LifeMD Inc. Q1 2023 Earnings Call

Speaker 2: and did March 31, 2023. Joining the call today are Justin Schriver, Chairman and Chief Executive Officer and Mark Bennettson, Chief Financial Officer of Life MD. Follow-up with management to prepare remarks. We will open the call for question and answer session.

Speaker 2: I'd like to remind everyone that today's call is being hosted via webcast and the recording will be made available via the link in today's press release, which is available in the investor's relation section of the company's website.

Speaker 2: Before we begin, I would like to remind everyone that during this call, the company will make a number of overlooking statements which are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from those projected.

Speaker 2: These risk uncertainties are described in the company as 10K and 10Q violence within other violence that like that, and be made make with the SEC from time to time.

Speaker 2: Forward-looking statements made during this call are based on current information available to the company as of today, May 12, 2023. The company assumes no obligation to update or revise any forward-looking statements after today's call except as required by law. Also, please note that management will be discussing certain non-GAAP financial issues

Speaker 2: and will be available to recite in the Investors' Relation section of the company's website. Now I'd like to turn the call over to LifeMDs, CEO , Justin Traber, please go ahead. Thank you, Darrell, and good morning, everyone. Thank you for joining us today. We're excited to share the outstanding results of our first quarter and the promising developments across life.

The strong foundation we established last year are translated into tremendous first quarter performance. Both revenue and the justice of the Ebitus are past our prior guidance. Our telehealth business all returned to double digit growth, achieving a 23% sequential revenue increase. Support Angie Rotten Live Industry Defenseere Commission ARGester gender views Price Actual

By optimizing our operations, we've achieved record gross margins.

A considerable reduction in marketing and G&A expenses as a percentage of revenue.

and a 40% improvement in our patient's first year lifetime value.

I firmly believe that our first quarter financial results validate and demonstrate the robust, fundamental growth made possible by our focused investments and efforts throughout 2022.

We also strengthened our financial position by securing a $40 million debt financing deal with Avenue Capital.

a leading institutional debt fund.

In doing so, we addressed one of the greatest constraints we faced last year, the size of our balance sheet.

To date, we have only drawn $15 million against this facility, but more importantly, we are operating with increasing profitability and are on track to reach free cash flow breakeven or positivity by mid-2023.

The solid financial foundation positions LifeMD as a well-capitalized, growth-driven company in our sector. Our focus remains on several key initiatives which we're eager to discuss.

First, our legacy lifestyle healthcare business, encompassing men's sexual health, hair loss, dermatology, and insomnia, continues to thrive. After repositioning our product and subscription offerings to maximize profitability, we achieved 20% sequential revenue growth in Q1 in this segment.

It comes as no surprise that this segment of our business is immensely profitable, producing contribution margin in excess of 30%. Building long-term equity value in our brands remains a key focus.

We are continually enhancing the patient experience, launching new telehealth services, and increasing retention and patient lifetime value.

And I'm pleased to say that our efforts are being rewarded. In Q1 2023, we saw a 40% increase in first year lifetime value for patients using our telemedicine offering. Second, we are committed to expanding our virtual primary care offering under the life and deep brand. With over 11,000 active patients as of March 31, 2023.

growth in new product offerings such as dermatology, insomnia, and our GLP-1 weight management program.

We continue to see tremendous interest and demand for our differentiated telehealth service offerings from customers, even under a cash pay model, which is allowing us to further improve our platform and expand our healthcare footprint.

Also, as we previously guided, we are in the process of setting up the appropriate contracts and infrastructure required to begin accepting private insurance and Medicare payments later this year.

Although we continue to see strong growth with our cash pay offerings, we believe that coverage is important and that accepting private insurance and Medicare will enable us to reach an even larger audience and expand our market share.

Third, we are making significant progress in growing the enterprise side of our business.

While this currently represents only a small portion of our overall revenue, we are convinced more than ever that there is significant demand for our technology platform, the services of our affiliated medical group, and the expertise of our team from life sciences companies.

We expect to have material news to report on this front in the coming month.

For, our work simply subsidiary is rapidly scaling up, expanding its customer base, and enhancing its product offerings.

We're seeing this growth in WorkSimply's top and bottom line.

In Q1, WorkSimpleys revenue grew by 101% compared to the previous year, and its even emergence exceeded 20%. Now catering to over 170,000 active subscribers worldwide, WorkSimpleys services are available in 16 languages.

and serve both consumers and small to medium sized businesses. With continued diversification into resume services, human resources, and digital signature service markets.

It is quickly morphing into a powerhouse in its field, evolving into a one-stop shop for consumers and small businesses requiring workplace and document services.

The growing profitability and cash flow of WorkSimply provide a substantial source of non-dilutive capital for reinvestment into our core telehealth business.

Lastly, and this is a point that truly excites me, we've begun to integrate AI into various workflows over the past quarter.

The current focus of these integrations has been around enabling our patient care and call center teams to provide elevated service to our patients more efficiently, as well as continuing to build upon our already robust business intelligence platform to drive more predictive analytics.

that will enable us to continue to optimize our marketing and patient retention investments on a real-time basis. I look forward to sharing more updates over the coming year, as we believe these and other AI-driven technologies we are implementing will continue to differentiate our offerings.

and allow LifeMD and our affiliated medical group to provide a better experience for patients.

With that, I will now turn the call over to our CFO Mark Benison to provide a summary of our financial results. Mark.

Thank you Justin and good morning everyone. I am pleased to report that during the first quarter of 2023, LifeMD not only returns to double digit growth and telehealth revenue on a sequential basis, but also continues to drive the company's profitability to record levels.

In fact, our performance eclipse even our own expectations and prior guidance for first quarter results on both the top and bottom line.

Additionally, as reported on our last earnings call, we successfully closed an institutional debt financing with Avenue Capital for up to 40 million, of which we have drawn only 15 million.

The combination of a strong balance sheet and life and G achieving rapidly growing profitability puts us in a very strong position to continue to execute upon our top and bottom line goals for the rest of 2023 and demonstrate our ability to deliver upon the financial guidance we provided.

Now turning to the results for the first quarter of 2023. Revenue in the first quarter totaled 33.1 million, up 14% as compared to the same quarter a year ago, and up 18% sequentially versus the prior quarter.

First quarter telehealth revenue increased by 23% sequentially versus the fourth quarter of 2022, marking our return consistent with our guidance to growth in telehealth revenue.

Work simply continued to expand the tremendous rates with first quarter revenue increasing to $12.9 million, up 101% as compared to the same year ago quarter and 10% sequentially versus the prior quarter. Subscriber growth remained very strong with telehealth active subscribers increasing 14% to $179,933.

and work simply, active subscribers increasing 65% to 173,333 versus the same year-ago period. Of particular note, the average order value and first-year lifetime value of new patients in our lifestyle healthcare prescription business.

increased by 40%. We expect as we continue to retain and rebuild these patients that this increased value will be accretive to both the top and bottom line for telehealth.

During the first quarter, approximately 70% of our telehealth revenue came from the rebuildings of existing patients versus new patient sign-up revenue.

This metric improved by 14% versus the same year-ago period, reflecting our continued strong retention of patients.

Gross margins for the first quarter reached 87%, up 500 basis points versus prior year.

Gross profit for the quarter totaled $28.9 million, an increase of 22% from the same year ago period. The next question is from

Operating expenses for the first quarter totaled $31.8 million, a decrease of $5.1 million of $ mobs Hmm.

Operating expenses included $4.2 million of non-cash expenses associated with stock-based compensation, non-cash write-off, depreciation, and amortization expenses.

In the first quarter of 2023, we also reduced our marketing expense as a percentage of revenue to 50% versus 75% of revenue in the same year ago period.

Our GAAP net loss attributable to common stockholders for the first quarter totaled $4.8 million or $0.15 per share. This compares to a net loss attributable to common stockholders of $14.1 million or $0.46 per share in the first quarter of 2022.

Adjusted EPS, a non-GAAP financial measure that excludes non-cash expenses, preferred stock dividends, litigation expense, non-controlling interest, M&A expenses, financing costs, and foreign currency translation totaled the gain of $0.06 per share.

as compared to a loss of $0.25 per share in the same year-ago period. Adjusted EBITDA, a non-GAAP financial measure excluding the same account categories as noted in adjusted EPS.

totaled the gain of $2 million in the first quarter of 2023.

This compares to an adjusted EBITDA loss of $7.6 million in the same year ago quarter.

Now, turning to our balance sheet. Cash total is $11.5 million as of March 31, 2023, and at the same time, current liabilities were reduced by $4.4 million, driven by reductions in our account payable balance. Excluding the impact of discretionary pay down of accounts payable and accrued expenses, we have a total of $2.5 million in total.

a free cash flow breakeven or positivity by the middle of 2023.

In addition, we successfully closed the non-dilutive financing with Avenue Capital for up to $40 million in debt capital of which $25 million remains undrawn. All of this puts Life on D's balance sheet in a position of strength and ensures our business is well capitalized to meet our long-term objectives.

This wraps up our financial results. I'd now like to turn the call back over to Justin.

To wrap up today's call, I'd like to summarize for our shareholders our three main strategic priorities for 2023. Internally, we call them the three P's.

profitability, partnerships, and primary care.

The first P, profitability. We will continue to scale and optimize our operations such that Life MD will deliver upon our financial guidance of delivering $12 to $18 million a full year 2023 adjusted EBITDA. A significant improvement over the fiscal year 22 figure.

of a $15 million adjusted EVA loss.

The second P, partnerships. As I mentioned earlier, LifeMD will enter significant partnerships this year.

The recent announcement of one such partnership with Health Warehouse, we expect to follow with several meaningful partnership and enterprise deals across pharmaceutical health and wellness and healthcare services spaces. The third P, primary care.

We will continue to invest in our primary care platform, which is at a major inflection point.

Our platform not only supports the continued growth of our urgent care and concierge care service offerings, but is now serving as a facilitator for partnerships and condition-specific offerings that require a sophisticated primary care infrastructure, such as our weight management program that includes GLP-1 medication.

With that, I would like to thank our entire team again for their hard work and our shareholders for their continued support and trust in our vision as we head into what I think will be the most exciting period for our company thus far. With that, I would like to open the call for Q&A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation zone will indicate your line in the question queue. You may press star 2 to remove yourself from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. For a moment please while we poll for your questions.

Our questions come from the line of David Larson with BTIG. Please proceed with your questions. Hey guys, congratulations on an excellent start to the year. Both your EBITDA and revenue look very good relative to expectations.

Thank you.

First of all, thank you David for the compliments. We're really happy with first quarter performance across the board.

Regarding Health Warehouse, they're a great pharmacy. They ship prescription medications and over-the-counter products across all 50 states. They have a very large patient population. They have a lot of people on a daily basis that...

show up at their website without having a prescription necessary for either a new medication or a lot of times the refill. They also have a big, you mentioned the one million patient number, that was the number that they provided to us, but they have a very, very large number of patients that are

population of patients that have used them in the past for prescription. And their intent is to go back to that patient population and...

market LifeMD, you know, a very trusted, high quality, affordable telehealth provider. And then as people are coming in, we're in the process of getting live some additional flows, so that as patients are showing up at their website for prescription, they can immediately and seamlessly...

speak to a LifeMD affiliated provider on demand and get a prescription if that's appropriate.

So how does the relationship work? Like it sounds like warehouse.com has their own pharmacy life and you obviously also have your own pharmacy services. Would you expect to increase the number of you know prescriptions that you're dispensing as a result of this relationship or would it be more focused on?

incremental membership in the primary care area? Well, remember Life and View, David partners with a number of pharmacies across the country. We don't own a pharmacy. And so in this case, this would be all about us helping them grow their business by increasing access to quality of life.

I think increased to 180,000 from 169,000 in 4Q, but the telehealth revenue was actually down 11% year over year. Can you just provide some context around that? I mean, it sounds like you're focusing more on profitable growth as opposed to revenue growth at all costs. Any color there will be very helpful.

Yeah, this is Mark. Yeah, that's definitely part of it. We're focused on profitable growth, but the real way to look at it is, as we spoke about last year and, you know, guided this year, we did a little bit of a reset in the back half of last year such that our telehealth revenue was lower in Q4 than it was in Q3. And that's anything more than $Major and people reacted more strongly with this one. All of these calm down ease rates, and if we've economic anatoms low in the future,

Q1 of last year because we stripped out a lot of the types of customers and subscribers that were not as profitable and focused obviously on the ones that were the end product areas that were most profitable. So the real way that you have to look at it is off of the sequential base since we are a recurring subscription business and the revenue did grow 23% sequentially.

off of the Q4 base and we expect to continue to grow sequentially throughout the year as we've completed that reset process in the back half of the year. All that's consistent with how we guided last year.

And Mark, you mentioned a couple metrics around the yield on ad spend or the 40% improvement in like value to you in year one. Do you have any other metrics that you can share? Like any specifics, any numbers that you can share in terms of like the CAC, year one.

you know, revenue and lifetime value? Yeah. Look, we were, prior to some of the upgrades and enhancements that we made last year, getting closer to just under $400 in year one revenue in our prescription businesses from the typical patient. And just under the new pilot,

the new mechanisms and how we're performing today, that number is right now a little bit over $500 in the first year. So that's essentially the 40% increase. Now, there was a slight increase, about 10 or 15% in CACs. So the actual LTV to CAC is still increasing by about 30%, 20%.

growing from around 3x return on investment to closer to 4x return on investment.

Okay, and then so that all sounds very good. When we look at other competitors in the space like Teladoc, for example, they've been facing some challenges in their direct to consumer business. Those EBITDA margins have come under significant pressure. Part of that is due to higher ad costs.

And we're kind of seeing that across the board as companies kind of tighten up ahead of the risk of a recession. What are you seeing in terms of your own ad costs? Sounds to me like you're managing through it and what's the difference?

David, this is Justin. I'll comment on that. So we have seen with some traffic sources, we have seen slightly higher ad costs, but we've been doing a great job at launching new products.

really focused on really focusing very heavily on the retention side of the business, you know, going back into our data, you know, and finding patients that can be put back onto a subscription and the need treatment. And we've just been, like I said, focused on optimization and, you know, figuring out ways to kind of creatively market.

the awesome portfolio services that we have. And so we're really happy right now with where the unit economics are. It's a great quarter and very confident as well, very confident as well that we can continue to grow the business with the same unit economic profile or even better.

throughout the rest of the year despite seeing some increases in advertising costs. Michael Bock Okay. And then can you talk a little bit about your EBITDA margin expectations for the WorkSimply and also healthcare businesses? I think I heard a number 20% for WorkSimply. Any color around the healthcare side?

Yeah, so WorkSimply is currently a little bit over 20%, the need with the margins. I'd expect by the end of the year, they could be approaching 30%, probably won't quite get there. They'll be a little bit under that. On the healthcare side of the business, we had a slight loss in the quarter at this point where...

a little bit over a million a quarter loss, not a very significant one. We expect to be profitable by the end of the second quarter, beginning of the third quarter in the telehealth business. And then by the end of the year, the fourth quarter, I mean, I'd expect to see.

EBITDA margins potentially around mid single digits. And then obviously scaling into double digits next year and continuing to grow pretty rapidly thereafter. I would say in the healthcare business, the healthcare business is completely profitable with the exception of the fact that we've made it.

should be profitable by the end of the year, the rest of the business is very profitable.

Okay, and then along those lines, within the primary care business, I think I saw something like 100% sequential growth. Is that correct? And then Justin, you talked a little bit about accepting insurance over the coming months or years. Just any caller there would be helpful.

My view is obviously that primary virtual primary care is a high growth area. We saw that with plush care within accolade It continues to be high growth within accolade and the intrinsic value there was obviously very high Just any any more comms there would be very helpful.

Sure. David, we're excited about this. I think that we will have.

I think that we will be live in 10 states by the end of the summer as we previously guided with the top three-ish health plans in each state.

So really excited about that. We just think it's gonna again put downward pressure on You know our cost to acquire as you know We we think it's somewhere 30 40 percent of patients right now that they end on a license These flow just want to use their insurance card, even if the price is similar So we're on track there is a big effort in terms of the cost of the insurance.

for Medicare and most importantly we're in the process which is setting up a best in class compliance infrastructure which as you can understand is the most, what we feel is the most important part of Medicare, there's a bill.

Right now that's working its way through the house with bipartisan support. It's designed to essentially reduce costs in the Medicare system by moving, a lot of services out of the hospital. And some third parties have estimated that the economic opportunity of that for in home and virtual providers. And then they were able to leave the hospital to see their

because we think there's a long-term, very significant opportunity there. We also have some partnerships on the enterprise side that I would describe in the late stage. With companies, this could also be, the Medicare coverage would be really game-changing for us. We also look at it as a competitive advantage.

in our enterprise business as well. Okay, and then you also made some comments around GLP-1 and the cost of diabetes, drugs. That's getting a lot of attention amongst the investment community. Just any thoughts or color there?

Would be great. How do you help control spend and is it a profitable solution for you? Just any thoughts there? Sure. We've been working. Clearly I think everybody understands the market opportunities within this whole weight management and specifically, you know, semaglutide, truseptide space. A lot of people are estimating that could be a hundred.

$200 billion a year market in the US and maybe is, you know, up to 50% of Americans could be on one of these medications. Life MD has a weight management platform that is live. We're currently doing 30 to 50 patients a day.

We're intentionally limiting the patient numbers there. There's very, very strong demand for weight management treatment that includes, when appropriate, these medications. I think it's going to be a very exciting part of our story this year. One of the things, David, that I'll point out is we made big investments in tech.

over the last two years, as you know, especially almost all of it inside of our virtual primary care platform. And all of a sudden, you know, we now have a market such as this.

where this platform that we put an incredible amount of effort and time and capital into the world is perfectly positioned to help patients access these drugs.

to help them go through the prior ops process. We have care journeys that we're launching inside of our mobile applications and desktop applications, specifically designed for weight management. Our lab partnerships with Quest in particular is game changing. They have a lab that they build and pricing designed specifically for these medications. So we would like to be able to leaving you with the final reason why hand something like this all for yourself yourself. This will pay back a little bit more compact this time around if we'd had to go everyday. And we will obviously support many different researchers working inside our Alpine governments to get existing machine learning support for all this process as well.

here the 2q guidance looks pretty good to me we're now halfway through May the EBITDA guide for two and a half to three and a half million is ahead of what we were modeling just any

Saucer color there. I mean what are the tailwinds or headwinds?

around that. Thanks. Yeah, okay, I think the revenue is pretty consistent with where we said the EBITDA is a little bit higher. We've just had a lot of really strong momentum. The gross margins have been performing really well and a little bit of where we were in terms of guidance. So retention has been...

Slightly better. So, you know, all of that's kind of added up to the guide that's a little bit ahead. Obviously, it works and plays also been performing well, although in line with what we had baked into the guidance.

Okay, congratulations on a very good quarter. Good start to the year and I'll hop back into queue.

Okay, congratulations on a very good quarter. Good start to the year and I'll hop back in the queue. Thanks, David.

Thank you. We have reached the end of our question and answer session. I'd like to turn the call back over to Justin Stryver for any closing comments. Thanks, everybody, for participating in Life would be's Q1 earnings call. Hope everybody has a great weekend and look forward to providing hopefully another very positive update next quarter.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.