Q4 2023 Marpai Inc Earnings Call
Operator: Good morning, and welcome to the Marpai fourth quarter and fiscal year 2023 earnings conference call. All participants will be in a lesson only mode.
Good morning, and welcome to Denmark, P fourth quarter and fiscal year 'twenty 'twenty earnings Conference call, all participants will be in a listen only mode.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note that this event is being recorded. I would now like to turn the conference over to Steve Johnson, Chief Finance Officer. Please go ahead. Thank you, and good morning and welcome to Marpai's fourth quarter and fiscal year 2023 earnings release webcast. With me today is Damien Lamendola, CEO and Director of Marpai. This morning, we will review the state of the industry and cover some of the key trends that are relevant to Marpai. Damien will also highlight our strategic priorities, and we will walk through some specific actions that the team has completed. Then I will take you through the financial highlights, our next steps, and we will wrap up with some final thoughts. As the conference operator mentioned, today's webcast will be recorded and available later today, so if you miss something, you can go back and get that. Switching to the next slide, just briefly, just see the required safe harbor and forward-looking statement disclosure. I'm not going to read through all that.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Please note this event is being recorded.
I would now like to tender conference over to Steve Johnson, Chief Financial Officer. Please go ahead.
Steve Johnson: Thank you and good morning, and welcome to <unk> fourth quarter and fiscal year 2023 earnings release webcast.
Steve Johnson: With me today is Damian lemon door, CEO and director of marketing.
Steve Johnson: This morning, we will review the state of the industry.
Steve Johnson: Some of the key trends that are relevant to market.
Speaker Change: Damian will also highlight our strategic priorities and.
Speaker Change: And we will walk through some specific actions that the team has completed.
Speaker Change: Then I will take you through the financial highlights our next steps and we will wrap up with some final thoughts.
Speaker Change: As the conference Operator mentioned is today's webcast will be recorded and available later today. So if you Miss something you can go back in and get that.
Speaker Change: Switching to the next slide just briefly did see that required for safe Harbor and forward looking statement disclosure.
Speaker Change: I'm not going to read all of that.
Speaker Change: Yeah.
Speaker Change: Alright on slide three.
Steve Johnson: All right, on slide three, I'd like to turn over the call to Damien, and he'll start us off with what the industry trends are. Great. Thank you, Steve. Marpai is a leading national health benefit third-party administrator, sometimes called a TPA, for Self-Funded Employers. The industry is experiencing significant growth, which we expect to continue to positively impact the performance of Marpai. First, there is a continued shift in employers taking advantage of benefit plan savings by moving to a self-funded plan. In fact, on average, a company switching to a self-funded plan saves 8 to 10 percent on their health plan costs.
Speaker Change: Is I'd like to turn over the call to Damian and he'll start us off with what the industry trends are.
Damien Francis Lamendola: Great. Thank you Steve.
Damien Francis Lamendola: He is a leading national health benefit.
Damien Francis Lamendola: Third party administrator, sometimes called the Tpa.
Damien Francis Lamendola: For self funded employers the industry is experiencing significant growth, which we expect to continue to positively impact the performance of the market.
Damien Francis Lamendola: First is a continued shift employers taking advantage of the best plan savings I believe me to a self funded plan in fact on average our companies switching to a self funded plan say, 8% to 10% on the health plan costs.
Damien Francis Lamendola: Second, with inflationary pressures on both health care costs and employee compensation, employers are looking for innovative solutions to increase their base savings. Third, the TPA model allows increased flexibility and customization, which allows employers to drive toward a more value-based care model. The industry has seen significant demand from clients looking for unique solutions to mitigate high-cost chronic conditions and manage prescription costs for the employee. The TPA model lets employers focus on their core business and allows the TPA to manage and monitor the various programs on their behalf.
Damien Francis Lamendola: Second the inflationary pressures in both health care costs and employee compensation employers looking for innovative solutions to increase their base savings.
Damien Francis Lamendola: Third the Tpa model allows increased flexibility and customization, which allows employers to drive toward a more value based care model.
Damien Francis Lamendola: And finally, the industry is seeing significant demand from clients looking for unique solutions to mitigate high cost chronic conditions and manage prescription cost for their employees.
Damien Francis Lamendola: The P. P. A model that's employer's focus on their core business and allows the T. P. A to manage the mantra diverse programs on their behalf.
Damien Francis Lamendola: It all begins with our customers. We focus on making the customer experience as pleasant as possible. No one likes to see their doctor, and it's usually only when you're sick.
It all begins with our customer we focus on making the customer experience as pleasant as possible no one likes to see their doctor and usually only when you're sick.
Damien Francis Lamendola: Marpai is one of the few independent third-party administrators that has access to two leading national provider networks with both Aetna and Cigna, so our members have a terrific choice of in-network care. We're also revamping our customer service department to make sure we get our members the right answers when they need them. We perform multiple internal audits and process improvement exercises to keep our team continuously improving. Our president, Don Powers, and I personally met with several of our key clients to listen to the feedback and implement many of the great ideas they have suggested. Next, the team is engaged on operational. We're still digesting the Maestro Health acquisition and integrating the best practices from both organizations. We're also utilizing our strength in generative artificial intelligence to focus internally and automate several tasks to improve quality and speed while also reducing the cost of service for members. Lastly, to help save them time, money, and potentially lives, Marpai offers specialized, proven clinical programs to tackle diabetes, orthopedic issues, GI problems, heart, and lung conditions, and many more.
Damien Francis Lamendola: Phase one of the few independent third party administrators that has access to two leading national provider networks with both Aetna and Cigna. So our members have a terrific choice of in network care.
Damien Francis Lamendola: We're also revamping our customer service department to make sure we get our members the right answers when they need them.
Damien Francis Lamendola: We performed multiple internal audits and process improvement exercises to keep our team continuously inquiry.
Damien Francis Lamendola: Our president John powers, and I personally met with several of our key clients, so listen to the feedback and implement many of the great ideas. They have suggested.
Damien Francis Lamendola: Next the team is engaged on operational excellence.
Damien Francis Lamendola: We're still digesting the maestro health acquisition and integrating the best practices from both organizations.
Damien Francis Lamendola: We're also utilizing our strength and generous artificial intelligence to folks internally and automate several task to improve quality and speed, while also reducing the cost of service for our members.
Damien Francis Lamendola: Lastly to help save them time money and potentially lies more pay offer specialized proven clinical programs tackle diabetes I'll speak issues Gi problems hearts and lung conditions and many more.
Damien Francis Lamendola: As I said, these programs help our clients save time, money, and also lives. I'm going to turn it over to Steve. Steve will address some of the actions that have been completed so far since we joined back in early November. Thank you, Damien. Uh, let me go back.
Damien Francis Lamendola: As I said these programs help our client save time money and also lives.
Damien Francis Lamendola: And that always see people address some of the actions that have been completed so far since we joined back in early November.
Speaker Change: Thank you Damian.
Speaker Change: Let me go back.
Damien Francis Lamendola: Alright, part I believe it was just a short four months ago, when we joined the <unk> team.
Steve Johnson: It is hard to believe it was just a short four months ago when we joined the Marpai team. In late November, Damien and I held our first investor webcast, and we outlined several actions that we believed would help right the ship. It is always nice to be able to follow up and show that you did what you said you were going to do.
Damien Francis Lamendola: In late November gave me that I held our first investor webcast and we outlined several actions that we believed would help right the ship.
Damien Francis Lamendola: It is always nice to be able to follow up and show that you did what you said you were going to do.
Steve Johnson: We were successful in completing the sale of our non-core FSA and HSA business for $1.7 million last December. Additionally, we were able to negotiate a payment term extension as well as a $3 million discount with AXA stemming from our acquisition of Maestro Health in late 2022. We were able to secure nearly $2 million in non-dilutive capital from Libertas funding, and we were very fortunate to have John Powers join us as our new president.
Damien Francis Lamendola: We were successful in completing the sale of our noncore FSA and HSA business for $1 $7 million last December.
Damien Francis Lamendola: We were able to negotiate a payment term extension as well as a 3 million dollar discount with Axa.
Damien Francis Lamendola: Stemming from our say our acquisition of Maestro halt in late 2022.
Damien Francis Lamendola: We were able to secure a nearly $2 million in non dilutive capital from Libertad <unk> funding.
Damien Francis Lamendola: And we were very fortunate to have John powers join us as our new President.
Steve Johnson: And he has been working feverishly, meeting with clients, and he was successful in closing a three-year contract with a new Southeastern-based client that started earlier this month. Quite simply, we outline our objectives and then execute them. Next, we'll start with the financial highlights of the fourth quarter. Net revenues were $8.7 million, an improvement of $1.1 million or 12% over the fourth quarter of 2022. Gross profit was $3 million, an improvement of $0.2 million, or 6.5%, over the fourth quarter of 2022. Operating expenses were $8.2 million, an improvement of $3.6 million, or 30.6%, lower than last year. The operating loss was $5.2 million, an improvement of $3.8 million, or 42.3% lower than the prior quarter. And the net loss was $5 million, an improvement of $3.5 million, or 41.1% lower than the fourth quarter of 2022. Earnings per share were a loss of $0.65, an improvement of $1 over the fourth quarter of 2022. While we didn't have much time, we were able to make some progress financially. Now moving on to the full-year highlights.
John Powers: And he has been working feverishly meeting with clients and he was successful in closing a three year contract with a new south eastern based client that started earlier this month.
John Powers: Quite simply we outlined our objectives and then execute.
John Powers: Next we'll start with the financial highlights of the fourth quarter.
Net revenues were $8 7 million, an improvement of $1 1 million or 12% over the fourth quarter of 2022.
John Powers: Gross profit was $3 million an improvement of <unk>.
John Powers: Point 2 million or six 5% over the fourth quarter of 2022.
John Powers: Operating expenses were $8 2 million, an improvement of 3.6 million or 36% lower than last year.
John Powers: Operating loss was $5 2 million, an improvement of $3 8 million.
John Powers: Or 42, 3% lower than the prior quarter year.
John Powers: And the net loss was 5 million an improvement of $3 5 million or 41, 1% lower than the fourth quarter of 2022.
John Powers: Earnings per share was a loss of 65 cents, an improvement or a dollar over the fourth quarter of 2022.
John Powers: While we didn't have much time we.
John Powers: We were able to make some progress financially.
John Powers: Now moving on to the full year highlights.
Steve Johnson: For the full year, net revenues were $37.2 million. It was an improvement of 12.8 million or 52.6% higher year over year, and, of course, much of that growth was due to the Maestro acquisition. Growth profit was $12.9 million, an improvement of $5.7 million or 79.2% higher than last year. Operating expenses were $40.9 million for the year ended. It was an increase of 6.7 million or 19.7% higher than the previous year.
John Powers: For the full year net revenues were $37 2 million.
John Powers: It was an improvement of $12 8 million or 52, 6% higher year over year and of course much of that growth was due to the maestro acquisition.
John Powers: Gross profit was $12 9 million, an improvement of $5 7 million or 79, 2% higher than last year.
John Powers: Operating expenses were $40 9 million for.
John Powers: For the year ended it was an increase of $6 7 million or 19, 7%.
John Powers: Higher than the previous year.
Steve Johnson: Operating loss was $28 million for the year, an increase of about $1 million or 3.8% higher year over year. Net loss was $28.8 million for the year ended, an increase of 2.3 million or 8.6% higher compared to the same period last year. Basic and diluted earnings per share were a negative $4.14.
John Powers: Operating loss was $28 million for the year, an increase of about $1 million or 3.8% higher year over year.
John Powers: Net loss was $28 8 million for the year ended.
John Powers: An increase of $2 3 million or eight 6% higher compared to the same period last year.
Basic and diluted earnings per share was a negative $4 and 19 in 2014 cents.
Steve Johnson: An improvement of $1.09 per share compared to last year. And really, the story here is Marpai is starting to gain the benefits of the Maestro acquisition with much more to come. Now, let's shift over to some of the balance sheet highlights. Our ending cash balance was $1.1 million. Our restricted cash was $12.3 million, and I wanted to highlight that for our business, for Marpai's business, restricted cash primarily represents the funds on hand to pay for member benefit claims. And then if you look at our balance sheet, there's an offset under our current liabilities called accrued fiduciary obligations, which were $11.6 million. Simply, Marpai collects the funds from our clients prior to the payment of the Members Benefit Claims, so I wanted to highlight that for everyone.
John Powers: An improvement of $8 nine per share compared to last year.
John Powers: And really the story here is mark he is starting to gain the benefits of the maestro acquisition with much more to come.
Okay.
John Powers: Now, let's shift over to some of the balance sheet highlights.
John Powers: Our ending cash balance was $1 1 million.
John Powers: Our restricted cash was $12 3 million and I wanted to highlight that for our business from our Pes business restricted cash primarily represents the funds on hand to pay per member benefit claims and then if you look at our balance sheet, there's no offset under our current liabilities called a crude.
John Powers: Fiduciary obligations, which were $11 6 million simply Marty collect the funds.
John Powers: From our clients prior to the payment.
John Powers: The members benefit claims so I wanted to highlight that our forever one.
Steve Johnson: Long-term assets. In the fourth quarter, Marpai wrote down 50% of our goodwill, or approximately $3 million. Our current liabilities, the key highlight there is our accounts payable, were up $3.2 million from the previous year, and our other long-term liabilities of $19.4 million are primarily related to the amounts payable from the acquisition of Maestro Health, and that figure does not reflect the $3 million discounts that we negotiated in February. Stockholders' equity was a negative $13.4 million.
John Powers: Long term assets in the fourth quarter more payroll down 50% of our goodwill or approximately $3 million.
John Powers: Our current liabilities a key highlight there is our accounts payable were up $3 2 million from the previous year.
John Powers: And our other long term liabilities of $19 4 million.
John Powers: Our primary related to the Axa payable from the acquisition of Maestro health and that figure does not reflect the 3 million dollar discounts that we negotiated in February.
John Powers: Stockholders equity was a negative $13 4 million.
Steve Johnson: Now we'll move over to... The cast will highlight. Net cash used in operations was $15.7 million, down $19.5 million from the prior year. Net cash provided by investing was approximately $1 million, which relates to the sale of our non-core FSA business mentioned earlier. Net cash provided by financing activities was approximately $5.1 million, and that was primarily from the sale of common stock earlier last year and for the payments made during the year for the acquisition of Maestro Health. Overall, the company used $9.6 million in cash.
John Powers: Now I will move over to.
John Powers: The cash flow highlights.
John Powers: Net cash used in operations was $15 7 million.
John Powers: Down $19 5 million from the prior year.
John Powers: Net cash provided by investing was approximately $1 million, which relates to the sale of our noncore FSA business as mentioned earlier.
John Powers: Net cash provided by financing activities was approximately $5 1 million and that was primarily from the sale of common stock earlier last year.
John Powers: And for the payments made during the year for the acquisition of Maestro health.
John Powers: Overall, the company used $9 6 million in cash.
Steve Johnson: All right, next step. I just want to highlight some of the key success factors, and one... [inaudible] need is for our attention on execution. Our team needs to continue to reduce costs and achieve profitability. We must complete our ongoing technology projects to drive efficiencies in claims and customer service. We have an experienced sales team brought in by John Powers that will grow the top line. And we must utilize our artificial intelligence skills to reduce risk and continue to refine our proactive disease state model.
Alright next steps.
Speaker Change: I just wanted to highlight some of the key success factors.
Speaker Change: And one.
Speaker Change: Constant.
Speaker Change: Need is for our attention on execution.
Speaker Change: Our team needs to continue to reduce costs and achieve profitability.
Speaker Change: We must complete our ongoing technology projects to drive efficiencies and claims and customer service we.
Speaker Change: We have an experienced sales team brought on by John powers that will grow the top line and.
Speaker Change: And we must utilize our artificial intelligence skill.
Speaker Change: To reduce risk and continue to refine our proactive disease state models.
Damien Francis Lamendola: I'll turn it over to Damien for some final thoughts. Thanks again, Steve. As you have seen, the team has achieved quite a bit over the past four months, but we have a long way to go on our journey of being one of the largest independent third-party administrators in the country while driving down the cost of health care. We must, and we will position the company's capital structure for profitability and growth.
Speaker Change: I'll turn it over to Damien for some final thoughts.
Damien: Thanks again.
Damien: As you have seen the team has achieved quite a bit over the past four months, but we have a long way to go on our journey of being one of the largest independent third party administrators in the country, while driving down the cost of health care without the cuts her health care health care down for our clients and members, we must and we will position the.
Damien: <unk> capital structure for profitability and bricks.
Operator: The industry has just gotten a small taste of what our leadership team is capable of, and as we addressed early on in our presentation this morning, we have highly favorable opportunities in a growing industry with clients that need our help. We have just started to leverage our deep industry relationships to enhance our market position, and we must use our competitive advantage with our existing talent in artificial intelligence to drive operational cost reductions to become the lowest cost third-party administrator in the country. Thank you, Damien. This concludes Marpai's fourth quarter and fiscal year 2023 earnings call. If you have questions or require further information, please see the information on our screen or go to our investor relations website. Again, this webcast will be available for replay, and thank you for joining us this morning. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [inaudible]
Damien: The industry has just gotten a small taste of what our Asia team is capable of.
Damien: And he addressed early on in our presentation. This morning, we have highly favorable.
Damien: Favorable opportunities in a growing industry with clients that need our help we are just starting to leverage our deep industry relationships to enhance our market position and we must use our competitive advantage with our existing talent and artificial intelligence to drive operational cost reductions to become the lowest cost third party admin.
Straighter in the country.
Speaker Change: Thank you Damien this completes <unk> fourth quarter and fiscal year 2023 earnings call. If you have questions or require further information. Please see the information on our screen or go to our Investor Relations website again. This webcast will be available for replay and thank you for joining us this morning.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].