Q1 2024 Marpai Inc Earnings Call
Speaker Change: [music].
Operator: Good morning, and welcome to the Marpai First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. 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 turn the conference over to Steve Johnson, Chief Financial Officer. Please go ahead. Thank you.
Good morning, and welcome to the Mart paid first quarter 'twenty 'twenty four earnings conference call all participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing to Starkey followed by zero. Please note. This event is being recorded I would now like to turn the conference over to Steve Johnson Chief Financial Officer. Please go ahead.
Steve Johnson: Thank you and good morning, and welcome to the Marpai First Quarter 2024 Earnings Release Webcast. With me this morning is Damien Lamendola, CEO and Director of Marpai, and John Powers, President of Marpai. Today we'll dive into the booming TPA market, our strategic moves, and the financial results that are propelling Marpai forward. Please see the required safe harbor and forward-looking statement disclosure on your screen. Next, I'll turn it over to Damien to talk through our agenda for today.
Steve Johnson: Thank you and good morning, and welcome to the marked a first quarter 2024 earnings release webcast with its with me. This morning is Damian landowner CEO and director of more pay and John powers President of market today.
Steve Johnson: Today, we will dive into the booming tpa market, our strategic moves and the financial results that are propelling more pay forward.
Steve Johnson: Please see the required safe harbor and forward looking statement disclosure.
On your screen.
Damien Francis Lamendola: Next I'll turn it over to Damien to talk through our agenda for today.
Damien: Let's jump right in.
Damien Francis Lamendola: First, I'll break down the TPA market trends fueling our future growth. John will then detail our recent game-changing action, walk us through our fundamental performance, and I'll wrap up outlining our unwavering strategic focus.
Damien: First I'll break down the tpa market trends.
Damien: Our future growth.
Damien: John will then detail our recent game changing engines.
John Powers: He will walk us through our financial performance.
Speaker Change: Oh, I know I'm wasting strategic focus.
Damien Francis Lamendola: Healthcare premiums are skyrocketing, driving employers to cost-saving, self-funded plans, which third-party administrators like Marpai manage. That's a win-win for businesses and us. But unlike most third-party administrators, we offer access to two leading national provider networks, giving our members exceptional choice and better care. As seen in the bottom chart, these increases are driving more and more employers to self-funded, health-benefit plans.
Speaker Change: Hope you're pretty premiums are skyrocketing right employers to cost saving so fun to play with.
Speaker Change: Third party administrators like Mark they manage.
Speaker Change: That's a win win for businesses and us but.
Speaker Change: So it isn't like most third party administrators, we offer access to cheap leading national provider networks, giving.
Speaker Change: Given our members, except no choice and better care.
Speaker Change: See in the bottom chart. These in these increases increases.
Speaker Change: Driving more and more employers to self funded health benefit plans.
Damien Francis Lamendola: Typically, an employer can save 10% by just switching to a self-funded benefit plan. And while many third-party administrators struggle with network coverage, Marpai is one of the few independent third-party administrators that has access to two leading national provider networks with Aetna and Cigna, so our members have a terrific choice of in-network care.
Speaker Change: Oh estimates vary typically an employer can say, 10% I just switching to a self funded at the plant.
Speaker Change: Maybe third party administrators struggle with network coverage more phase one of the few independent third party administrators and has access to cheap leading national provider networks with Aetna and Cigna. So our members have a terrific choice amazing at work here.
Speaker Change: Yeah.
Damien Francis Lamendola: Also, the TPA market is a very attractive space for both financial and strategic buyers, with the growing importance of TPAs as the conduit for significant cost savings and recurring cash flows. There has been strong activity in the M&A market, and valuations continue to be high.
Speaker Change: Thanks, Damien also the Tpa market is a very attractive space for both financial and strategic buyers with the growing importance of T. P. H as the conduit for significant cost savings and recurring cash flows.
Speaker Change: There has been strong activity in the M&A market and valuations continue.
Speaker Change: Sure Ross.
Damien Francis Lamendola: One key differentiator of Marpai is the sheer number of choices that a potential client can choose for their benefit plan and dial up the savings with additional value-added services such as wellness programs and cost containment services. We're not just claim processors; we're strategic partners offering value-added services like wellness programs that deliver real savings for clients. This translates to a win-win for everyone and an exceptional return on investment for Markay. We believe that the company is positioned for success. Now I'll turn it over to John Powers, president of Marpai, to highlight the company's completed activities.
Speaker Change: One key differentiator of market. It is the sheer number of choices that a potential client can choose for their benefit plan and dial up the savings with additional value added services, such as wellness programs and cost containment services or not.
Speaker Change: Not just claim processors or strategic partners offering value added services like wellness programs that deliver real savings for clients.
Speaker Change: This translates to a win win for everyone and acceptable return on investment for market.
Speaker Change: We believe that the company is positioned for success.
Speaker Change: Now I'll turn it over to John powers, President Mark eight to highlight the company's completed actions.
John Powers: Thanks, Steve. Since joining in January, we've hit the ground running. We've conducted a strategic review, eliminating low margin and high-touch clients. This boosted our average per employee per month revenue by 21.5% and gross profit by 22.6% compared to Q1 of 2023. We've also secured a great new off-cycle client, hired top-tier sales talent to help accelerate growth, and delivered a highly successful open enrollment season. But that's not all.
John Powers: Thanks, Steve since joining in January we hit the ground Marathi, we've conducted a strategic review.
John Powers: <unk> low margin and high touch clients. This boosted our average per employee per month revenue by 'twenty, one and a half or so in the gross profit by 22, 6% compared to Q1 of 2023.
John Powers: We've also secured.
John Powers: We've also secured a great new off cycle client hired top tier sales talent to help accelerate growth and delivered a highly successful open enrollment season.
John Powers: But that's not all.
John Powers: We've laser focused on the member experience, improving service metrics like faster response times and smarter cost containment reviews. Finally, we've completed the first phase of our upgraded client and broker reporting package. I'll turn it back over to Steve to discuss the financial results.
John Powers: We are laser focused on the member experience improving service metrics like faster response times and smarter cost containment reviews. Finally, we've completed the first phase of our upgraded client and broker reporting packages.
John Powers: I'll turn it back over to Steve to discuss the financial results.
Steve Johnson: Thanks, John.
Steve Johnson: Execution and profitable revenue growth are our top priority. In the first quarter of 2024, net revenues were approximately $7.4 million for the three months ended, down $2.4 million, or 24%. Lower year-over-year compared to the three months ended in March of 2023. As John alluded to, this is primarily due to our strategic shift away from low-margin clients. Gross profit was $2.5 million for the three months ended in March 2024, down $0.7 million or 23% lower year over year. Operating expenses were $6.6 million for the three months ended in March 2024, an improvement of $5.2 million or 44% lower year-over-year compared to last year. This demonstrates our commitment to efficiency.
Execution and profitable revenue growth are our top priorities.
Steve Johnson: In the first quarter of 2024 net revenues were approximately $7 4 million for the three months ended.
Steve Johnson: Down $2 4 million or 24%.
Steve Johnson: Lower year over year compared to the three months ended in March.
Steve Johnson: 2023.
As.
John alluded to this was primarily due to our strategic shift away from low margin clients.
Steve Johnson: Gross profit was $2 5 million for the three months ended in March 2024, down <unk> 7 million or 23% lower year over year.
Steve Johnson: Operating expenses were $6 6 million for the three months ended in March of 2024, an improvement of $5 $2 million or 44% lower year over year compared to last year. This.
Steve Johnson: This demonstrates our commitment to efficiency.
Steve Johnson: Operating loss was $4.1 million for the three months ended in March of 2024, an improvement of $4.5 million, or 52% lower, compared with the three months ended in March 2023. Net loss was $4.3 million, an improvement of $4.5 million, or 51% lower year-over-year compared to March 2023. Basic and diluted earnings per share were a negative 46 cents in the first quarter, an improvement of $1.22 per share compared to the three months ended in March of 2023. The takeaway is that we're making significant strides towards profitability.
Steve Johnson: Operating loss was $4 1 million for the three months ended in March of 'twenty, 'twenty four and improvement.
Steve Johnson: 4.5 million or 52% lower compared.
Steve Johnson: Compared with the three months ended in March 2023.
Steve Johnson: Net loss was $4 3 million.
Steve Johnson: An improvement of $4 5 million or 51% lower year over year compared to March of 2023.
Steve Johnson: Basic and diluted earnings per share were a negative <unk> 46 cents.
Steve Johnson: In the first quarter, an improvement of $1.22.
Steve Johnson: Per share.
Steve Johnson: Compared to the three months ended in March of 2023.
Steve Johnson: The takeaway, we're making significant strides towards profitability.
Steve Johnson: Moving on to our balance sheet highlights, the ending cash balance at the end of the quarter was $0.9 million. Restricted cash was $12.8 million, and I always like to remind folks that our restricted cash primarily represents the funds on hand to pay for member claims. And if you look down further on the balance sheet, you will see an offset under current liabilities called accrued fiduciary obligations, which were $9.5 million, collects the funds prior to payment of the member's benefit claim. Total assets were $30.1 million, down $1.6 million from year-end. Current liabilities, the accounts payable, were $3.8 million, down $0.8 million from year-end 2023. So we started paying down our aged payables.
Steve Johnson: Moving onto our balance sheet highlights.
Steve Johnson: Ending cash balance at the end of the quarter was <unk> 9 million.
Restricted cash was $12 8 million and then I always like to remind folks that our restricted cash primarily represents the funds on hand to pay per member claims and if you look down further on the balance sheet, you will see an offset oh under current liabilities.
Steve Johnson: <unk> called accrued fiduciary obligations, which were $9 5 million.
Steve Johnson: Maher pay collects the funds prior to payment of.
Steve Johnson: The members benefit claims.
Steve Johnson: Total assets were $30 1 million down $1 6 million from year end.
Steve Johnson: Current liabilities the accounts payable was $3 8 million down <unk> 8 million from year end 2023, So we started.
Steve Johnson:
Steve Johnson: Paying down our our aged payables total liabilities were $44 6 million down <unk> 5 million from the year end in 2023.
Steve Johnson: Total liabilities were $44.6 million, down $0.5 million from the year end in 2023. And stockholders' equity was a negative $14.5 million, representing an increased deficit of $1.1 million from the year end in 2023. So again, everything is moving and pointing in the right direction.
Steve Johnson: Stockholders equity was a negative $14 5 million.
Steve Johnson: Representing an increase deficit of $1 1 million from the year end in 2023, So again, all moving and pointing in the right direction.
Steve Johnson: In Q1, our focus was stabilizing the balance sheet, and we've achieved that. Now moving on to the cash flow, a few key numbers from our cash flow statement. Net cash used in operations was only $3.6 million, an improvement of $2.9 million from the first quarter of 2023. Net cash provided by investing was not material.
Steve Johnson: In Q1, our focus was stabilizing the balance sheet and we've achieved that.
Steve Johnson: Now moving onto the cash flow.
Steve Johnson: A few key numbers off our cash flow statement.
Steve Johnson: Net cash used in operations was only $3 6 million an improvement of $2 9 million from the first quarter of 2023.
Steve Johnson: Net cash provided by investing was not material.
Steve Johnson: Net cash provided by financing activities was approximately $3.7 million, which was primarily from the sale of common stock in private offerings to insiders at market prices. Overall, the company was essentially cash flow neutral in the first quarter, an improvement of $6.5 million from the first quarter of 2023. Next, I want to highlight a few of our financial accomplishments in the first quarter and highlight also that these recent capital actions provide the required funding for operations for the next 12 months.
Steve Johnson: Net cash provided by financing activities was approximately $3 7 million, which was primarily from the sale of common stock in private offerings do insiders at market prices.
Steve Johnson: Overall, the company was essentially cash flow neutral in the first quarter.
Steve Johnson: An improvement of $6 5 million from the first quarter of 2023.
Speaker Change: Next I wanted to highlight a few of our financial accomplishments in the first quarter.
Speaker Change: And highlight also that these recent capital actions provide the required funding for operations for the next 12 months, while we may do other capital raising activities the.
Steve Johnson: While we may do other capital raising activities, the capital that we currently have on the balance sheet is adequate to fund our operations for the next 12 months. Some of those actions that contributed to that were a previously announced payment term extension by ATSA and a $3 million discount on the outstanding payable. If you recall, Marpai purchased Maestro House from AXA in November of 2022, and we have a roughly $19 million payable that we are paying down for AXA.
Speaker Change: The capital that we currently have on the balance sheet is adequate to fund our operations for the next 12 months some of those actions that that contributed to that.
Speaker Change: It was a previously announced a payment term extension by Axa.
Speaker Change: And a $3 million discount on the outstanding.
Speaker Change: Outstanding payable if you recall.
Speaker Change: Maher pay purchased a maestro house from Axa in November of 2022, and we have a roughly $19 million.
Speaker Change: Payable.
Speaker Change: That we are paying down for Axa and we negotiated in February.
Steve Johnson: We negotiated in February an adjusted payment schedule and recently completed some minimal payments for 2024 and delayed all further payments until 2025. In addition, AXA has indicated that they will reduce our outstanding payable by $3 million, and I wanted to highlight that the $3 million discount is not included in our 2-1-2024 result. In addition, we completed financing of up to $11.8 million in convertible notes with JGB Management Capital. It has a conversion feature at a premium to the current share price, so very, very favorable terms there.
Speaker Change: And adjusted payment schedule, where we made and recently completed some minimal payments for 2024 and delayed all further payments until 2025 and in addition, our Axa has indicated that.
Speaker Change: They will reduce our outstanding payable by $3 million and it's wanted to highlight that it's not included in our that $3 million discount is not included in our Q1 2024 results.
Speaker Change: In addition, we completed a financing of up to $11 8 million in convertible notes.
Speaker Change: With G G B management capital.
Speaker Change: It has a conversion feature at a premium to the current share price. So a very very favorable terms there more details can be found in our eight.
Steve Johnson: More details can be found in our 8K that was filed upon consummating the deal. And then, finally, and probably most importantly, we've gotten continued support by insiders and leadership through an additional $3.7 million equity raise at the market just in Q1 alone. So we're well positioned for continued growth.
Speaker Change: <unk> 8-K that was filed upon to consume.
Speaker Change: Consumer consummating the deal.
Speaker Change: And then finally and probably most importantly is we've gotten continued support by insiders and leadership through an additional $3 7 million dollar equity raise at the market just in Q1 alone.
Speaker Change: So we're well positioned.
Speaker Change: For continued growth.
Speaker Change: Okay.
Speaker Change: Thanks, Steve.
Steve Johnson: Our strategic priorities remain clear: operational excellence and delivery on the Marpai Saves Promise. The action we've taken and the financial results we've achieved demonstrate our unwavering commitment to these goals. We're very excited about the results.
Speaker Change: Key priorities remain clear.
Speaker Change: Exceptional customer experience.
Speaker Change: Operational excellence and delivering on the more PE saves promise the actions, we've taken and the financial results. We've achieved demonstrate our unwavering commitment to these goals.
Speaker Change: Very excited about the future.
Steve Johnson: Thank you very much, Damien and John. I'll leave this slide up for a little bit.
Speaker Change: Thank you very much staying in and and John I'll leave this slide up for a little bit if.
Steve Johnson: If you have any questions or require further information, please feel free to contact me at steve.johnson@marpaihealth.com, or feel free to go to our investor relations website, which has tons of information there. I will highlight that this webcast will be available for replay. This concludes our first quarter earnings call. Thank you again for joining us this morning. Ladies and gentlemen, thank you for participating; you may now go.
Speaker Change: Do you have any questions or require further information. Please feel free to contact me at Steve Johnson at Mahrt pay health Dot com.
Speaker Change: Or feel free to go to our Investor Relations website.
Speaker Change: Which has tons of information there.
Speaker Change: I will highlight that this webcast will be available for replay of this.
Speaker Change: <unk>, our first quarter earnings call. Thank you again for joining us this morning.
Operator: Ladies and gentlemen, thank you for participating; you may now disconnect.
Speaker Change: Ladies and gentlemen, thank you for participating you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Sure.
Unnamed: Klee, Edmundo Gonzalez, Simon Li, Yoram Bibring, Damien Lamendola, Steve Johnson, and Marpai
Speaker Change: Yeah.