Q1 2025 Marpai Inc Earnings Call
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Operator: Good morning and welcome to the Marpai first quarter 2025 earnings webcast. All participants will be in lesion-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by Z.
Good morning, and welcome to the Mark by first quarter 2025 earnings webcast, all participants will be in these oh any mode.
Should you need assistance. Please see the conference specialist by pressing the star key followed by zero.
Operator: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded I would.
Steve Johnson: I would now like to turn the conference over to Steve Johnson, Chief Financial Officer. Steve, please go ahead. Thank you and good morning and welcome to the Marpai First Quarter 2025 Earnings Release Webcast. With me this morning is Damien Lamendola, CEO and Director of Marpai.
Steve Johnson: I would like to turn the conference over to Steve Johnson, Chief Financial Officer, Steve <unk>.
Speaker Change: All I had.
Speaker Change: Thank you and good morning, and welcome to the market first quarter 2025 earnings release webcast with me. This morning is Damian Lam and Dor, CEO and director of more pigs.
Steve Johnson: Before we begin, I'd like to draw your attention to the four looking statements included in this presentation. And let's get right into it. Moving to our Q1 2025 highlights, we're seeing continued momentum and an acceleration of our turnaround effort. Net revenues were $5.4 million for the three months ended March 31, 2025. $2 million or approximately 27% lower than Q1 in 2024. Some additional color with that is that industry turnover is typically 20 to 30% annually, so we're on the higher end of that. And the company continues to focus on our margin generating clients. So as we move forward, we continue to manage and either raise prices and do the renewals or the lower margin clients will continue to drop off.
Speaker Change: Before we begin I'd like to draw your attention to the forward looking statements included in this presentation.
Speaker Change: And let's get right into it.
Speaker Change: Moving to our Q1 2025 highlights we're seeing continued momentum and acceleration of our turnaround efforts net.
Speaker Change: Net revenues were $5 4 million for the three months ended March 31, 2025, 2 million or approximately 27% lower than Q1 in 2020 for some additional color with that is that industry turnover, it's typically 20% to 30% annually. So we're on the higher end of that and the company.
Speaker Change: Continues to focus on our margin generating clients. So as we move forward, we continue to manage and either raise prices and and do the renewals or.
Speaker Change: The lower margin clients will continue to drop off.
Steve Johnson: Operating expenses were $7.7 million for the three months ended March 31st, $3.8 million or 33% improvement over Q1 of 2024. Our operating loss was $2.3 million for the first quarter, $1.8 million or 45% improvement over Q1 of 2024. Our net loss was $3.1 million for the three months ended in March. which was 1.3 million or a 29% improvement over Q1 of 2024. Basic and diluted earnings per share were a loss of $0.21 for the three months ending March 31, 2025, which was an improvement of $0.25 per share over the first quarter in 2024.
Speaker Change: Operating expenses were 7.7 million for the three months ended March 31st $3 8 million or 33% improvement over Q1 of 'twenty 'twenty four.
Speaker Change: Our operating loss was $2 3 million for the first quarter.
Speaker Change: 1.8 million or 45% improvement over Q1 of 2024.
Speaker Change: Our net loss was $3 1 million for the three months ended in March.
Speaker Change: Which was $1 3 million or a 29% improvement over Q1 of 2024.
Speaker Change: Basic and diluted earnings per share were a loss of 21 cents for the three months ended March 31, 2025, which was an improvement of 25 cents per share over the first quarter in 2024.
Steve Johnson: Next, I'll turn it over to Damien to highlight the role of third-party administrators.
Speaker Change: Next I'll turn it over to Damian to highlight the role.
Speaker Change: Third party administrators, sorry, I'm going to turn it over to myself to talk about the role of third party administrators.
Steve Johnson: Sorry, I'm going to turn it over to myself to talk about the role of third-party administrators. So third party administrators, what are they? As healthcare inflation continues to rise, a growing number of employers are adopting self-funded health insurance. Third-party administrators, or TPAs, play a vital role in this landscape by managing claims, processing, and reporting. While TPAs manage the administrative aspects of the insurance program, they typically offer several value-added solutions that drive both revenue for the TPA and savings for the employer.
Speaker Change: So third party administrators what are they.
Speaker Change: As health care inflation continues to rise growing number of employers are adopting self funded health insurance.
Speaker Change: Third party administrators or T. P. A's play a vital role in this landscape my managing claims processing and reporting.
Speaker Change: While T P H manage the administrative aspects of the insurance program. They typically offer several value added solutions that drive both revenue for the Tpa in savings for the employer.
Steve Johnson: is positioned to effectively partner with these employers to navigate the complexities of self-funded plans. The value proposition of a TPA is significant. Employers typically see savings up to 10% by simply moving to a self-funded model managed by a TPA. This is driven by several key benefits. First, cost efficiency through reduced administrative expenses. Second, flexibility in designing customized benefit plans to meet the specific needs of their employees. And third, compliance support, helping employers navigate complex regulatory landscapes and mitigate risk. And finally, and somewhat more importantly, is transparency. Through detailed reporting and data insights, we empower employers to make informed decisions about their healthcare spending, whereas in typical fully-funded arrangements, the employer does not receive detailed claim data or analytics of their member population.
Speaker Change: Maher pay is positioned to effectively partner with these employers to navigate the complexities of self funded plans.
Speaker Change: The value proposition of a T T a significant.
Speaker Change: <unk> typically see savings up to 10% by simply moving to a self funded model managed by G. P. A.
Speaker Change: This is driven by several key benefits first cost efficiency through reduced administrative expenses.
Speaker Change: Second flexibility in designing customized benefit plans to meet the specific needs of their employees.
Speaker Change: And third compliance support helping employers navigate complex regulatory landscapes, and mitigate risks and finally and somewhat more importantly is transparency.
Speaker Change: Through detailed reporting and data insights, we empower employers to make informed decisions about their health care spending, whereas in typical fully funded arrangements.
Speaker Change: The employer does not receive detailed claim data or analytics of their member population.
Steve Johnson: The TPA market in the United States is $150 billion with forecasted annual growth of 12.1% through 2031. Marpai has a national footprint, allowing us to service employers with multi-state locations, which many of our regional competitors can't do. Marpai also offers significant cost savings programs, and our relaunch of the Marpai RX program will be game changing.
Speaker Change: The tpa market in the United States is is 150 billion with forecasted annual growth of 12, 1% through 2031.
Speaker Change: <unk> has a national footprint, allowing us to service employers with multi state locations, which many of our regional competitors can't do.
Speaker Change: Mark do you also offers significant cost savings programs and our relaunch of the Murphy Rx program will be game changing.
Steve Johnson: More details regarding MarpaiRx will be shared later in the quarter. As a leading national independent TPA, our clients come first, and we can aggressively negotiate with providers, optimize pharmacy benefit management, enhance utilization management, offer an emphasis on wellness and prevention. and implement alternative payment models like reference-based pricing and bundled payments.
Speaker Change: More details regarding our P. Rx will be shared later in the quarter.
Speaker Change: As a leading national independent Tpa, our clients come first and we can aggressively negotiate with providers optimize pharmacy benefit management and.
Speaker Change: Hence utilization management.
Speaker Change: Offer an emphasis on wellness and prevention.
Speaker Change: And implement alternative payment models like reference based pricing and bundled payments.
Speaker Change: Yeah.
Damien Lamendola: Thanks, Steve. At Marpai, our core mission is to deliver affordable and intelligent health care solutions. and their deliverables remain consistent. Revenue growth.
Speaker Change: I see.
Speaker Change: And more pay our core mission is to deliver affordable and intelligent health care solutions.
Speaker Change: Goals remain consistent.
Damien Lamendola: We have a strong pipeline of business for the second half of 2025, and we'll communicate further updates when we hold our third quarter earnings call in November. On the customer experience, we are executing our rollout of the Empyra member portal, which is on track to be completed by the end of the second quarter. and on profitability, we are relentless in driving efficiencies and cost reduction. In a short span, Marpai's team engineered an exceptional turnaround, dramatically reducing losses.
Speaker Change: Revenue growth, we have a strong pipeline of business for the second half of 2025, and we'll communicate further updates when we hold our third quarter earnings call in November.
Speaker Change: The customer experience, we are executing our rollout of the apparel member portal, which is on track to be completed by the end of the second quarter.
Speaker Change: Our profitability, we are relentless in driving efficiencies and cost reductions.
Speaker Change: In a short span, our pes team engineered and exceptional turnaround dramatically reducing losses and.
Damien Lamendola: and as Marpai's largest shareholder, hitting profitability this year is my absolute top priority and I won't be satisfied until we reach that milestone. To further our goal of profitability and drive growth, we strengthened our leadership team. I'm particularly pleased to highlight the recent appointment of Dallas Scripp as our Chief Operating Officer and President of Marpai RX. Dallas brings a wealth of experience in the TPA industry with a strong track record from his previous roles and is a recognized leader in the field. Dallas's appointment is a crucial part of our strategy to build a stronger bench across the organization.
Speaker Change: Maltase Asmara largest shareholder hitting.
Speaker Change: Hitting profitability. This year is my absolute top priority and it won't be satisfied until we reach that milestone.
Speaker Change: To further our goal of profitability and drive growth, we strengthened our leadership team I'm, particularly pleased to highlight the recent appointment of Dallas script, as our Chief operating officer and President of what they are ex <unk>.
Speaker Change: Dallas brings a wealth of experience in the Tpa industry with a strong track record from his previous roles as a recognized leader in the field Dallas.
Speaker Change: Dallas is appointment is a crucial part of our strategy to build a stronger bench across the organization.
Damien Lamendola: We have assembled a high-performing team that will propel our growth finishes and drive us towards sustainable profitability.
Speaker Change: We have assembled a high performing team that will propel our growth initiatives and drive us towards sustainable profitability.
Damien Lamendola: My two final thoughts. In conclusion, Marpai is making significant strides in our turnaround. We're leveraging the growing demand for TPA. and Marpai, we cut costs, we expect profits, we are growing and we will be cash flow positive this year.
Speaker Change: A few final thoughts.
Speaker Change: Inclusion.
Speaker Change: <unk> pay is making significant strides in our turnaround.
Speaker Change: We're leveraging the growing demands for T T A's and more paid we cut cost we expect profits were growing and we will be cash flow positive. This year. Thank you for your time well now open the floor for any questions you may have.
Damien Lamendola: Thank you for your time.
Operator: We will now open the floor for any questions you may have. Thank you.
Speaker Change: Thank you we will now begin our question and answer session to ask a question you May press star, but then the number one on your attached unfold.
Operator: We will now begin the question and answer session. To ask a question, you may press the star button, the number one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the button. To withdraw your question, please press the start button, then number 2.
Speaker Change: If you are using a speaker phone please pick up your handset before pressing the keys to withdraw your question. Please press the star, but then the number two.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: At this time, we will pass momentarily to assemble our oster.
Neil Kataldi: The first question comes from Neil Kataldi from Blueprint Capital Management, please go ahead. Hey, guys, thanks for taking my questions today. I got a few, if you don't mind. First, it looks like you didn't sign up as much new business in the first quarter compared to maybe what we we would have expected, you know, in twenty twenty four. I was wondering if you could give us some color into the sales strategy today and what you're changing so you can grow quicker. Yeah, good. Great question. We really focused on the turnaround in 2024, improving our operations, our efficiencies.
Speaker Change: The first question comes from Neil Cataldi from Blueprint Capital Management. Please go ahead.
Neil Cataldi: Hey, guys. Thanks for taking my questions today I got a few if you don't mind first it looks like you didn't sign up as much new business in the first quarter compared to maybe what we are we would have expected you know in 2024 I was wondering if you could give us some color into the sales strat.
Neil Cataldi: <unk> today, and what you're changing say you can grow quicker.
Speaker Change: Yeah. Good great question we.
Speaker Change: Really focused on the turnaround in 2020 for improving our operations are our efficiencies are we didn't hire are two key salespeople until may of last year, so kind of joined.
Damien Lamendola: We didn't hire our two key salespeople until May of last year, so kind of early enough to get some new business, but not early enough to get the larger clients out there. Now we've got the full team on for the full year. The nice thing is the team's been doing a great job of picking up lives, what I would call off-cycle, with about 80% typically on either renew or change TPAs on January 1st. That's when you usually get your big bump there, and obviously we didn't get it this year. Part of that was also managing, as I mentioned in my comments, some of the lower margin clients to other TPAs to let them handle those less profitable clients.
Speaker Change: Early enough to get some new business, but not not early enough to to get the the larger clients out there now we've got the full team on a for the full year. The nice thing is the team has been doing a great job of picking up our lives.
Speaker Change: What I would call off cycle with about 80% typically either renew or changed G. P. As on January 1st that's when you usually get your big bump are there and obviously, we didn't get it this year and part of that was also managing as I mentioned in my comments.
Speaker Change: Managing some of the lower margin clients are to other tpa's to let them handle those those are less profitable clients.
Damien Lamendola: Okay, great. So, uh, we should expect you guys to kind of win lives off cycle this year and then in the gen cycle next year could be could be much different. Exactly, exactly. And we've got the second half of 2025, we've got a very strong pipeline. Our predecessor company, Connell Benefits, had a strong relationship with the Teachers Retirement System of Texas. And we've recently signed a couple of school districts with them, and they start September 1st from there. So those would be some good wins that we've got coming on. And then as I mentioned, we'll also give a full update for the January 1st sales pipeline after our third quarter, Carl, in mid-November.
Speaker Change: Okay, great. So are we.
Speaker Change: We should expect you guys to kind of win lives off cycle. This year and then in the Jan cycle next year, it could be could be much different.
Speaker Change: Exactly exactly I mean, we've got the the second half of 2025, we've got a very strong pipeline.
Speaker Change: Our predecessor company kind of benefits had a strong relationship with the teachers retirement system of Texas, a and we've recently signed a couple of school districts are with them and they start September one.
Speaker Change: From from there so those would be some some good wins that we've got coming on and then it is a I mentioned will also give a full update for the January 1st.
Speaker Change:
Speaker Change: Sales.
Speaker Change: <unk> after our third quarter call in mid November its it's typically a 90 day cycle.
Damien Lamendola: It's typically a 90-day cycle and we'll have very good clarity on the numbers for 2026 by mid-November. Okay, great.
Speaker Change: And we'll have very good clarity on the are the numbers for 2026 by mid November.
Speaker Change: Okay great.
Neil Kataldi: Switching gears, you burned, I think, $3 million in the first quarter. That's a pretty big hole to fill, given the commentary around getting to cash flow positive.
Speaker Change: Switching gears you burned I think 3 million in the first quarter, a that's a pretty big hole to fill given the commentary around getting to cash flow positive.
Damien Lamendola: Can you talk about potential for further cost reduction initiatives, and what gives you confidence you can really get to break even by your end? Yeah. Great question. We still have a few more duplicative vendors to rationalize, and we have a few legacy contracts that are coming to an end, which will provide additional savings. And the real bang for the buck is we're working on driving our operational efficiencies and some of the redundancies that we have, one, to reduce costs, and two, you know, provide better customer service and member service from there, which, again, it's a virtuous cycle.
Speaker Change: Can you talk about potential for further cost reduction initiatives and what gives you confidence you can really get to breakeven by year end.
Speaker Change: Yeah. Great question. Great question is are we still have a few more duplicative vendors to rationalize and we have a few legacy contracts that are coming due and which will provide additional savings.
Speaker Change: And the real Bang for the Buck is where we're working on.
Speaker Change: Driving our operational efficiencies and some of the redundancies that we have one to reduce costs and to <unk>.
Speaker Change: Provide better customer.
Speaker Change: Customer service and member service from there, which again is it's a virtuous cycle. When you when you offer great service.
Damien Lamendola: When you offer great service, the ability to reference existing clients and to gain additional clients runs very positive. And in addition, we've really reduced our cash burn rate. You'll see a significant reduction in the second quarter from there. And so, we look solid for the second half of the year. Okay, great.
Speaker Change: The ability.
Speaker Change: The ability to reference existing clients and and to gain additional clients runs very positive and in addition, we we've really reduced our cash burn rate, you'll you'll see a.
Speaker Change: Significant reduction in second quarter from there and so we look we look solid.
Speaker Change: For.
Speaker Change: The second half of the year.
Speaker Change: Okay, Great and then my last question now just you mentioned the empower our portal I was wondering if you could provide a little more color on that and the benefits that the solution offers to tomorrow.
Neil Kataldi: And then my last question, I was just, you mentioned the Empara portal.
Damien Lamendola: I was wondering if you could provide a little more color on that and the benefits that the solution offers to Marpai. Yeah, this one is really a fantastic solution for us, is right now between the acquisition of Maestro and Marpai, we had a few different portals and apps out there for our clients to utilize. And what we're doing is rationalizing those multiple portals into the Empara solution, which is really a world-class application, utilizing AI. And what's really neat about there is we've loaded each of our clients' summary plan documents, which is the core of our clients' benefit plans.
Speaker Change: Yeah. This this one is really a fantastic solution for US is a right now between the acquisition of Maestro and Maher pay we had.
Speaker Change: A few different portals and and apps out there for our clients to to utilized and what we're doing is rationalizing those are.
Speaker Change: Multiple portals into the Empire solution, which is really a world class application.
Speaker Change: Utilizing AI and what's really neat about there is as we've loaded each of our clients summary, playing documents, which is the the core of our clients' benefit plans.
Damien Lamendola: And it allows our members to go on the app, get their ID cards, and ask questions like, hey, is knee surgery approved for my benefit plan? And it goes and searches and answers automatically, which also reduces the number of calls that we require in our call center. In addition, if there's further clarification needed, there's a button right on the app that says, make a call, and that gets transferred to our call center. And it feeds all the prior information and the discussion and answers that were done in the app to the customer service agent, so they're right up to speed and can get to the solution that the member's looking for.
Speaker Change: And it allows our members to go on the App, you know get their I D cards and ask questions like Hey is knee surgery approved.
Speaker Change: For my benefit plan and it goes in and searches and answers automatically.
Speaker Change: Which also reduces the number of calls that we are requiring all call Center. In addition, if there's further clarification needed.
Speaker Change: There's a button right on the App that says make a call and that gets transferred to our call Center.
Speaker Change: And it it feeds all the prior information in the discussion in answers that were done in the app to the the customer service agents, so they're right up to speed and can get to the solution that the members looking for so we see a big opportunity too.
Damien Lamendola: So we see a big opportunity to, again, improve our efficiencies, reduce the number of heads that are required in our call center, and also provide information right at their fingertip.
Speaker Change: Again improve our efficiencies and reduce the number of heads that are required in our call Center and also provide information right at their fingertips.
John Powers: John, that's great, Steve. Thank you. I'm looking forward to watching the progress and I'll talk to you guys. All right. Thank you.
Speaker Change: Okay. That's great. Thank you I'm looking forward to watching the progress and I'll talk to you guys soon.
Alright, thank you.
Damien Lamendola: Thank you so much for the question, Neil. And again, if you have a question, please press the star button, then the number one.
Speaker Change: Thank you so much for the question Neil and again, if you have a question. Please press the star button that number one.
Speaker Change: Yeah.
Operator: Since there are no further questions at this time, this concludes our question and answer session.
Speaker Change: Since there are no further question at this time. This concludes our question and answer session I would like to turn the conference back over to Steve Johnson for hours closing remarks.
Steve Johnson: I would like to turn the conference back over to Steve Johnson for our closing remarks. Thank you very much. I appreciate you joining us this morning. I just want to reiterate, a replay of the webcast will be available later today for the next week if you wanted to delve into more details or catch something on the slides. Thank you again.
Speaker Change: Thank you very much and I appreciate you joining us this morning.
Speaker Change: I just want to reiterate a replay of the webcast will be available later today for the next week.
Speaker Change: If you wanted to delve into more details or or catch something on the slides. Thank you again.
Speaker Change: Okay.
Operator: Conference is now concluded. Thank you for attending today's presentation. You may now
Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.