Q2 2023 Sharecare Inc Earnings Call
Good day and welcome to the share count our second quarter 2023 earnings call and webcast.
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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 for railroad, 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.
<unk> includes statements regarding strategic initiatives.
The cost savings.
Okay capabilities I find in our guidance.
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.
What changes that will occur after this call.
Prescriptions 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, putting 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 certain non-GAAP financial measures that we believe are important in evaluating performance.
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 call and the conference call over to Mr. Jeff Arnold Jeff. Please go ahead.
Good morning, and thank you for joining us today as we discuss share cares Q2, 2023 results first I want to briefly discuss the conclusion of our strategic review, which we announced on May 31. The board came to the unanimous decision that our three business channels enterprise provider and life Sciences complement one another.
With a depth and breadth of capabilities that together create a unique platform driven ecosystem built for scale. The strategic alignment of these businesses allows us to seize new growth opportunities and serve our expanding customer base and their needs more effectively which I will highlight during today's comments.
We continue to make significant progress this quarter coming in at the high end of revenue guidance and exceeding the high end of our adjusted EBITDA guidance with a revenue of $110 4 million and adjusted EBITDA of 3.8 billion, our strong financial results and expansion of our adjusted EBITDA margin. This quarter have us on track to reach our goal.
<unk> of cash flow breakeven by years, yet we also continue to make progress with Caroline to integrate our respective complementary capabilities to bring efficiency flexibility and efficacy to our tech enabled advocacy solution to scale to current and new health plan customers.
The robustness of our high Tech high touch platform that delivers comprehensive care solutions was instrumental in our performance in the quarter, yielding 7% revenue growth for the enterprise channel compared to Q2, 2022, and marking continued progress toward our full year target of $12 9 million eligible lives across.
Large employers health systems payers T P A's and government customers, our integrated approach to care has proven successful enhancing user experiences reducing cost and measurably improving clinical outcomes across populations, whether people simply require routine preventative care or managing high risk and chronic condition.
In fact in a third party evaluation of the effectiveness of share catch disease management program for one of our leading health plan clients, we decreased annual cost for engage members by 8% primarily by Lori inpatient admission cost.
We're also driving associated cost savings as measured by our value on them. That's met approach by helping members reduce their risk across more than 40 lifestyle biometric and prevention measures as.
As an example, based on research conducted with the U N C Center for the business of health, we know that increasing movement among people, who largely spend their days city carries with it a cost savings of approximately $475 per member per year as it reduces the risk of associated conditions that can show up later and claims cost while.
We significantly impact risk reduction associated with sedentary lifestyle across our entire book of business through our digital platform digital therapeutics and lifestyle management Kochi programs. We also continue to explore innovative and accessible ways to help employers encourage exercise among their workforces.
A recent example, which launched earlier this year and uses the immersive power virtual reality is I'll get out of the program and a customer pilot completed in the quarter participants all of them classified instead of theory increase weekly moderate intensity activity from a baseline of 21 minutes to more than 181 minutes by the end of the program.
61% of respondents reporting having either more or much more energy than they did before get active.
Our continued investments in generative AI technology cap.
Capitalizing on our Doc AI acquisition and building digital connectivity to ingest clinical data are enhancing our offerings and improving our capabilities and creating longitudinal member records were.
Able to generate personalized health insights derived from individual longitudinal and aggregated data delivering more tailored engaging care solutions. Additionally, we were able to quickly identify health risk within customer populations and close care gaps such as cancer screenings medication adherence and cardiovascular and M. S K related issues.
At scale a win win for the organization and their members.
Then one of our large employer groups, we've identified hundreds of thousands of care gaps since the beginning of the year and we continue to improve processes to enable our clinical advocates to quickly and efficiently close most complicated and costly care gaps. We also have a unique advantage in being able to train our AI models with proprietary content from our award winning digital.
For example, our unwinding anxiety program has yielded a 67% reduction in anxiety corresponding to a 64% remission rate and randomized controlled trials compared to clinical care alone. This content can now be integrated and delivered through our generative AI models to seamlessly meet people, where they are and their mental health journey.
Care lengths sure cares homecare solution with a net promoter score of over 90 has also been a vital addition, given no other advocacy provider has its own nationwide network of caregivers to offer a physical presence in the home in fact that the convergence of our payer agnostic advocacy solution chair Careplus and care.
<unk> creates the opportunity to go deeper with all our members as our highly credentialed in home caregivers bring the advantage of physical proximity and established cross as well as deeper knowledge about the patients' needs and the ability to recommend the programs available to them across our ecosystem.
Early feedback from one of our marquee employer clients, who recently implemented care lengths for their associates identified that their efforts to ease caregiver caregiver burden are resulting in more productive and satisfied employees.
At this employer or professional caregivers have provided care to associates across a number of real world use cases, including people, who require post discharge and surgical transitional care, those who need extra in home non clinical support and employees, who also our caregivers for a chronically ill adult.
Have a growing pipeline for 'twenty 'twenty, four and 'twenty 'twenty five and we're not only assist with members unmet functional needs in the home, which drives trusted engagement, but also identified clinical complexity and social risk factors that can help address through our clinical advocacy services. Our third party referral programs and the case of one of our large health plan clients that leverage our caregivers.
To drive engagement in the home they saw a 30% increase in completion of annual wellness visits and a 30% increase in completion of in home clinical visits for risk adjustment.
Capitalizing on these patient engagement capabilities and our in home clinical expertise, we are poised to seize the opportunity to address the full set of health care quality metrics and standards by leveraging assets and our provider channel to create new and better risk adjustment and care gap closure models for the home care market. These new model.
<unk>, which we plan to rollout in 2024 standard greatly benefit Medicare advantage plans by providing accurate and complete code capture and increasing their quality scores, while driving improved outcomes for patients through prevention screening better chronic disease management and addressing social determinants of health.
Speaking of our proprietor channel, which is now delivering help insight and data solution and it's coming off a great first quarter it performed better than ever in Q2, yielding 11% revenue growth compared to Q2, 2022 and setting us up to meet our core kpis target for the full year.
The demand for medical records and clinical content from health plans continues to be a major driver for our growth and our provider pipeline show significant promise.
While maintaining a focus on historically strong markets such as provider practices and specialties were branching out into larger strategic health systems through Rfps and proactive targeting to date. This year, we've already surpassed total RSP participation compared to all of 2022. Additionally, we're advancing our channel strategy through part.
<unk> ships with seven peso and new agreements with revenue cycle management groups. The robustness of our audit business the maturity of our new services and the E. R. R closed in Q to bolster our confidence in achieving our 2023 provider goals.
<unk> life Science channel, which is continuing to evolve to offer broader more robust customer activation and management solutions across the health care industry was approximately flat for the quarter year over year as anticipated.
It was our slowest growing channel this quarter, it's important to note that this occurred during an industry wide decline of 27% and digital AD spending by pharmaceutical companies. According to Nielsen data recently, the channel launches 'twenty 'twenty four go to market offerings, featuring four unique high impact digital solutions for clients.
And expanded its reach through new collaborations to sell point of care inventory across lab course, onsite testing and diagnostic facilities.
As we continue to maximize the integrated assets across our channels. We are working on several new opportunities, including leveraging lifesciences proven activation capabilities at 100 million person Zero Party database to market the direct to consumer offerings of Carolyn for nonmedical supported home and a new solution that's in development they realize.
<unk> longevity program.
Given the momentum and efficacy around the G. L. P. One drugs the realized longevity program Leverages, our assets reach and expertise to provide a comprehensive framework for managing G. L. P. One medication cost their utilization management, ensuring treatment adherence and balancing financial efficiencies with improved health outcomes are key.
This offering is our weight loss program eat right now, which is scientifically proven to reduce craving related eating by 40% and take a mindfulness based whole human approach to foster sustainable positive eating habits it stick overtime.
Our strategic direction unique ecosystem, which creates valuable cross sell opportunities and proven commitment to manage costs, coupled with our strong financial performance in Q2 signal a promising future for sure care, we extend our gratitude to our shareholders partners and the dedicated sure care team for their support.
And at this time I'd like to hand, the call over to our CFO , Justin Ferrara, who will delve deeper into the financial details.
Thank you Jeff.
We reported strong second quarter results with revenue of $110 4 million, which is the high end of our guidance and represents year over year growth of six 3% and adjusted EBITDA of $3 8 million, which exceeded the high end of our guidance, notably our adjusted EBITDA margin of 3.5%.
There's a 90% improvement over the previous quarter as well as an approximate 70% improvement over the same period last year.
Yeah.
Our growth was driven by an increase in eligible lives on our platform and our enterprise channel as well as an increase in records processed and the provider channel. We are on track to achieve our core yearend kpis in both channels, which are $12 9 million eligible lives and $6 5 million records processed as Jeff mentioned earlier, our provider channel.
<unk> set another quarterly revenue record in Q2.
And despite ongoing market pressure life Sciences, Q2 revenue was approximately flat year over year, which was consistent with our expectations.
Our financial Health remains strong we ended the second quarter with a cash balance of $144 million and approximately 200 million in available liquidity.
Our commitment to efficient financial management is further evidenced by our cash flow, which showed significant improvement from the last quarter.
Reporting a 7.7 million burn this quarter, excluding the impact of the stock buyback compared to 28 million burn in Q1.
Our dedication to achieving cash flow breakeven by the end of the year remains a core focus and this quarter's results underpinned that commitment.
Regarding our previously announced stock repurchase program to date, we have bought back $2 5 million worth of shares in the open market, leaving us with $47 5 million remaining under the current authorization.
We will continue to evaluate our capital allocation strategy, but strongly believe our stock price currently does not represent the intrinsic value of our business.
As we look to Q3, we expect to generate revenue within the range of 111 billion to 113 billion. Our adjusted EBITDA guidance for Q3 is 8 million to $10 million.
Which represents over 100% increase in adjusted EBITDA over Q2 of this year and there are several key drivers behind our expected adjusted EBITDA improvement.
First in the enterprise channel, we continue to automate several back office functional areas that are driving improved margins. Additionally, we have non technology related costs that have been strategically reduced without impacting customer facing operations and our provider channel which continues to deliver.
Our record top line results the third quarter is historically, the strongest quarter of the year as we processed a large volume of Medicare advantage risk adjustment audit related charts. Additionally, our previously discussed globalization efforts continue to progress, resulting in improved margins in life Sciences Q3.
Historically stronger quarter relative to Q2, and our current campaign activity anticipate similar growth this year.
More broadly speaking, while our business will continue to have some channel level seasonality going forward Q3 as expected adjusted EBITDA is indicative of the emerging underlying earnings power of share care.
And in part by our $30 million annualized cost savings initiatives, which we are on track to achieve by the end of 2023.
In summary, I'm pleased with our strong second quarter.
Spanning adjusted EBITDA margins improved cash burn and the strength of our balance sheet.
We want to reiterate our full year revenue guidance of between 452, five and $460 million in full year, adjusted EBITDA guidance of $25 million to $30 million.
Your continued support is greatly appreciated we're now ready to take your questions. Thank you.
We will now begin the question and answer session.
Ask a question you May press Star then one on your telephone keypad.
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At this time, we will pause momentarily to assemble our roster.
And our first question comes from David Larsen of BT.
Please go ahead.
Hi, congratulations on the good quarter I like.
The beat in revenue and EBITDA.
So good quarter. Congrats can you talk a bit about the enterprise division and growth in lives. There I think last quarter you had mentioned.
Signing up 275000 lives those will impact 2024, just any color there and then you've mentioned care gap closures a couple of times.
Are you generating revenue with each care gap closure and argue recording moves for the health plans and how do you sort of report that back just any color there would be very helpful. Thank you.
Okay.
Hey, David It's Justin.
Thanks for the question and then I'll work by quarter on the I'll take the first question on eligible lives.
That's correct, we did add over 250000 in Q1, and we talked about our excitement because we thought that we'd meet or exceed that number in Q2, and we have done that so had great. A great addition to eligible lives we expect those to come on.
Towards the end of the year.
Or one one we're working through that with.
The customer now, but it was a great quarter and adding eligible lives to the platform and as I talked about in the script, we're tracking to achieve our core PPI this year of $12 9 million.
And David regarding the can't get closer that Jeff talked about this at the time of Newport.
Bill.
Helpful.
P M P M.
Yeah.
So youre not charging them on CAD gap.
But it is part of what total.
Yeah.
So I think it was a little bit difficult to hear you I think you said that the Carryout closure program as part of the five dollar P. M. P M right and that you track that data you reported back to the plan is that part of share care plus the five dollar biggie right yeah.
Yeah, So David I I did not say $5 I said hired on that if there is a high end P. M P. Yep.
But they're not all the partners right.
And the Carryout closures as part of share care, plus or is that part of share care legacy.
It is part of <unk>.
Okay. So what I'm hearing is there's good uptake in share care, plus alright, and then without getting too specific obviously can you maybe talk a little bit about your relationship with and live in I think there was a a client through and live in that you were you were working with them.
They they basically transition to the lower cost share care product what are the odds of them sort of coming back to the higher cost share care plus solution in 2020 for 2025 any thoughts there.
Well I think overall, we're pleased with the Carolina partnership as we continue to integrate and sell together. We've added another health plan since our go live with Caroline and and and we do believe there is an opportunity to increase the number of.
Services that we're offering the one customer that youre, referring to and and we're in active conversations around that.
Okay. That's that's very helpful. And then just can you maybe talk a little bit about the sort of EBITDA expectations. I mean, obviously youre looking at a potentially very significant increase in EBITA in three Q and for Q2.
Just any color or thoughts there I mean, I always quite frankly get a little bit worried when we talk about offshoring jobs.
Any.
And what sort of additional detail can you provide please thank you.
Yeah, we're incredibly pleased with the progress that we've made in our optimization efforts and the majority of that work is already behind us as we sit here in August and just don't know if you want to give any additional color to that.
Yeah, So two things David.
As.
We're going to achieve.
In the opening remarks, the the $30 million in savings this year.
But that EBITDA expansion isn't just from driving efficiencies around cost, it's all around top line growth as well and we've we've spoken historically about Q3.
Yeah, the largest quarter historically for our provider channel Q4 is always the largest quarter on the provider I'm on the life Sciences business.
And then I I touched on it in the opening remarks that life science sequentially grows from Q2 to Q3, so it's really a combination of driving top line growth across.
Our channels as well as at the same time, realizing the lion's share of the benefits of all that optimization work that we've done from year to date. The majority of that is going to hit our bottom line in the second half of the year. So.
It gives us really good confidence.
And achieving the targets for this year.
Okay, and then for carrier links.
Is there any reason why carry weeks could not be expanding to other plans beyond Medicare advantage. It seems to me like there'd be a huge need across commercial plans Medicaid plans employer groups like.
Just any any thoughts on the growth there. Please.
I think where we're in active conversations across all those channels. We had a good success story that I mentioned in my script with one of our large employers.
On the commercial side, you utilizing care length is unemployed benefit.
We've expanded beyond our one large pair into our first blues plan and and we're in active conversations with MAA with Medicaid and with health systems.
Yeah.
Yeah.
One thing I would add David is our hospital readmission program really.
Well received by not of risk does that include the Acos and health system.
Jeff said I mean, the G. P. M that we have the go to market plan for gambling include all the channels that you mentioned.
Okay, and then just one more for me and I'll hop back in the queue.
Jeff I like hearing about all of the sort of cost savings data.
Sure care is providing to customers.
I mean is this something that you're you can bear risk on are you are you driving any revenue based on the amount of cost savings you can deliver to certain health plan clients and I think you had talked about a white paper that you were going to publish just any any additional color or thoughts there would be helpful.
Yeah, I think you know, we're having increased visibility with our data with our clients as we work with them more over time, so we're collecting lots of data.
And we're driving insights from that data and sharing it with our clients, which is giving us confidence in how to price and today, we're doing that through P. Ge's performance guarantees but.
But we see us moving more towards risk measured risks.
Overtime, but but it's working and you know very well kind of as we had hoped as get confidence in the data.
Generate the insight delivered.
Deliver the capability and move from performance guarantees to more at risk models and and that's that's a constant conversation that we have with our clients as we see evolving with them over time.
Okay, and then I'm sorry, just one more for me can you comment on the competitive environment like I mean, I'm thinking about American well in particular, they have their converged platform elements as one of their largest customers. I mean, just who are you bumping into if any.
Buddy and your largest customers and it's my understanding that you powered Sydney for L. A the answer I think we'd give you a huge sort of competitive advantage just any any thoughts or color on the on the overall market.
Yeah, I would say in the overall market is it's competitive but.
But we are well diversified so as you know we work with large health plans and and we work hard everyday to drive value for Carolina and elegant as is.
One example, but other plans as well we had several large employer clients as you know and we've invested heavily in sales you know to kind of increase our rfps.
We've invested in government and we had some good success stories, there with the state of Georgia, and others, we have health systems, which were dark starting to do some really effective cross selling in and turning health system clients into enterprise clients for their employees.
We've started to add T. P. A's are this quarter, which we see as a big growth area for us and so I think the diversification of share care helps us a lot. So we can go to market with a carolina or we can go direct through our sales force or are we can cross sell and so it's given us a lot of a lot of at bats.
That helped us in a competitive market.
Okay. Congrats on the good quarter I'll hop back in the queue. Thank you.
Thank you.
The next question comes from Eric Percher Nephron Research. Please go ahead.
Thank you.
Start on the enterprise side, good to hear about the lives additions could you speak a little bit about development of the marketplace and maybe as we think about lives ex carillon you know what are you seeing among the blues targets for the year end.
Whether it's keeping pace with expectation.
Well I think on covered lives. It's it's it's we're keeping pace with expectations, so selling through our partners like Caroline is meeting expectations.
Our sales force delivering new logos is meeting expectations.
Our continued focus on the blues plan and we've added a new blues plan. This year that continues to beyond Mark. So all those things are are progressing as planned.
As the marketplace goes were having success in Upselling, our digital therapeutics to our installed base.
And we're leading with our owned solutions, which give us higher margin and more revenue and so we're starting to see some good pull through in that area as well.
Yeah, well until our partnership with <unk>, where we are jointly selling the market that you mentioned is tracking very well.
Okay. So so that seems to be an important factor you mentioned your own offerings and you mentioned G. L. P. One, which it seems to be that high.
Topic. This earning season can you give us a little bit more on what you've done there with real age and what management looks like for you beyond that.
Well, yes, we've done a lot of work and you know the GOP one space since we last stock of understanding on our clients or should this be a managed service or whats the cost if it goes unmanaged and then what are the unique assets. It sure care has that it can married with a G. L. P medications, so that you could get.
<unk> results and so we already have a real age program that has been distributed to 13 million covered lives.
And so you know people have their real age program and.
We already have a C. D C approved weight loss program and eat right now that came from our mine Sciences.
Acquisition, that's all based on mindfulness and how to curb cravings.
We have obviously share care plots in our advocates that can help with insurance companies and and so we're packaging all of that together and and creating a b to be offering that we're going to launch in January of next year to our enterprise clients.
Interesting.
Do you partner to the life Sciences.
Part of the market here as well.
Well, yes. So we were doing a lot of research right now on you know once we developed a solution for B to B, which is the combination of real age eat right now our advocates and some incentive strategies is what would that be it.
And interesting life science, offering as well and as you know we have a zero party database of over 100 million people.
The power of what powers, our life science business and many would qualify.
Qualifying and the demand is obviously quite high and so we're thinking through different life science offerings for not only enterprise, but direct to consumer.
Is there a historical analogue that's been similar I kind of think back to that Hep C products are quite different.
Have you ever seen a launched it got this type of employer.
Interest.
Hey, Eric demands are.
It's I can't think of anything off the top of my head I mean, the demand is massive and so you know you've got all you've got massive consumer demand you have obviously a cost issue.
Then you have this is a forever drug and so you need behavior change programs with it and.
So we're excited about it I mean, we have as I said, we've got the real age program, we have the perfect weight loss solution and eat right now we've got the infrastructure would be advocates.
And so we're just thinking through how do we package and price the offering and how can we get to market by Q1.
Yeah, Yeah, and I guess my question is a little bit more of it have you done this before in other categories, where our new product obviously the opportunities larger here, but is there a good example of of having executed on this before.
Well I mean, I would just add one is when we when we launched advocacy yeah.
We went from essentially zero lives too close to a million.
That has to be one of the larger <unk>.
More successful launches, we have very happy customers.
Yeah, right, that's not an easy task we weren't in that business. This time last year and got close to a million lives on our embassy platform today and very happy customers Yeah.
And in doing the crossover sellers like we know how to do that between enterprise and life Sciences. So for example, our eat right now.
Our unwinding in diet is both b to B and B to C and this quarter March care length, we launched care length, B to B and B to C. So we're using life sciences now to promote care lengths you know our direct to consumer similar to what we've done with mine Sciences.
Great.
Other question was on the life Sciences business and Jeff you've obviously seen a few cycles and love to get your view on the macro trend here and what enables you to put up a flat in a down market and then just an understanding we're going to see it.
An increase in Q3 Q4 is typically the seasonally large quarter habit is what you've seen year to date make you feel about Q4.
So I can I'll start with that is that we're number one as I've talked about for Q3.
We're going to see growth from Q2 to Q3, and that's you know that's not trivial growth. So we're bullish as we sit here today.
At the outset of the year you know we were conservative in our guide right and so we think we factored in most of you know a year that we were anticipating headwinds.
But yeah, there could be more pressure again, we talked about a lot, but we don't really know until we get into the quarter. We're confident that there'll be growth in Q4, and its just a matter of how much but we know that sequentially, we're going to grow into Q3 and into Q4 and you know.
We do we hit.
The target exactly I'm not sure, but we feel very confident in our range across our business for the year, which is why we reiterated guidance today.
Got you, Yeah, and I would just say and I would just say that the quality of the execution of campaigns year to date has been very strong and again you know how we differentiate is our zero party 100 million person database. So where are you know were pretty precise on our targeting.
But just to answer your question I mean, what gives us the confidence of the quality of our execution of campaigns to date.
So we think the customers will be there in the second half of the year for us.
Yes, I hear you on that is how you outperformed the market, but Jeff what is your perspective on the overall market and do you expect this downturn to do you have a view on duration.
I'm, hoping you know the 'twenty 'twenty four is is stronger than what the last two years have been.
So, but you know we're we're watching it carefully and we're adjusting our products and our mix are you now to.
Be able to succeed in current conditions.
But we're hopeful with the GOP ones and others that that there'll be some new opportunities.
Thank you Bob.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Mr. Jeff Arnold for any closing remarks.
Well. Thank you in closing I want to reiterate that we're very pleased with our financial performance this quarter.
Also like to take a moment to reinforce the fact that we are confident check here today and into the future and remain committed to maximizing shareholder value, we're confident in our strategic direction and our products and solutions and in our pipeline, we're confident in our team and our ability to maximize the opportunities before us optimize efficiencies and manage.
Expenses responsibly, we appreciate your time and interest this morning, and thank you and have a great day.
The conference has now concluded. Thank you for attending today's presentation and you may now.
Correct.
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