Sharecare Inc. Q1 2023 Earnings Call
Good day and welcome to the share Count first quarter 2023 earnings call and webcast.
All participants are in listen only mode.
After todays presentation, there will be an opportunity to ask questions.
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Today's call is being recorded and will be available on the company's website.
On today's call, we have Mr. Jeff Arnold Chairman, and CEO and Mr. Justin Ferrara, President and Chief Financial Officer, as well as Mr. Geoffrey Mohan Chief operating officer, who will join for the question and answer session.
Before we begin we would like to remind you that certain statements made during this call will be forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, which includes statements 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.
Are reasonable we undertake no obligation to revise any statements 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 <unk>.
And our filings with the SEC, including the risk factors section of our Form 10-K for the year ended December 31st 2022.
In addition, please note that the company will be discussing 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 can be found in the press release that is posted on the company's website.
I would now like to hand, the conference call over to Mr. Jeff Arnold Jeff. Please go ahead.
Good morning, Thank you for joining us today as we present chair cares Q1, 2023 results as our overall strategy and focus remained consistent with our previous quarterly updates we will keep today's remarks brief before opening the line for Q&A.
We began the year on solid footing with first quarter revenue of $116 3 million and adjusted EBITDA of $2 1 million and are pleased to report robust performance across our enterprise provider and life Sciences channels during.
During the quarter, we demonstrated our commitment to sustainable growth and profitability, while making forward progress toward achieving our year end goals, including our core kpis of $12 9 million eligible enterprise lives and $6 5 million records process.
Our enterprise business experienced 17, 4% year over year growth for the quarter generating $70 2 million in revenue supported by the successful launch of our advocacy product share Careplus, which is receiving positive customer feedback and engagement as well as our home care offering care lengths. This.
Smith underscores the value of our exceptional clinical and non clinical operations as well as our comprehensive technology platform on which we continue to integrate AI to better predict customer needs and optimize service delivery.
The combination of our advanced analytics, AI, driven insights and proactive engagement through our advocates have significantly improved the quality of care, we provide while maintaining cost efficiency.
Further our investment in sales is showing positive progress as we signed contracts totaling more than 275000, new eligible lives in Q1.
Mark and a significant increase from the same period last year as a recent example, our expanded public sector team has helped broaden our market reach winning the RFP for a large state employees wellness program set to begin in January of 'twenty 'twenty four.
And our provider channel, we processed $1 7 million medical records, delivering 17, 2% year over year revenue growth and a 19% increase compared to Q4 2022.
This growth can be attributed to new client contracts with large national payers and increased demand for record retrieval and release of information.
<unk> away from Medicare and commercial risk adjustment.
Through globalization efforts and increased digital medical record delivery, we began to realize operating expense savings and are tracking towards our anticipated annualized cost savings goal of $14 million in the channel by the end of the year.
Turning to our life Sciences channel, we experienced a modest but promising five 6% revenue growth year over year. In Q1. This channel continues to add significant value to our enterprise channel, bringing advanced member targeting capabilities, including a zero party database of over 100 million individuals for precision targeting and an extensive catalog and aboard.
Ward winning content.
Looking forward life Sciences pipeline for the year is showing a healthy increase currently up 20% compared to the same period last year.
We continue to thoroughly pursue our strategic review process exploring all options to maximize shareholder value at the same time, we remain focused on driving organic growth across our platform and executing on strategic cost saving initiatives to drive near and long term value to shareholders. In summary, Q1, 2023, and it's been a solid quarter for share care.
With consistent growth across all our key business channels, our dedication to leveraging technology against our extensive datasets for continuous improvement and innovation gives us confidence in sustaining this momentum throughout the year and into 2020 for now I'll hand, it over to Justin to provide more details on our financials Justin.
Thank you Jeff.
We had a strong start to the year with first quarter revenue of $116 3 million, representing 15, 5% growth from 100.7 million a year ago and.
And adjusted EBITDA of $2 1 billion versus <unk> 2 million a year ago with both exceeding the high point of our guidance.
Positive performance is due to growth across enterprise provider and life sciences channels, yielding momentum toward achieving our core kpis as we secure more eligible enterprise lives and increase the number of medical records retrieved.
<unk> also continues to maintain a strong balance sheet.
Ending the quarter with $155 million in cash on hand over $205 million and available liquidity and no debt.
Looking forward to Q2, our guidance for revenue between $109 5 million and $110 5 million an increase from $103 8 million in the second quarter of 2022.
Our Q2 adjusted EBITDA guidance is $2 5 million to $3 5 million an increase of approximately 40% over Q2 fiscal 'twenty two using the midpoint of the range.
We are hard at work to realize the $30 million annualized savings opportunity with 22 million of savings projected to be realized this fiscal year we.
We expect these savings to accelerate as we move into the latter half of the year.
We believe the combination of our strategic automation reengineering business processes and workforce globalization will contribute to the expansion of our adjusted EBITDA margins nearly double our year over year, adjusted EBITDA target and enable us to turn cash flow positive within 2023.
Based upon our Q1 top line outperformance and current business visibility, we are raising the low end of our full year 2023 revenue guidance to $452 5 million.
We are also reaffirming the top in 2023, rather than a guidance of $460 million and adjusted EBITDA range of $25 million to $30 million.
We appreciate your continued support we're now ready to take your questions. Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone you will need to pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Once again Star then one to ask a question at this time, we will pause momentarily to assemble the roster.
And our first question will come from David Larsen of Beachy I G. Please go ahead.
Hi, congratulations on the good quarter Jeff.
Jeff You mentioned that I think you added something like 275000 lives in the first quarter.
Can you talk a little bit more about that where those from a handful of customers where they from carillon. When should we expect those lives to roll onto enterprise can you talk and can you talk a little bit about the sort of expected cadence in enterprise revenue and lives as we progress through 2023. Thank you.
Uh huh.
Thank you.
Yeah, we had a we had a really good.
First quarter, our sales force is really starting to kick in to kind of put it in perspective.
Last year in Q1, we signed up 14000, new eligible lives. This quarter. It was over 275000 <unk>. The majority of those lives are in 2024.
And then I think I mentioned in the opening comments, we've been investing in our public sector sales.
Salesforce as well so we were able to land a large state wellness account. However that does also include lives that carillon brought over and Q1 as well as some new customers.
That'll roll on throughout the year.
Oh, Okay can you talk about your progress on the receptivity that clients have to share care plus how many clients do you have on that platform and what is the delta in the P. M. P. M right and then why our clients are willing to pay more for share care plus does that result in higher.
Our claims claims transceivers for them.
Yeah.
Maybe I'll start pay David's Justin I'll start with <unk>.
With the lives the lives is.
As we've discussed a close to a million lives on the platform for sure I care plus.
And it is at a higher P. M P M.
Our average close to.
You know between three and four dollar P. M P M.
On our share care plus lives, which is an increase as we've talked about historically two are purely digital lives that.
Our roughly $2 P. M. P. M. So it's a significant uptick in maybe Geoffrey you can add on the clinical piece, but what I'll add is.
Why it's why it's a strong offering is having.
Having a digital first approach I think is really compelling. So you know we've always been good at the front door you know how do we get people to engage how do we make our b to b experience feel b to C. You know how do we produce personalized award winning content and when we added the digital first advocacy.
You know it it was enabled right through that same digital front door and we have one large advocacy client and which I was looking at the data. This morning over 50% of the interactions between the advocate for advocacy is happening digitally.
Which is what we had hoped for in Jeopardy, you want to touch on the clinical yes, sure I mean, our clinical value is driven by a really strong in analytics upfront. When we have our systems in place to identify cost saving opportunities in terms of the redirection and utilization.
So identifying the emerging clinical onset and the impact it was call. It diminishes what we have seen is that.
Controlling the waste through optimizing the EDI visits inpatient visits optimizing the Onyx cost then there was the value to our customers for.
Well the customers Werent sure it gets less.
<unk> Windows I mean back to it is that they didn't.
Oh, very quantifiable savings to our customers.
Okay. Geoffrey can you. Please put a number on that like what percent.
Savings do we see what percent reduction in in patient admissions to do we see is 5% reasonable is 10% reasonable I. Just think that's an important metric you know given that you know, even though youre clients my spend a little more there ultimately saving more money by using the share care plus platform.
Yeah, I mean, I think as you will know David it's very difficult to do.
That's a big number varies from customer to customer and people find the customers.
But we are going to publish a report very soon then.
<unk>, how much may have been due to the hospital admission or one of our customer and it might be slightly odd for me to speak on that but it is in the range of 22.
30% range.
Why did the kitchen in the.
Oh come on with that and that the board would be publishing really beating.
Sure.
Okay, and then can you talk about the cadence of life additions that are expected in 2023 should we expect to see continued increases in lives being added to enterprise because of deals that were signed last year or just any any color there would be very helpful.
Yes, the global.
We've talked about this Dave is that.
One one is typically the largest growth, but we have line of sight to adding additional lives on July one and October one. So you can expect to see additional lives added through the year.
Okay and then just.
One more and I'll hop back in the queue can you talk a little bit about Caroline because it just seems to me like that's a very high value solution. There's a lot of growth in M. A it's basically Uber for home care and just how is that trending relative to expectations and I think United is a client any incremental discussions you've been having with them.
We continued to grow our membership base for care links I think we've talked in the past its gone from less than 300000 to over $1 8 million last year to over $2 million. This year. We brought on our first blues plan this year for care lengths and and we have really good tracks.
And we are also using Caroline is not only is the tip of the spear for MA business, but we're using is to differentiate our within our advocacy solution as well do you want to talk to that real quick yeah. Sure. I mean this also goes back to a previous question, David I think gatherings as Jeff said people the sphere.
Which is being used to contain the cost of care. We have created many programs and there are plenty to negotiate.
That links to take care of the chronic and acute illnesses and to optimize some of the cost savings, which I talked about.
Okay Fantastic I have a whole list of questions here, but I'll hop back in the queue. Thank you.
Okay.
Yeah.
Yeah.
Our next question comes from Richard close of Canaccord Genuity. Please go ahead.
Yes, thanks for the questions congratulations on the results.
First on.
The provider segment, you mentioned some it sounded like paid payment integrity wins can you just dive into those relationships I think you said some national payers.
Yeah, Yeah that was all medical retrieval business. So we had a record quarter in revenues and records processed.
And what's been great in that business as we've been able to really effectively cross pollinate, what historically was a provider sale now half of our revenues made up from payers.
Okay. So it wasn't payment I'd tell you it wasn't payment integrity Richard it was.
Was audits from our payer customers and again, just underscoring what Jeff was saying that we've talked a lot about is our cross selling capabilities and that is you know close to half of that business is now from payers.
Okay. That's helpful. Thanks, with Justin with respect to the 30 million cost savings opportunity 22 million hitting here in 2023 can you go over just like you know where we see that in terms of.
Now in terms of the various buckets.
Yeah. So you know this has been underway for.
Over a year now and it's performing very well.
That $30 million into two areas 14 million of it is on the workforce globalization around our provider division.
We are well on track and we expect to realize $10 million of that 14. It will be 14 million by the end of the year $10 million. This year and that will primarily be primarily in the Cogs line. Some on the Opex side.
And then there are also well underway on the $16 million of rationalization across the enterprise and corporate business and we talked about $12 million of that 16 being realized in 2023 and that will be a mix of opex and capex. So you should see.
Our capex come down throughout the year as well as efficiency on our on our Opex line, which is part of you know, which gives us confidence and nearly doubling our EBITDA target for this year.
Okay.
With respect to life sciences, encouraging on the growth year over year and the pipeline increase.
The 20% pipeline increase Jeff are you thinking you know you closed some deals that hits this year or is that more purchasing for the cat winter 2024 year.
That's for this year.
Okay.
Alright, thanks for the questions I'll hop back in the queue.
Okay. Thank you.
The next question comes from Eric Percher Nephron Research. Please go ahead.
Thank you maybe I'll just start where you just ended on Lifesize.
Can you give us a little bit of perspective on market spend now versus a year ago, and what youre seeing in macro trend versus the micro in the 20% you called out.
Yeah, I mean, our.
Reports that we go off of is that you know Nielsen showed farm a digital spend was down 19% in the first quarter and so we are.
And Suzie ASIC are about the performance of that channel in the first quarter, just being up a little.
All over 5%.
But we watch that closely.
But we're seeing macro trends move against us in the digital pharma, we've read other areas may be HCP, an area it might be stronger, but our specific area, which is digital pharma spend is down year over year. So we're pleased to not only hold serve but to show nice growth in an expanding pipeline.
And then maybe I would I'd add to that is we continue to see.
Our strong.
Performance, 80% of our campaigns have been exceeding benchmarks just a couple of others that are our top 20 brands grew 30, 43% year over year, our top 20 clients grew 15% year over year.
We had big year over year growth from three of our larger longest standing clients. So if you took that you know three big clients that we'd have the longest amount of time they respectively grew.
Over 100%, 350%.
Over the year so.
What we're really pleased with is we're starting to see that modest growth, we're starting to see that pipeline, yes. The sector's down you know overall it as Justin referenced but our top brands are renewing and they're growing.
That's helpful. And then my other question was on the potential use of capital from a sale.
In provider and just the general M&A market.
Any update you can provide us in terms of where valuation set and whether we're seeing more transactions today.
We see Pes made with current valuation.
Well, what I would say to that is as you know we've been very active in the market.
Trying to prove out the underlying value of our owned assets independently and collectively to the market.
And you know like others, I think youre, suggesting we feel like we're undervalued.
It market obviously plays into this.
But we see we see lots of opportunity and that's been.
Been taken into consideration as we've gone through the year within our strategic review.
But but yes, we see we see the valuations are now not only affecting our public peers, but also private companies.
Thank you.
Sure.
This concludes our question and answer session I would like to turn the conference back over to Jeff Arnold for any closing remarks.
Great well. Thank you in closing I want to reiterate that we're very pleased with our financial performance. This quarter. In addition to exceeding the top end of our Q1 2023 revenue and adjusted EBITDA guidance, our enterprise channel as we discussed booked 275000, new eligible lives during the quarter.
Including a significant public sector win for a large state employee.
Wellness plan. This progress demonstrates the value we already are realizing on the operational alignment and the investments in our sales force, which we're confident will continue to drive meaningful growth throughout this year and beyond that provider channel also performed very well in Q1, achieving record breaking quarterly revenue, while our life Science channel grew.
During the quarter and its current pipeline as we discussed is up 20% year over year.
As we stated we believe that all three of our channels complement one another with a depth and breadth of capabilities that together have enabled <unk> to create a unique platform driven ecosystem. That's built for scale as I noted in my opening remarks, we continue to consider strategic options that could unlock additional value for shareholders, but above and beyond these.
Considerations, we have embarked on globalization strategies and cost savings initiatives across our channels, which we believe will contribute to the expansion of our adjusted EBITDA margins and enable us to turn cash flow positive within 2023 as always thank you for your interest.
Have a great day.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
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