done really well rolling that out starting in January . So that builds confidence. And then we're starting to get better muscle memory on how to include Sharecare into national account RFPs. We're getting better on how to think about things like deal desk, where, you know, how do we approach clients separately or together.

And we expect that more business is going to come over. And it already has through Carillon. From where we started in Q4, we've already onboarded new, big, important clients. Justin mentioned one payer. There's others. And so we think that we're on a good path. Okay. And then my final question, I'll turn it over. Okay.

Apologize for asking too many, but on Care Links, I just want to better understand the 1.8 million new members that I guess you can target with Care Links.

How does that compare? I think when you bought it in 2021, August of 2021, you said you had about 1 million MA lives in the pool. I'm not sure if it's apples and oranges, if you could just talk to us a little bit about. Did you generate the $35 million from Care Links that you expected at the time of the acquisition for 2022?

essentially you went from 300,000 MA lives to 1.8 million at the end of 2022? Yeah, and it'll be over 2 million this year.

Okay, all right, I'll jump back in the queue. Thanks. Thanks. The next question is from Craig Hettenbach of Morgan Stanley . Please go ahead.

Following up on the lower PMPM at Caroline, can you just talk about does this shape your view of the broader opportunity set? Do you think it's specific to them or just how you're thinking, take a picture on the enterprise side, an opportunity?

So what we believe is special about Sharecare Plus is it's a digital first offering. And what we mean by that is it's self-service. So anything that I could do with an advocate, I should be able to do directly within the platform myself. And that's not, doesn't cost as much obviously to execute that type of experience. And so there's certain clients that, that

will gravitate to that for certain reasons. Maybe they've got the right demographic of the population or maybe there's cost constraints. We have an example within the Carillon partnership where there was some cost constraints and there was the desire to get to digital first. And so, you know, so that particular client were moving down the path of the more digital offering with the less high touch services, which is gonna reduce that particular client's PMPM.

of things. We like it because it's higher margin and it's easy to turn on. I mean, I think I've shown it to you in the past. Literally, it's like turning Wi-Fi on the little blue button shows up and all the data is there. And so I see it as an advantage in that we as a go-to-market, that we've got both offerings and depending on the client, we tailor the offering to fit the need.

As a follow-up, Justin, you mentioned just some infrastructure support for enterprise. Can you maybe touch on it on an intermediate to longer-term basis, where you think ultimately gross margin will shake out and what the implications are for that?

As a follow-up, Justin, you mentioned just some infrastructure support for enterprise. Can you maybe touch on it on an intermediate to longer-term basis, where you think ultimately gross margin will shake out and what the implications are for that? Yeah.

So we're making significant investments to support largely bringing on 900,000 lives. If you just put that in perspective, that's a massive lift between Q4 and Q1. And so we overinvested to make sure that our delivery for those customers was flawless, and it has gone extremely well.

We mentioned on the last call that we think that this business can be a mid 30s gross margin business long term. And that's what we believe. So that's ultimately how we'll model this out. In order to deliver.

We had to use outsource partners, which is why it's showing up in the cost of sales line. But over the course of this year, we'll optimize, we'll start to bring more of those resources in-house. And so you'll see the gross margin begin to expand through the course of this year. And ultimately, our belief is that this is a 35%

plus gross margin business force as you look to 2024 and beyond. Jaffers, anything like that to that? Enterprise or blended? That's enterprise. No, no, no, that's just I thought you were referring to the advocacy offering. So that's just around the share care plus like what we've been talking about here with Caroline. So enterprise as a whole we believe will be a you know back to where we were which is in the

is in the 50 to 55% long term. Yeah, Justin, you covered all. One thing which I would add is the asset that we have accumulated in terms of the analytics and precision on the technical side, that give us an ability on the pricing side of the equation to take more shared savings for our customers. And as Jeff said about the example of Lanar, this is where we are going in with a preposition, matching the market, getting the competition, and then adding more value to our customers to some of them are spending over 100 million.

resources that support those 900,000 new lives in the cost of sales line. As we bring those in-house, which we are planning throughout the course of this year and obviously into 2024, that will be split. Right? It won't all show up in the cost of sales line. So…

we see in the next 12 months returning back to our normalized enterprise gross margins, which have been running in that 50% range. Got it. Thanks for that, Collar. And then last question for Jeff. You mentioned or alluded to potential business combinations in enterprise. Can you touch on just maybe be it the importance of scale or capabilities? Like how do you take what

some of the momentum you have in enterprise and what could even elevate it further through any potential combinations? Yeah, that's a good question. We've learned a lot through this strategic review and, you know, if I had to quickly summarize it, I would say that, you know, enterprise is the core and what makes up the core is the digital front door, the therapeutics, the advocacy and the home care, similar to say what Vanar bought.

And it's really valuable and we're building pipeline and we've got great clients and we're showing renewals and we're growing our big accounts and we're excited about that. And we see, we're not just looking at the strategic review on what are assets that we could sell and what are those worth, but we're also looking at what could we buy.

and what would we use the proceeds for if we were to sell something, say like provider. And so there's a lot of activity going on right now of business combinations centered around the core of enterprise. And the theme I would say that we're focused on.

is two. One is how to create scale. That's the big theme of Sharecare is how do we get to scale and how do we contribute meaningfully but not. And so we're looking at potential business combinations that could get us there. And then the second is, there's also opportunities for acquisition for logo acquisitions where we think our superior platform could replace other platforms that would drive meaningfully but not.

And so those are kind of two ends of the spectrum as it relates to the enterprise that we've been spending a lot of time on and are excited about. And the folks that we have conversations with, I think really appreciate the capabilities that we have and the clients that are there. And then the theme of scale. Because I think digital health in general or health tech suffers from scale and subscale. And that's something that Sharecare really wants to try and allowed me to work on as an organization. So that's definitely something that Sharecare is excited about. Any other comments? David is still standing, but he's got the floor. I'd like to thank Hyd that Peter Hayden and theThank you all for joining us. And I'm very excited, I think that if you walk me through it, Ms.aren has certainly discussed it, because we hear

lead the path on is let's get digital health to scale. And likely through a combination.

The next question is from Eric Pertscher of Nefron Research. Please go ahead. Is AM single-stageRON an analogue interaction between the eye My observatory monitor can be DARK or

Thank you, Jeff, I also had a question relative to the review and maybe to focus on your comments on provider. It sounds like there was a comment around validating strategic value. Also a comment on the potential value of a sale.

Can you remind us what your considerations are? And I know there's an element of ongoing access that is key here. What are you looking for to be able to go forward with the sale? Well, one is we want to maximize price. So how do we maximize price? That's one consideration. The second consideration is how do we maintain data rights?

and potentially if we were to sell it, are there partners to sell it to that could increase the amount of data that we could have access to and maybe potentially together create new products, data products. And then the third consideration is use of proceeds. So if I lose that asset and I have that revenue and even how do I replace it? And so those are the three and, and, and.

And we feel like we're getting good validation that we can get a good price. People value what we've built over the last several years. And we believe that there's partners out there that would get creative with us on data rights and data products.

And then we're looking at things within Enterprise that if we were to buy them, could we use the proceeds of provider to have less dilution, or to make that acquisition happen.

That is helpful. Maybe a follow-up there. Have you seen a significant shift in valuations? It does feel like we have seen quite a few digital health transactions announced over the last two months. Does it feel like sellers are at market? Yes.

That's helpful. Maybe a follow-up there. Have you seen a significant shift in valuations? It does feel like we've seen quite a few digital health transactions announced over the last two months. Does it feel like sellers are at market?

I feel like there's definitely, you're starting to see both obviously first in the public markets, a push, a pullback. And I think now in the private markets, and a lot of it depends on what their cash position is. And so if they're sitting on a good cash position, they don't wanna come off valuations in the first conversation. And if there's a need for cash, then that's a different conversation. But I definitely think it's a buyer's market. And then the last question on consumer.

you come in and you learn your real age and we have this really great content that we then deliver you that helps you be better educated to lower your risk.

then we tie incentives to that like taking your real age and lowering your risk and so it's a it's a important component and it's also very tightly woven into life sciences so we know you know we have a really unique asset in life sciences and you know with cookies going away this idea of a zero party database where I've got a hundred million people or I know their email

and they filled out a hundred questions on RealAge and they've given me permission to talk to them, is a huge asset. Whether we're helping our payer partners recruit members or our hospital partners recruit patients or us using that, their advanced targeting to get more members to enroll in our programs. And so through this strategic review, we've had several conversations and know there's buyers of that business.

And we don't think now is the right time to sell it financially because of where the market's at. But at the same time, we're also trying to understand it's not as simple as, say, provider will just give us the data rights. There's a little bit more complexity here that still needs to be thought through. And we're also hopeful that it's going to bounce back. It's like, I mean, if you remember, what was it, 37% growth in 2021? You know, if you remember, Eric, that asset grew 36% organically. And then the market changed last year and went to essentially flat.

But we have a great team, we have a great asset. We have great optionality. And we got, yeah, great optionality. So hanging on to that asset a little bit longer, we believe will only increase the value of that business. Would it be wrong to think that when you first announced this, there was a real focus on simplification and what you were just discussing around the core of enterprise. And today I'm hearing a little bit more that you want to make sure you have ways to redeploy and focus on EBITDA. Is that a change in your view? Sure.

I don't think it's a change. I think it's an improvement. So we're basically saying that we've done this strategic review and affirm that yes, enterprise is the core and we're doing really well there and we need to double down there. And we've affirmed that there's a market for provider and it's easier to detach from Sharecare and we think we could maintain data rights, which is why we're in the business to start with and then we're getting that more profitable too because we've started this major, you know.

globalization with Jaffrey coming on board and Harsha coming on board, our CTO. And then on life sciences, we've gone down the track to say, yes, there's buyers for that too. It's a little bit more complex to untangle it, but it's not growing right now. But we believe so much in the team and the asset, we know it's going to grow in the future. And I can't do everything at once. I have to sequence things. And so if I was, if I if I had to prioritize what the sequence, it would be get enterprise to scale.

trade the provider asset to the right partner that not only provides money but strategic value. And then in life sciences, be in more of a position of strength by showing growth because we think that the team will achieve the growth. And if we're not getting the growth right now, it's more macro issues than capability issue. Great color. Thank you. Sure. The next question is a follow-up from Richard Close of Canaccord. Please go ahead.

Yeah, maybe just to follow up on that last set of questions. So. You know, Jeff, you know, in terms of the sequence that you just mentioned, so should we think about, like, 2023 from a timeline perspective. You know, should we think about this being essentially a clean story as we roll into 2024?

Just maybe some thoughts on the timing of you know finalizing what you're trying to do here with the review and Yeah offloading and and whatnot You know, that's a great question so so basically if you think about what our goal is from today is like we wanted to Convey the confidence of the topics that we've been talking about of here's where enterprises. Here's where life sciences Here's where provider is

We wanted to convey with confidence that we've got financial advisors and we have active conversations, and this is a daily thing that we're working on, figuring out how do we take these puzzle pieces and unlock value in the best way. And while that's happening, there's a huge focus on profitability. And so we're taking, we've made big investments in sales, we've made big investments in products, and now we have to realize that cost savings.

so we can improve our EBITDA profile and others. And so that's happening. And we've set a goal to say, hey, we're sitting here, we've basically put guidance out that says we're booked. And yes, we believe that there are all kinds of good things are gonna happen throughout the year, like they always do, but this is what we're going with is what we're booked. And that we're gonna conclude this strategic review as quickly as we can. And we're not right now if you said, well, where are you? I would say, I'd say we're, we're, we're, we're, we're,

you know, we can improve our EBITDA profile and others. And so that's happening. And we've set a goal to say, hey, we're sitting here, you know, we've basically put guidance out that says we're booked. And yes, we believe that there are all kinds of good things are gonna happen throughout the year, like they always do. But this is what we're going with is what we're booked. And that we're gonna conclude this strategic review as quickly as we can. And we're not, right now, if you said, well, where are you? I would say, I'd say we're almost in the red zone.

You know, like, you know, we're almost in the red zone, and it will definitely conclude in 2023. And we're working to give, to finalize it so that we can give you complete clarity as we make progress throughout the year, but more importantly into the future.

Okay, thank you. Sure. This concludes our question-and-answer session, as well as the conference. Thank you for attending today's presentation. You may now disconnect.