LifeMD Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 11, 2024

There are 8 speakers on the call.

Operator

Good afternoon. Thank you for joining us today to discuss LifeMD's results for the 4th quarter and year ended December 31, 2023. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer and Mark Benethin, Chief Financial Officer. Following management's prepared remarks, we will open the call for a question and answer session. Before we begin, I would like to remind everyone that during this call, the company will make a number of forward looking statements, which are subject to numerous risks and uncertainties that may cause actual results to differ materially from those projected.

Operator

These risks and uncertainties are described in the company's 10 ks and 10 Q filings and within other filings that LifeMD may make with the SEC from time to time. Forward looking statements made during this call are based on current information available to the company as of today, March 11, 2024. The company assumes no obligation to update or revise any forward looking statements after today's call, except as required by law. Also, please note that management will be discussing certain non GAAP financial measures that the company believes are important LifeMD's performance. Details on the relationship between these non GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release issued earlier today.

Operator

Finally, I would like to remind everyone that today's call is being recorded and will be available for replay in the Investor Relations section of the company's website. Now, I'd like to turn the call over to LifeMD's CEO, Justin Schreiber. Please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. After the market closed, we issued a press release announcing our Q4 year end results. Later today, we will post an updated corporate presentation on our website at ir. Lifemd.com, as well as our shareholder letter. I share a lot of my thoughts on our journey and where we're headed.

Speaker 1

So I encourage everyone on this call to give it a read. With that said, 2023 was a tremendous and record setting year for LifeMD. Our revenue, patient subscriber base and profitability all increased sharply versus 2022. Catalyzing this growth was the launch of our nationwide GLP-one weight management program in April 2023, which has since grown to become one of the largest and fastest growing businesses of its kind in the U. S.

Speaker 1

In fact, our weight management program finished 2023 with over 22,000 active patient subscribers, well ahead of the 20,000 patients we previously guided to. As of today's call, we have over 35,000 weight management patients and that number is growing rapidly. In addition, as we announced in December, we made our largest foray to date within the business to business market when we executed a collaboration agreement with Medifast, one of the largest diet, coaching and nutrition companies in the U. S. This collaboration included $10,000,000 of collaboration fees and a $10,000,000 equity investment while providing Medifast's 40,000 coaches and their customers with access to our industry leading telehealth platform and affiliated medical group.

Speaker 1

I believe this transaction truly validates the strength of our highly differentiated direct to patient telehealth platform and offering. Our lifestyle healthcare business led by RexMD had its 4th consecutive year of double digit annual revenue growth. Beyond the consistently strong growth we've seen with RexMD, the brand continues to be immensely profitable, finishing 20 23 with a contribution margin in excess of 30%. In addition, our non core subsidiary, Work Simply, continued its consistent growth trajectory with 50% year over year revenue growth and EBITDA margins exceeding 25%. I am pleased to report that 2024 is off to a strong start and that we remain well positioned for sustained growth and profitability.

Speaker 1

We remain laser focused on continuing to deliver outstanding performance and long term value for our shareholders through the execution of 4 key objectives in 2024. First, we expect to continue our rapid growth in GLP-one supported weight loss market. As stated earlier, our weight management program has grown from nothing when we started in April 2023 to over 22,000 active patient subscribers by year end 2023 and over 35,000 subscribers as of today. Our tremendous growth, which continues to accelerate in pace, is largely attributable to our highly differentiated service based offering, leveraging our primary care platform to provide our weight management patients comprehensive end to end care for their weight loss goals. Early retention results continue to be impressive with over 80% of patients who start therapy remaining on therapy after 90 days.

Speaker 1

Economics for these patient groups remain very strong with day 1 net revenue over ad spend exceeding 1x. While daily acquisition volumes have continued to trend up as we scale our medical, operations and patient services groups to create additional appointment capacity. We continue to make significant investments in these areas as well as in our technology business led by RexMD's consistent double digit growth rates while maintaining its high contribution margins. Since launching in December 2019, RexMD has grown to become one of the most trusted and largest men's health brands in telemedicine. To date, this has largely been achieved through growth in our men's sexual health market.

Speaker 1

We expect continued double digit growth in this market while also introducing complementary new products designed not only to capture share in adjacent markets, but to provide substantial cross sell opportunities for our existing REX patients. Over 160,000 and growing REX patients tend to be well established in their lives with ample disposable income and they appreciate the quality of care they receive from LifeMD affiliated providers. The investments we are making in product and operational expansion will only serve to elevate our market share and enhance the experience we deliver. 3rd, we have made and will continue to make significant progress in building our infrastructure to accept reimbursement from private and government payers for medical services provided by our affiliated medical group. Over the past several quarters, we have successfully enrolled our medical group in 10 major health plans, spanning 7 of the 10 states we are initially focused on.

Speaker 1

As part of this effort, we have built out a best in class compliance program for both private payer reimbursement and Medicare and have made significant enhancements to our technology platform to support this program. While we are slightly delayed from our initial timeline, largely due to resources being focused on meeting the outsized demand we've had in our weight management business, this initiative remains a top priority for us. We are now expecting to turn this on by the middle of 2024. We will start with a select group of our largest states and those states' largest carriers where we have enrolled our affiliated medical group and expect to expand this to all 50 states over the next 18 months. We believe that allowing our patients to use their insurance to offset the cost of our virtual and in home care services will accelerate demand for our service offering and drive better retention.

Speaker 1

Our 4th key initiative is maintaining our laser focus on delivering growth levels above our 2024 guidance, while continuing to drive profitability margins. In 2023, we made sizable progress in this area, growing our adjusted EBITDA from a loss of $14,000,000 in 20.22 to a profit of $12,000,000 in 2023. More importantly, our cash flow from operations grew to almost 9,000,000 in 2023 versus negative cash flow from operations of $23,000,000 in 2022. We also ended the year with our strongest balance sheet yet with more than $33,000,000 of cash. As we guided in January, we expect both our top line and bottom line results to improve substantially in 2024 and we remain focused on turning our telehealth business profitable on a standalone basis by the middle of 2024.

Speaker 1

Lastly, Work Simply continues to deliver strong financial results finishing 2023 with 50% year over year growth and adjusted EBITDA margins exceeding 25%. This self managed business continues to be a meaningful contributor to LifeMD's into a diversified workplace and document services business for consumers and small businesses. In doing so, the business has also refocused its marketing and retention efforts on domestic and global markets that produce the highest revenue per user relative to ad spend. In doing so, Work Simply's active subscriber count has declined slightly year over year, but their unit economics have continued to improve, which has in turn supported sizable growth and improving bottom line margins. In short, there is a lot to be excited about in 2024 for shareholders.

Speaker 1

And with that, I'll turn the call over to our CFO, Mark Benethin, who will provide a summary of our financial results. Mark?

Speaker 2

Thank you, Justin, and good afternoon, everyone. LifeMD had record 4th quarter performance on both the top and bottom line with consolidated net revenues growing to $44,900,000 and adjusted EBITDA growing to $5,500,000 These figures included the recognition of $5,000,000 of program fees paid by Medifast, less LifeMD related expenses. Additionally, we ended the quarter with over $33,000,000 in cash and positive free cash flow. In 2023, cash flow from operations was nearly $9,000,000 versus negative $23,000,000 in 2022. We remain in the strongest financial position in the company's history and are well positioned to execute upon our aggressive growth and profitability plans.

Speaker 2

In addition, based on the strong start to the year led by performance in our GLP-one Weight Management business, we are raising our consolidated revenue guidance to at least $200,000,000 from the previous guidance of $195,000,000 to $205,000,000 Now turning to the results for the Q4 of 2023. As I mentioned, consolidated revenues in the 4th quarter totaled $44,900,000 an increase of 60% compared with the same year ago period. Telehealth net revenues grew 90% versus the year ago period and 28% sequentially. Net revenues from our Wave Management business more than doubled sequentially. Subscriber growth remained very strong with the number of telehealth active active subscribers increasing 27% to approximately 215,000 while Work Simply active subscribers contracted 6% to over 158,000 both versus the year ago period.

Speaker 2

As Justin mentioned, Work Simply continue to refocus our marketing and retention efforts on their highest value customer markets, thus generating materially higher revenue per user and enhanced profitability. The number of weight management active subscribers grew to over 22,000 as of year end 2023 and ahead of our previous guidance of 20 1,000 active patient subscribers by year end. Consolidated gross margin for the 4th quarter was 88.1%, up 260 basis points versus the prior year period. Gross profit for the quarter totaled $39,500,000 an increase of 64% from the year ago period. Operating expenses for the 4th quarter totaled $41,700,000 an increase of $7,300,000 versus the year ago period, largely due to a $3,000,000 increase in discretionary selling, marking, clinical and patient care expenses to support the rapid growth of our weight management program, expenses to support the launch of the Medifast partnership and a $2,500,000 increase in non cash expenses for stock based compensation and depreciation and amortization.

Speaker 2

Net of these items, operating expenses were up only $1,000,000 or 3 percent year over year. Our GAAP net loss attributable to attributable to common stockholders of $12,700,000 or a loss of $0.40 per share in the Q4 of 2022. Adjusted EPS is a non GAAP financial measure that excludes interest, taxes, non cash expenses, dividends, stocks and insurance acceptance readiness, litigation, non controlling interests, M and A, financing transaction costs and foreign currency translation. Reflecting those adjustments, adjusted diluted EPS for the Q4 of 2023 was 0 point period. Adjusted EBITDA, which is a non GAAP financial measure that excludes the same items I noted for adjusted EPS, totaled $5,500,000 in the Q4 of 2023.

Speaker 2

This compares with adjusted EBITDA of $1,000,000 in the same year ago quarter. Now turning to the results for the full year of 2023. Consolidated revenues for 2023 were $152,500,000 an increase of 28% compared to 2022. Telehealth net revenues grew 19% versus the prior year, while Work Simply revenues grew 50%. Gross margin for the full year was 87.6%, up 3 30 basis points versus 2022.

Speaker 2

Gross profit for the year totaled $133,600,000 an increase of 33% from 2022. Our GAAP net loss attributable to common stockholders for full year 2023 totaled $23,700,000 or a loss of $0.70 per share. This compares to a GAAP net loss attributable to common stockholders of $48,600,000 or a loss of $1.57 per share in 2022. Reflecting the same adjustments as I mentioned in the 4th quarter results, adjusted EPS for 20.23 was $0.35 per share compared with a loss of $0.45 per share in 2022. Adjusted EBITDA, a non GAAP financial measure that excludes the same items I noted for adjusted EPS, totaled $12,000,000 in 20.23 of $14,000,000 in 2022.

Speaker 2

Cash totaled $33,100,000 as of December 31, 2023. As mentioned earlier, we are raising our 2024 guidance for consolidated net revenues to at least $200,000,000 while reaffirming our adjusted EBITDA guidance of between $18,000,000 $22,000,000 This wraps up our financial results. I'd now like to turn the call back over to Justin.

Speaker 1

Thanks, Mark. As we wrap up, I want to reflect on our journey so far and the path ahead. Over the past few years, I've consistently stressed our commitment to building a best in class telehealth technology platform. Everything we achieved in 2023 stands as testament to our execution of this commitment. Today, we are stronger than ever before financially, operationally, clinically and technologically.

Speaker 1

This is an exciting time to be a shareholder. We're still in the early days of our growth and I believe that 2024 will be an even greater year than 2023 in terms of growth and the long term value we are building for our shareholders. The fact is we're still in the earliest days of telehealth and LifeMD is at the forefront of this healthcare revolution. Our focus on building an incredible healthcare experience for our patients is paying dividends. Our industry leading affiliated medical group, operational capabilities and proprietary platform are allowing us to seamlessly expand our healthcare presence with our existing and future offerings.

Speaker 1

Our work is helping to build a healthcare system that makes more sense, helps more people and creates better outcomes across the board for patients. Thanks to our strategic vision and execution over the past few years, the opportunity that lies ahead for us is immense. As we prepare to finish the Q1 of 2024, I remain confident in our ability to deliver on our expectations and beyond this year. To our patients who trust us with their health, our employees and providers who believe in and advance our mission and our shareholders who continue to support us, I thank you for joining us on this journey towards a healthier future. With that, I would like to open the call for Q and A.

Operator

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of David Larsen with BTIG. Please proceed with your question.

Speaker 3

Hi, congratulations on the fantastic Can you maybe just talk a little bit more about the weight management program? In particular, like what sort of returns are you seeing with the Medifast relationship in terms of them sending you members and also you sending them members? And then if you could talk a little bit about the pace of onboarding. It was my understanding that over the past 6 months, there have been periods of time where you're adding maybe 200 or 300 a day, maybe this has increased to 500 a day. Just any thoughts around sort of the investments in the platform to make sure that the pace of ads is clean and neat?

Speaker 3

And then just any color on pricing for the drugs themselves would be great. Thanks a lot.

Speaker 1

Yes. Hi, David. This is Justin. I'll take first stab at your question. Maybe Mark has some comments he'd like to add.

Speaker 1

First of all, with regards to Medifast, we're really happy with the progress of that collaboration in Q1. In the shareholder letter that just got pushed live to the website, we talked about that in some more detail. We're not going to release specific numbers on Medifast as we've kind of publicly said. I think that's their job, not ours. But I can tell you we're very happy.

Speaker 1

We've exceeded our expectations and theirs I think for the Q1 of the collaboration. And we're certainly super excited about the rest of the year. To your second question, we actually just today I think had first couple of patients that signed up to be part of their coaching and diet program. So it took us a while to just get the compliance and all the infrastructure in place for that. But we think there's a meaningful percentage of our patients that will really be helped by that program alongside of a therapy.

Speaker 1

On the your second question relating to the scale of the weight loss program, Mark and I are comfortable sharing that over the last 30 days, we've been averaging over 400 new patient acquisitions per day. So it's been a very, very strong month. And as we said in our remarks, this we're seeing excellent growth and we're extremely bullish on this business overall. Also super bullish for what it's doing for our platform. I mean, just as we continue to add tens and tens of thousands of new patients, the technology enhancements we're making, the improvements we're making and the data infrastructure and patient experience, I mean, it's really, really exciting when you think about all the learnings from this and how we can apply this to other very large chronic conditions down the road.

Speaker 1

On the pricing question of yours, We haven't really made any changes to pricing. We still have a lot of patients that are purchasing 3 to 6 month memberships for the weight management program. So there's a lot of deferred revenue that you'll see in the 10 ks that's filed today. And we haven't had to change pricing at all. We look at ourselves.

Speaker 1

We're not the cheapest provider out there, but we think we're the highest quality. We're still the only platform that I know of that operates at the scale that we do that is doing sync visits for every single new patient on the LifeMD platform. Across the board, we're focused on delivering high quality care to patients. And I really think that's paying off, right? I mean, I think that one of the reasons why we continue to see the kind of demand that we do is not just because of our amazing patient acquisition and treatment plan and they just know they're getting good care and they know they're getting great prices on these medications.

Speaker 1

We're doing everything we can to help them access branded therapies and if not, we're referring them to high quality compounding pharmacies that I think are delivering them a very high quality therapy until they're able to get insurance coverage for branded therapy.

Speaker 3

That's very helpful. Thank you very much. And one follow-up to my first three part question. Like if the GLP-1s are cost they cost around $1,000 or $1200 a month right now, Have you seen a generic product launch? And if not, like when do you think it will launch?

Speaker 3

And what do you think the pricing on the generics will be? And then one of the pushbacks I've heard from some investors is like, hey, look, if a solid oil comes to market and as generics enter into the market and as pricing pulls back in, will we continue to see the sort of demand that we're seeing now for LifeMD's platform. And in my view, so I guess what is your sort of response to that assuming pricing does improve significantly over the next 2 years for the drugs themselves? How do you think that will impact your platform? Will it be a tailwind or a headwind?

Speaker 3

What do you think?

Speaker 1

Yes. Well, you hit me with a number of questions there again. But on the first question, the first generic GLP-one is coming to market in June of 2024. That's the generic version of Victoza. That's a once daily administered GLP-one that doesn't have I don't think the efficacy profile is not quite the same as semaglutide and tirzepatide.

Speaker 1

So we're certainly like we have amazing relationships across the board. You're going to see multiple generic players in this space and LifeMD will certainly offer that generic if I mean there's going to be demand for it. We just don't know how much demand is going to be. And we're certainly well positioned for that. We're also making really, really making big investments in our prior auth infrastructure.

Speaker 1

We're evaluating a number of companies that have they're just best in class when it comes to getting prior auths approved for these medications. There are a lot of companies now that are using artificial intelligence to really optimize the whole prior auth process. So we're working with we're not working with YEP, but we're talking to a number of those companies. And this is a it's a major, major priority for LifeMD to be as good as anybody out there. I'd love to use the word the best, but there are going to be other market participants that are great at this.

Speaker 1

But we're going to be as good as anybody else out there at getting these prior auths approved for patients. So that's the one thing that I think investors need to keep in mind. Even though a lot of patients right now, the majority of patients are not getting approved for a branded therapy and they're having to resort to a high quality compounded therapy because of that, LifeMD is going to be positioned the second that private and government payers or employers decide that there's enough long term outcomes associated with these drugs to justify the price tag of them. So I think that's an important thing to note. As far as and I think that kind of leads really well into your last question.

Speaker 1

But there's an oral drug, It's going to improve the compliance for patients. You're going to have greater demand for these therapies. A lot of people think the orally administered drugs are going to be more efficacious. We're going to rely on the same prior auth infrastructure. We're going to be as it's not the role of virtual care companies like LifeMD and others, it's not going to change.

Speaker 1

If anything, there'll be more demand for platforms like ours. You're still going to need a prior auth, you're still going to need a comprehensive solution, you're still going to need labs, you're still going to need coaching, you're still going to need diet. It's not like an oral therapy comes onto the market and all of a sudden all that goes out the window. So I don't think it changes the investment thesis at all for LifeMD and I think it actually fits perfectly with everything we're focused on over the next couple of years.

Speaker 3

Okay.

Operator

Our next question comes from the line of William Wood with B. Riley. Please proceed with your question.

Speaker 4

Thank you so much and I really appreciate you taking our questions and obviously a really nice quarter and great year overall. So I think the first question, I'd love to get a little bit of additional color on the Q1 weight management number, you're noting about 13,000 so far, maybe a little bit above that. And how we should be thinking about that in terms of your Q1 $42,000,000 $43,000,000 guidance, how that should be fitting in and the sort of the makeup there?

Speaker 2

Yes. Yes, William, this is Mark. So obviously that does all fit in to the guidance. However, as we mentioned before, about 55% of our new sales are 6 month subscriptions, and we've had a significant ramp in our new patient activity and onboarding as we've created more capacity in our clinical teams to handle additional appointments and patient volumes really in the second half of the first quarter, so starting around the 2nd week or so of February. We're going to see a significant amount of deferred revenue related to that.

Speaker 2

In fact, by the end of the Q1, we could see a $4,000,000 increase in deferred revenue by the end of the Q1 versus the end of the year. It could potentially be even higher than that. Obviously, it contributes to some of the revenue growth that we're seeing in the business. If you net out the $5,000,000 of Medifast fees in Q4 and you add back about $1,000,000 of Medifast fees we're forecasting in the Q1, you're still seeing a couple of $1,000,000 of sequential growth. That number would be materially higher.

Speaker 2

It would be $4,000,000 to $5,000,000 higher than that. So would have been $6,000,000 or $7,000,000 without that deferred revenue. So we're really starting to see very meaningful numbers from those acquisition volumes. Obviously, that deferred revenue is going to come back to us with a big chunk of it in Q2 and then obviously a portion even in Q3 as the 6 months of subscriptions have to be amortized over 6 months. And then outside of the 6 month subscriptions, another 35% are 3 months.

Speaker 2

So you really only have about 10% to 12% of the subs that are 1 month subscription. So it's phenomenal for us on a cash basis. It obviously creates a lot of deferred revenue that's going to really start to come back to us

Speaker 4

in the Q2. Got it. That was very helpful. Appreciate that. Follow-up on your RexMD, you noticed the continued strength there doubling double digit growth year over year, I believe.

Speaker 4

And just curious, you also mentioned possibly entering some new markets maybe with some new offerings. I was wondering if you could add a little bit of color on what those markets and or offerings may be and maybe when we can expect them?

Speaker 1

The biggest thing we're focused on William is launching an HRT offering under RexMD and we're planning to launch that in the coming months. We have some opinion leaders that have kind of recently gotten involved, not in a position right now to disclose their names, but there's some of the top people in the world in this space and we're developing what I think is going to become the gold standard in hormone replacement therapy clinically. I think we're going to reach a lot of patients with this offering. And I think it's going to be a really interesting stepping stone into more like proprietary men's health offerings as well that really cater to this 165,000 patient population that we have that's part of RexMD. So that brand has matured a little bit.

Speaker 1

And I don't think I think that we certainly need to add some new product offerings on top of our sexual health offerings there. But I'm very, very exciting I'm very, very excited and optimistic about the potential for REX. I think it's also worth noting that these offerings that we're launching will have I expect to have extremely high retention rates, which is what we're all focused on. And retention, of course, equals as a result of high patient satisfaction and efficacy and a great job by the medical group, but for shareholders, retention equals earnings, right? So I'm really, really excited about this offering and getting it live in the next couple of months.

Speaker 4

Got it. I understand. And then one last, if I may. In terms of your insurance, you're continuing to expand that. I'm just curious if there's any expectations maybe or color on what we might be expecting for increasing your

Speaker 1

Yes. This is Justin again, William. I mean, we're not I'm not really comfortable releasing a specific number. I do feel good about saying that this certainly over the next couple of quarters, we will have very, very broad coverage in most, if not all of the top 10 states that we targeted. We also are planning to roll out into all 50 states, and we're working on that plan and investing in it already.

Speaker 1

I think that the subsequent states are going to be much easier since we've worked out a lot of the kinks with these top 10 states that we've started to enroll with. But look, this is an important initiative for us. We also got into several Medicare plans in the last couple of weeks, one in Florida and one in another state. So that like that continues to positively evolve as well. So I think this is like the business is doing great as you can tell by our remarks and numbers we put out.

Speaker 1

But this is something that like we have a we're putting a lot of resources into internally. And I think that this year it's going to be we're going to start to see patients using their insurance to subsidize the cost of their life MD care. And I think it's a big milestone for the company.

Speaker 4

Got it. I appreciate you taking our questions. I'll hop back in queue and congratulations again on a great quarter. Thanks.

Speaker 1

Thanks.

Operator

Our next question comes from the line of Alex Fuhrman with Craig Hallum. Please proceed with your question.

Speaker 5

Hey guys, thanks very much for taking my question and congratulations on a really strong year and launch of the weight management program. Justin, one of the things that really seems to differentiate your weight management program from a lot of the others that are out there is it was launched within weight management patients are receiving some type of treatment for related conditions or maybe medications other than just GLP-1s?

Speaker 1

Thanks for the compliment, Alex. It's a great question. We are we do take a lot of pride in the fact that we offer these services through our primary care platform and that we have basically a full time force of medical providers that work on that platform. I can't really I don't have a specific number for you, Alex. And I would say that I know that every single patient is speaking with a provider about other aspects of their health when they are onboarded onto our weight management program.

Speaker 1

However, I don't have a specific number that we can share with you that would be like a percentage of patients that's treated for another chronic condition. A lot of these the majority of these patients that are coming to us are very, very focused. They're very intent on the GLP-one medication and using that to jump start their kind of weight loss program. And that's where a lot of the interest is. So for the most part, that's where our providers have been focused on.

Speaker 1

Where I think you're going to see more where I think you're going to see more of this is actually like as a lot of people start to hit their goal weight and think about what's next, what other aspects of their health could use improvement or even optimization, that's where I really think you're going to see the LifeMD platform shine and you're going to see kind of more of our those other capabilities that we have come out.

Speaker 5

Okay. That's really helpful.

Speaker 1

Yes, Alex, I don't mean to not answer the question and it's a great question. We just don't have the data to answer that question properly. And initially, we're very focused on these patients are just focused on their weight and that's understandable, right? But I think longer term is where you're going to see us, where you're going to see a lot of these other conditions being treated and optimized.

Speaker 5

Okay. That's great. Thanks very much for those answers, Justin and Mark.

Operator

Our next question comes from the line of Ilya Zhukov with Freedom Broker. Please proceed with your question.

Speaker 6

Good afternoon. Thank you for taking my question and congrats with another record quarter.

Speaker 2

Could you please comment

Speaker 6

could you please give us more details on how has the work simply operating changed? So has the transformation process already been completed? And do you expect user growth to recover in the nearest quarters? Thanks.

Speaker 2

Yes, Mark. Yes, we do expect user growth to recover. I mean, the main way that it's evolved and they've really tried to diversify their platform as well as focus on certain regions of the world where they've gotten the highest return on investment. I'm not going to say which regions because that divulge is part of their strategy. But how it's evolved most notably, so obviously about 2 years ago, they acquired a resume business broke into the HR space.

Speaker 2

They've since evolved that business to include cover letters as well as AI technology to enable the automation of several of those functions, which has actually increased the adoption of that business. That's 1. 2, within this past year in 2023, they launched a legal simply, legal forms business and again launching the early stages of their proprietary forms library. In addition, they also launched the sign simply product, which essentially is a smaller version of a DocuSign for consumers and small businesses. And then lastly, they've begun to penetrate gig workers, consumer consortiums of small businesses.

Speaker 2

Essentially, they've taken their small business penetration from single digits to about 15% today over the last about 18 months. So those are just examples of ways that they've continued pretty typical that a business their size would do, especially if they were private and obviously not owned by us. But those are all things that are pending out. They're increasing the company's profitability. So even though they took a small step back 2022 when we refined our base in the telehealth business to lop off a lot of those trial offers that were not as profitable.

Speaker 2

They're now earning more per user and their economics and their margins have gotten substantially better while still being able to grow the top line of their business. They are going to return to subscriber growth again in 2024 now that they're back to the right base and they have better economics and you're going to see their margins expand even beyond where they are today.

Speaker 6

Thank you, Mark. I appreciate this. And congrats again with the strong quarter.

Speaker 1

Thank you.

Operator

Our next question comes from the line of Yi Chen with H. C. Wainwright. Please proceed with your question.

Speaker 7

Thank you for taking my question. My first question is, could you comment what percentage of market share do you currently have was over 22,000 patients for GLP program? With that.

Speaker 2

I mean, it's impossible, but it's like a pinball at this point. Everybody has pretty much a pinball. We're in the first inning of the weight management market. I mean, look, at the end of the day, both analysts think by 2,030, this is $100,000,000,000 plus market, more and more people are coming around

Speaker 6

for that. If you consider

Speaker 2

the fact that we ended the year with 22,000 patients, you're 129 a month with discounting, say, you're like $90,000,000 $95,000 a month. And we've already in the Q1 between the end of last year and today's call March 11, so it was at about 70 days, 71 days. We're already up to 35,000, so we added another 13,000. There's massive runway here. Nobody has a big share.

Speaker 2

Obviously, at the pharma side, there's 2 dominant players. But from the provider side, nobody has a big share of massive runway. We're in a situation where there's substantially more demand than there is supply on our side. If we had an infinite number of providers and could service people all day long, we could sign up even more than what we're doing today. That's showing no signs of slowing down.

Speaker 7

Would you be able to comment on the age groups of these patients who recently signed up for the weight management program? Are they are the majority of them towards the younger age group or older age group? And do you think these patients receiving GLP-one drugs will stay on it for a very long period of time?

Speaker 1

Yes, this is Justin. The average age right now is in the mid-40s for these patients. As we've shared in our remarks, retention rates so far have been very, very strong. It's very difficult to say. Our goal is to help patients hit their goal weight with one of these therapies in a comprehensive way.

Speaker 1

And hopefully they can change their diet and lifestyle in the process. And they're not on one of these medications for the rest of their life. I think that there are likely going to be some patients that are on these therapies for the rest of their life and need to be and it makes and their health outcomes are going to be better because of that. But as far as predicting I think as far as predicting that right now, it's impossible.

Speaker 7

Got it. Well, thank you and congratulations for the strong performance.

Speaker 2

Thank you. Thank you.

Operator

Our next question comes from the line of David Larsen with BTIG. Please proceed with your question.

Speaker 3

Hey, just one quick follow-up. Can we get an update on customer acquisition costs, companies like Teladoc and other entities in the mental health space have talked about increased pricing pressure there. Just any thoughts there would be great.

Speaker 2

Yes. I mean, look, there's been some increased pricing pressure, but we've been able to counteract it. I mean, look, in the recs business, we've seen this quarter slightly higher increases in CACs, but we were also getting much longer and bigger LTVs the past year we had in the prior year. So we've been able to more than offset that and actually are holding ourselves to a higher return on ad spend than what we used to get a year ago in that business. In the weight management business, we're actually as we've scaled to more volume, and I'm not saying this is going to always hold this way, but we actually have seen CACs slightly decline.

Speaker 2

We're actually seeing some of the best return on ad spend investment within the last 30 days that we've had in the history of the weight management program. That will fluctuate a little. We're obviously I mean, those things do fluctuate a little. But in general, we've consistently even as we've scaled to the highest volumes per day that we've seen, have seen really strong economics. So yes, I mean, look, CPMs and pricing out there, ebbs and flows have certainly had some increases in the Q1, but we've been able to manage through that and interact a lot of it.

Speaker 3

So if it's $99 a month and somebody signs up and they basically and it's $300 for 3 months and they sign up, what's your return like on day 1? Is it is the tax 300?

Speaker 2

Yes. Look, the real numbers are we're getting on average a little over $300 for an average order value and we're earning more than 1x our money day 1.

Speaker 3

Okay, great. And then last quarter you mentioned an agreement with IQVIA for sales and marketing efforts. Can you just provide a little more color there? What exactly was that?

Speaker 1

Sure. David, this is Justin. So we signed a collaboration. It was a marketing joint venture type agreement with IQVIA. We've explored several different medium to large pharma opportunities with IQVIA since signing that agreement.

Speaker 1

To date, like nothing has turned into a commercial opportunity for us, but we're optimistic. IQVIA is a great company and we really like the team there. And we're optimistic that some that that will be a fruitful relationship down the road.

Speaker 3

Okay. And I think what that means is they're working with pharma manufacturers are trying to identify products that you could help them bring to market. Is that right?

Speaker 1

Yes, exactly. I mean, I think yes, so IQVIA provides a lot of different commercial solutions directly to pharma companies. And one of the things that's interesting for them or that they were interested in was finding a partner that could enable them to offer or enable their clients in the pharma world, direct care platform to deliver direct care to their patients. So I think that look, I think the whole opportunity in pharma has just been has taken a lot more time to materialize than people thought, including me. I mean, I think if you listen to prior calls, I was much more bullish and excited on the whole direct to patient telehealth opportunity as it relates to pharma companies over the past several years.

Speaker 1

I think for a number of reasons, it's been the adoption rates have been very slow. I think a large part of that is pharma doesn't pharma has to be very careful about having anything to do with delivering healthcare. There are a lot of compliance issues. And so I just I think they're very difficult business models to sync with each other.

Speaker 3

Okay. Thanks very much. Congrats on a good quarter.

Operator

Thank you. We have reached the end of our question and answer session. And I'd like to turn the floor back over to Mr. Justin Schreiber for closing remarks.

Speaker 1

Thanks, Camilla. We appreciate everyone dialing into our earnings call today and look forward to next quarter and to giving you a very positive update next quarter. Thank you very much. Have a good evening.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Powered by Quartr
Earnings Conference Call
LifeMD Q4 2023
00:00 / 00:00