Q4 2022 Foxo Technologies Inc Earnings Call

Speaker 2: Good afternoon and welcome to FoxO Technology's fourth quarter and full year 2022 business update call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded.

Speaker 2: I would now like to turn the call over to Asha Branch. Thank you. Please go ahead.

Speaker 2: Thank you, operator. Hello, everyone, and welcome to the Foxxo Technologies 2022 business update call. On this call, we will recap our activities in 2022 and provide an overview of the company's strategy for 2023 and beyond. Before management begins their formal remarks, we would like to remind everyone that...

Speaker 2: From those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation and undertaking to update forward-looking statements to reflect circumstances or events. This concludes today's webinar.

Speaker 2: that occur after the date before looking statements are made, except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business.

Speaker 2: as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption, risk factors in our filings. You may get Foxhose Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov.

Speaker 2: I would also like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Fox's website. Now, I will turn the call over to Fox's Interim CEO and Chief Technology Officer, Tyler Danielson. Tyler?

Speaker 3: Thank you, Aisha, and thank you, shareholders, for joining us today. We're going to cover a variety of topics that will highlight the opportunities that lie before us.

Speaker 3: how we plan to capture that opportunity, and the financial and operational steps we have taken to do so. I feel great about the future we have been working towards and can't wait to share with you what we have been up to.

Speaker 3: This being our inaugural call as a public company, I would like to spend some time reintroducing you to our story by briefly discussing FOXO as a leader in commercializing epigenetic biomarkers of health and aging, and their application in the life insurance industry.

Speaker 3: At its core, Boxo is a technology and science company focused on optimizing human health span and lifespan. Many, if not most, of the leading causes of death occur as we age, and unsurprisingly, there are scientifically identifiable biological mechanisms behind this.

Speaker 3: As we begin to understand the biological science behind aging, we may, in fact, be able to stave off disease, stay healthier for longer, and live longer. That's the basis behind longevity science and what we are pursuing.

Speaker 3: We are commercializing an area of longevity science called epigenetics, which is the science of gene expression.

Speaker 3: As some of you may already know, DNA, or the human genome, has been referred to as the blueprint for life.

Speaker 3: And these blueprints are drawn up when you're born. Brown hair, green eyes, tall, short, and a million different combinations of the sort.

Speaker 3: Epigenetics, how our genes are expressed, can change in response to aging, environmental factors such as sun exposure and pollution, and lifestyle factors such as smoking and drinking).

Speaker 3: This natural fact serves to explain why two genetically identical twins can have dramatically different health and wellness outcomes as they age. Fox's unique case for this science lies in identifying patterns of DNA methylation or gene expression that correlate to the very impairments that life insurance underwriters are trying to assess. Fox News is produced by the U.S. Department of Health and Human Services, the U.S. Department of Health and Human Services, and by the U.S. Department of Health and Human Services.

Speaker 3: Historically, insurers have obtained these clinical biomarkers through numerous and rather invasive collection methods, such as blood and urine specimens.

Speaker 3: and/or medical records.

Speaker 3: And they currently use legacy technologies to price risk. Simply put, the life insurance industry is ripe for change. And that's what we're working towards: the disruption of a trillion-dollar industry.

Speaker 3: Using artificial intelligence and machine learning, we aim to decipher these epigenetic patterns in clinical biomarkers to gain biological insights into individuals based on a single biological sample - a simple, non-invasive saliva sample from males.

Speaker 3: To avoid mincing words, spit in a tube, and our technology can potentially replicate decades of uncomfortable, annoying invasions of the customer's life, while at the same time providing insurance companies with the same, if not better, data with which to price their policies.

Speaker 3: We believe that this technology can revolutionize the insurance industry by aligning the interests of insurance companies, their agents, and consumers.

Speaker 3: Our goal is to achieve this by providing consumers and insurance companies with novel epigenetic data in reports that they can read and understand.

Speaker 3: The longevity report is already available as an addition to life insurance policies, and we are exploring plans to expand this longevity report to other use cases.

Speaker 3: Consumers are more in touch and interested in their health than ever before, and we are actively pursuing the multitude of applications for this science to benefit their lives.

Speaker 3: To be clear, the goal of our product is to provide the end consumer with new, important information such as their biological age and potential risk factors that may reduce their lifespan, telling them what they can do to not only live longer, but also lead a healthier life.

Speaker 3: Allow agents to better guide their customers through financial insights into whether they are aging slower or faster, and how to plan accordingly.

Speaker 3: Ensure that insurance companies have a clear line of sight to the risk they are pricing.

Speaker 3: Through science-based evidence that better informs their underwriting process.

Speaker 3: We believe we are adding value for all parties - customers, agents, and insurance companies - and that is something to be excited about. When I became interim CEO in November of last year, I decided to start the year off by holding ourselves accountable to a level of operational excellence that our stockholders deserve. The leadership team and I wanted to start off fresh by reviewing every aspect of our business.

Speaker 3: Improve human health.

Speaker 3: Life insurance is one example of a major industry whose goal of having you live longer and healthier is perfectly aligned with our longevity mission.

Speaker 3: If people die younger than expected, claims increase and their margins decrease. Longevity science serves as a conduit through which consumers' interests and insurance companies' interests become aligned.

Speaker 3: Along with an adjustment to our vision and mission.

Speaker 3: We set core values to guide our daily work as a team.

Speaker 3: We are a group of future-focused leaders who collaborate closely together and efficiently work through changes.

Speaker 3: Specifically, we plan to change and will work to adapt as we see fit to our customers, the market, and our future competitors.

Speaker 3: These are important, and we have been working since the end of 2022 to ensure that we have all the right people aligned with our overall direction. I feel we now have the right team in place to serve our priorities.

Speaker 3: We have reset all of our strategic goals, or more specifically, our Objectives and Key Results (OKRs).

Speaker 3: To align with these goals, we are reducing or outright eliminating much of the non-core work that we thought was taking away from our most important objectives.

Speaker 3: Our strategic alignment allows us to focus on the most viable path forward.

Speaker 3: We have streamlined our organization.

Speaker 3: Reduced operating expenses, and we are a smaller team than we were six months ago.

Speaker 3: We realized that we couldn't do everything we wanted to do, as excited as we were about the ideas that we had.

Speaker 3: We realized that we couldn't do everything we wanted to do, as excited as we were about the ideas that we had. This meant aligning the team from the very top, on down.

Speaker 3: Every objective that anyone at Foxo is connected to moves the company in the same direction.

Speaker 3: We let go of things that didn't move us quickly toward revenue and reduce the risk of overexposing ourselves to a difficult market.

Speaker 3: Our narrow strategy is meant to go directly after what we've tested and learned in the market and know will work.

Speaker 3: With that said, I'd like to introduce our new Chief Operating Officer, Taylor Fay.

Speaker 3: Taylor has been with Foxxo since 2018 as one of the first five employees and is spearheading our short and long-term strategy planning and execution. I'll pass it on to him to discuss what we've been doing.

Speaker 3: 2018, as one of the first five employees, and is spearheading our short- and long-term strategy planning and execution. I'll pass it on to him to chat through what we've been doing. Taylor?

Thanks, Tyler. And thank you to everyone for being here today. I'm thrilled to be a part of this dynamic, hardworking team.

And I'm looking ahead to taking this company forward with a disciplined focus and excitement around bringing additional products to the market in 2023.

As Tyler noted, we have reorganized our workstreams around a much more focused OKR framework, so that we can guide the daily tactical progress of the team and connect that work to the overall focus of the company.

From a business standpoint, we see the use of a non-invasive saliva-based test as an industry-changing opportunity for life insurers.

This is our top long-term company priority.

And we want our resource use to reflect that.

One key challenge that we aim to manage is the cost of testing, and we see many opportunities to reduce it.

In collaboration with a major research institution, we have generated one of the largest epigenetic datasets, with decades of follow-up data on health and mortality measures.

We are now entering the analytical phase in collaboration with top academic scientists to accelerate research and further inform our product development activities.

In summary, the three core objectives for our business are: first,

Create an engaging customer experience that helps our customers live longer and healthier.

customer experience that helps our customers live longer and healthier lives...

1. Cell life insurance that is designed to keep you alive, and 3.

Insurance designed to keep you alive. And three, bring an underwriting tool to the market.

I will now turn the call over to our CFO, Ravi Patashnik, to discuss our financials.

Over to you, Robbie.

Thank you, Taylor, and hello everyone. I'll now recap our financial results for the year ending December 31, 2022.

For the year ended December 31, 2022, the net loss was $95.3 million, or $8.40 per share, compared to a net loss of $38.5 million, or $6.61 per share during the same period in 2021.

Increases in operating expenses drove nearly half of the increase in net loss, with a large portion related to equity-based compensation.

Non-operating expenses were responsible for the remaining change. These primarily related to the forward purchase agreement and changes in fair value measurements. Adjusted EBITDA provides additional insight into our underlying ongoing operational performance and facilitates period-to-period comparisons.

By excluding the earnings impact of interest, tax, depreciation, and amortization, investment impairment, non-cash change in fair value of convertible ventures, and equity-based compensation.

Management believes that presenting adjusted EBITDA is more representative of our operational performance and may be more useful for investors.

A reconciliation of net loss to adjusted EBITDA can be found in our annual report.

For the year ended December 31, 2022, adjusted EBITDA was negative $19.8 million, compared with adjusted EBITDA of negative $15 million during the same period in 2021.

We had substantial non-cash activities in both periods, primarily related to fair value measurements and equity-based compensation, including amounts related to the consulting agreement and other third parties compensated in stock.

Additionally, for the year ended December 31, 2022, a Just said EVA. includes an addback related to the forward purchase agreement, as this agreement was cancelled and represents a non-recurring charge related to capitalization activities.

Research and development expenses were approximately $3 million for the year ended December 31, 2022, compared to $4.9 million for the year ended December 31, 2021.

Selling, general, and administrative expenses for $27.2 million for the year ended December 31, 2022, compared to $10.3 million for the year ended December 31, 2021.

Operator: And. Good afternoon and welcome to FoxO Technology's fourth quarter and full year 2022 business update call. All participants are in a listen-only mode. As a reminder, this conference call is being recorded. I would now like to turn the call over to Asha Branch. Thank you. Please go ahead. Thank you, operator. Hello, everyone, and welcome to the Foxxo Technologies 2022 business update call. On this call, we will recap our activities in 2022 and provide an overview of the company's strategy for 2023 and beyond. Before management begins their formal remarks, we would like to remind everyone that... From those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation and undertaking to update forward-looking statements to reflect circumstances or events. This concludes today's webinar. that occur after the date before looking statements are made, except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business. as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption, risk factors in our filings. You may get Foxhose Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov. I would also like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Fox's website. Now, I will turn the call over to Fox's Interim CEO and Chief Technology Officer, Tyler Danielson. Tyler? Thank you, Aisha, and thank you, shareholders, for joining us today. We're going to cover a variety of topics that will highlight the opportunities that lie before us. how we plan to capture that opportunity, and the financial and operational steps we have taken to do so. I feel great about the future we have been working towards and can't wait to share with you what we have been up to. This being our inaugural call as a public company, I would like to spend some time reintroducing you to our story by briefly discussing FOXO as a leader in commercializing epigenetic biomarkers of health and aging, and their application in the life insurance industry. At its core, Boxo is a technology and science company focused on optimizing human health span and lifespan. Many, if not most, of the leading causes of death occur as we age, and unsurprisingly, there are scientifically identifiable biological mechanisms behind this. As we begin to understand the biological science behind aging, we may, in fact, be able to stave off disease, stay healthier for longer, and live longer. That's the basis behind longevity science and what we are pursuing. We are commercializing an area of longevity science called epigenetics, which is the science of gene expression. As some of you may already know, DNA, or the human genome, has been referred to as the blueprint for life. And these blueprints are drawn up when you're born. Brown hair, green eyes, tall, short, and a million different combinations of the sort. Epigenetics, how our genes are expressed, can change in response to aging, environmental factors such as sun exposure and pollution, and lifestyle factors such as smoking and drinking).

The increase was primarily related to stock-based compensation for third parties, amortization of our intangible assets and cloud computing arrangements, and implementation of our business plan, including efforts to support the long-term growth of our business.

One of our main initiatives has been to maintain financial discipline. As part of our business plan, we have simplified our operations.

and have taken actions to significantly reduce expenses, preserving capital. Boxel Life Insurance Company was divested, gaining us access to approximately $4.7 million that was previously held as statutory capital surplus.

We are actively seeking ways to further capitalize the company to execute our business plan, which Tyler and Taylor just detailed. That completes my financial summary. I will now turn the call over to Tyler for closing remarks.

Thanks, Robbie. We have been moving quickly to get the right strategy in place to increase adoption and grow revenue. We are also working hard on bringing more value to what epigenetic testing currently offers, and considering how, after multiple tests, we can show progress in a way that people can improve their lives both immediately and over time as they age.

We are very excited about epigenetic science and where it is all heading. While the insurance market has historically been slow to change, we believe we have a value proposition. We also know that the market will evolve, and we are actively looking for ways to adapt to our customers' needs and their agents who require our services.

We believe the opportunity here is very large, and we intend to go right at it.

Opportunity is very large here, and we intend to go right at it. Thank you, stockholders.

I'll now pass it back to the operator to close out the meeting. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Asha Branch: This natural fact serves to explain why two genetically identical twins can have dramatically different health and wellness outcomes as they age. Fox's unique case for this science lies in identifying patterns of DNA methylation or gene expression that correlate with the very impairments that life insurance underwriters are trying to assess. Fox News is produced by the U.S. Department of Health and Human Services, the U.S. Department of Health and Human Services, and the U.S. Department of Health and Human Services.

Asha Branch: Historically, insurers have obtained these clinical biomarkers through numerous and rather invasive collection methods, such as blood and urine specimens, and/or medical records. They currently use legacy technologies to price risk. Simply put, the life insurance industry is ripe for change. That's what we're working towards: the disruption of a trillion-dollar industry.

Asha Branch: By using artificial intelligence and machine learning, we aim to decipher these epigenetic patterns in clinical biomarkers to gain biological insights into individuals based on a single biological sample - a simple, non-invasive saliva sample from males. To put it plainly, just spit in a tube, and our technology can potentially eliminate decades of uncomfortable, annoying invasions of the customer's life, while simultaneously providing insurance companies with the same, if not better, data with which to price their policies.

Tyler Danielson: We believe that this technology can revolutionize the insurance industry by aligning the interests of insurance companies, their agents, and consumers. Our goal is to achieve this by providing consumers and insurance companies with novel epigenetic data in reports that they can read and understand. The longevity report is already available as an addition to life insurance policies, and we are exploring plans to expand this longevity report to other use cases."

Tyler Danielson: Consumers are more in touch with and interested in their health than ever before, and we are actively pursuing the multitude of applications for this science to benefit their lives. To be clear, the goal of our product is to provide the end consumer with new and important information, such as their biological age and potential risk factors that may reduce their lifespan, telling them what they can do to not only live longer, but also lead a healthier life.

Tyler Danielson: Allow agents to better guide their customers through financial insights into whether they are aging slower or faster, and how to plan accordingly. Ensure that insurance companies have a clear line of sight to the risk they are pricing. Through science-based evidence, better inform their underwriting process. We believe we are adding value for all parties - customers, agents, and insurance companies - and that is something to be excited about.

Tyler Danielson: When I became interim CEO in November of last year, I decided to start the year off by holding ourselves accountable to a level of operational excellence that our stockholders deserve. The leadership team and I wanted to start off fresh by reviewing every aspect of our business with the goal to improve human health. Life insurance is one example of a major industry whose objective of helping people live longer and healthier lives is perfectly aligned with our longevity mission. If people die younger than expected, claims increase and their margins decrease. Longevity science serves as a conduit through which consumers' interests and insurance companies' interests become aligned.

Tyler Danielson: Along with an adjustment to our vision and mission, we have set core values to guide our daily work as a team. We are a group of future-focused leaders who collaborate closely together and efficiently work through changes. Specifically, we plan to change and will work to adapt as we see fit to our customers, the market, and our future competitors.

Tyler Danielson: These are important, and we have been working since the end of 2022 to ensure that we have all the right people aligned with our overall direction. I feel we now have the right team in place to serve our priorities. We have reset all of our strategic goals, or more specifically, our Objectives and Key Results (OKRs). To align with these goals, we are reducing or outright eliminating much of the non-core work that we thought was taking away from our most important objectives. Our strategic alignment allows us to focus on the most viable path forward.

Tyler Danielson: We have streamlined our organization. Reduced operating expenses, and we are a smaller team than we were six months ago. We realized that we couldn't do everything we wanted to do, as excited as we were about the ideas that we had. We realized that we couldn't do everything we wanted to do, as excited as we were about the ideas that we had. This meant aligning the team from the very top, on down. Every objective that anyone at Foxo is connected to moves the company in the same direction. We let go of things that didn't move us quickly toward revenue and reduce the risk of overexposing ourselves to a difficult market. Our narrow strategy is meant to go directly after what we've tested and learned in the market and know will work.

Tyler Danielson: With that said, I'd like to introduce our new Chief Operating Officer, Taylor Fay. Taylor has been with Foxxo since 2018 as one of the first five employees and is spearheading our short and long-term strategy planning and execution. I'll pass it on to him to discuss what we've been doing. 2018, as one of the first five employees, and is spearheading our short- and long-term strategy planning and execution. I'll pass it on to him to chat through what we've been doing. Taylor?

Taylor Fay: Thanks, Tyler. And thank you to everyone for being here today. I'm thrilled to be a part of this dynamic, hardworking team. And I'm looking forward to taking this company forward with a disciplined focus and excitement around bringing additional products to the market in 2023. As Tyler noted, we have reorganized our workstreams around a much more focused OKR framework, so that we can guide the daily tactical progress of the team and connect that work to the overall focus of the company.

Taylor Fay: From a business standpoint, we see the use of a non-invasive saliva-based test as an industry-changing opportunity for life insurers. This is our top long-term company priority, and we want our resource use to reflect that. One key challenge that we aim to manage is the cost of testing, and we see many opportunities to reduce it. In collaboration with a major research institution, we have generated one of the largest epigenetic datasets with decades of follow-up data on health and mortality measures. We are now entering the analytical phase in collaboration with top academic scientists to accelerate research and further inform our product development activities.

Taylor Fay: In summary, the three core objectives for our business are: first, Create an engaging customer experience that helps our customers live longer and healthier. customer experience that helps our customers live longer and healthier lives... 1. Cell life insurance that is designed to keep you alive, and 3. Insurance designed to keep you alive. And three, bring an underwriting tool to the market.

Taylor Fay: I will now turn the call over to our CFO, Ravi Patashnik, to discuss our financials. Over to you, Ravi.

Ravi Patashnik: Thank you, Taylor, and hello everyone. I'll now recap our financial results for the year ending December 31, 2022. For the year ended December 31, 2022, the net loss was $95.3 million, or $8.40 per share, compared to a net loss of $38.5 million, or $6.61 per share during the same period in 2021. Increases in operating expenses drove nearly half of the increase in net loss, with a large portion related to equity-based compensation. Non-operating expenses were responsible for the remaining change. These primarily related to the forward purchase agreement and changes in fair value measurements.

Ravi Patashnik: Adjusted EBITDA provides additional insight into our underlying ongoing operational performance and facilitates period-to-period comparisons. By excluding the earnings impact of interest, tax, depreciation, amortization, investment impairment, non-cash change in fair value of convertible ventures, and equity-based compensation, management believes that presenting adjusted EBITDA is more representative of our operational performance and may be more useful for investors. A reconciliation of net loss to adjusted EBITDA can be found in our annual report.

Ravi Patashnik: For the year ending December 31, 2022, adjusted EBITDA was negative $19.8 million, compared with an adjusted EBITDA of negative $15 million during the same period in 2021. We had substantial non-cash activities in both periods, primarily related to fair value measurements and equity-based compensation, including amounts related to the consulting agreement and other third parties compensated in stock. Additionally, for the year ending December 31, 2022, adjusted EBITDA includes an add-back related to the forward purchase agreement, as this agreement was canceled and represents a non-recurring charge related to capitalization activities.

Ravi Patashnik: Research and development expenses were approximately $3 million for the year ended December 31, 2022, compared to $4.9 million for the year ended December 31, 2021. Selling, general, and administrative expenses were $27.2 million for the year ended December 31, 2022, compared to $10.3 million for the year ended December 31, 2021. The increase was primarily related to stock-based compensation for third parties, amortization of our intangible assets and cloud computing arrangements, and implementation of our business plan, including efforts to support the long-term growth of our business.

Ravi Patashnik: One of our main initiatives has been to maintain financial discipline. As part of our business plan, we have simplified our operations and taken actions to significantly reduce expenses, preserving capital. Boxel Life Insurance Company was divested, gaining us access to approximately $4.7 million that was previously held as statutory capital surplus. We are actively seeking ways to further capitalize the company to execute our business plan, which Tyler and Taylor just detailed.

Ravi Patashnik: That completes my financial summary. I will now turn the call over to Tyler for closing remarks.

Tyler Danielson: Thanks, Robbie. We have been moving quickly to get the right strategy in place to increase adoption and grow revenue. We are also working hard on bringing more value to what epigenetic testing currently offers, and considering how, after multiple tests, we can show progress in a way that people can improve their lives both immediately and over time as they age. We are very excited about epigenetic science and where it is heading.

Tyler Danielson: Although the insurance market has historically been slow to change, we believe we have a value proposition. We also know that the market will evolve, and we are actively looking for ways to adapt to our customers' needs and their agents who require our services. We believe the opportunity here is very large, and we intend to go right at it. The opportunity is very large here, and we intend to go right at it. Thank you, stockholders.

Operator: I'll now pass it back to the operator to close out the meeting. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.