Yahoo Finance LifeMD, Inc. (NASDAQ:LFMD) Q4 2023 Earnings Call Transcript
LifeMD, Inc. (NASDAQ:LFMD) Q4 2023 Earnings Call Transcript March 11, 2024
LifeMD, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon. Thank you for joining us today to discuss LifeMD's Results for the Fourth Quarter and Year Ended December 31, 2023. Joining on the call today are Justin Schreiber, Chairman and Chief Executive Officer; and Marc Benathen, 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. These risks and uncertainties are described in the company's 10-K 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 in evaluating 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. 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.
Justin Schreiber: Thank you, and good afternoon, everyone. After the market close, we issued a press release announcing our fourth quarter and 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. 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-1 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. 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 million of collaboration fees and a $10 million equity investment while providing Medifast's 40,000 coaches and their customers with access to our industry-leading telehealth platform and affiliated medical group. 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 fourth 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 2023 with a contribution margin in excess of 30%. In addition, our noncore subsidiary WorkSimpli 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. We remain laser-focused on continuing to deliver outstanding performance and long-term value for our shareholders through the execution of four key objectives in 2024. First, we expect to continue our rapid growth in the GLP-1 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. Economics for these patient groups remain very strong with day one 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 platform to meet the needs of this market where demand continues to outstrip supply.
Second, we remain focused on continuing to grow our more mature lifestyle healthcare 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. 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. Third, 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 seven of the 10 states we are initially focused on. 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. Our fourth 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 million in 2022 to a profit of $12 million in 2023. More importantly, our cash flow from operations grew to almost $9 million in 2023 versus negative cash flow from operations of $23 million in 2022. We also ended the year with our strongest balance sheet yet, with more than $33 million 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. Lastly, WorkSimpli 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 overall profitability and positive cash flow. WorkSimpli has recently pivoted their offering from mostly PDF and some HR solutions business 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, WorkSimpli'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.
And with that, I'll turn the call over to our CFO, Marc Benathen, who will provide a summary of our financial results. Marc?
Marc Benathen: Thank you, Justin, and good afternoon, everyone. LifeMD had record fourth quarter performance on both the top and bottom line with consolidated net revenues growing to $44.9 million and adjusted EBITDA growing to $5.5 million. These figures included the recognition of $5 million of program fees paid by Medifast less LifeMD related expenses. Additionally, we ended the quarter with over $33 million in cash and positive free cash flow. In 2023, cash flow from operations was nearly $9 million versus negative $23 million 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. . In addition, based on the strong start to the year, led by performance in our GLP-1 weight management business, we are raising our consolidated revenue guidance to at least $200 million from the previous guidance of $195 million to $205 million.
Now turning to the results for the fourth quarter of 2023. As I mentioned, consolidated revenues in the fourth quarter totaled $44.9 million, 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 weight management business more than doubled sequentially. Subscriber growth remained very strong with the number of telehealth active subscribers increasing 27% to approximately 215,000 while WorkSimpli active subscribers contracted 6% to over 158,000 both versus the year ago period. As Justin mentioned, WorkSimpli continued to refocus on marketing and retention efforts on the 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 20,000 active patient subscribers by year-end. Consolidated gross margin for the fourth quarter was 88.1%, up 260 basis points versus the prior year period. Gross profit for the quarter totaled $39.5 million, an increase of 64% from the year ago period. Operating expenses for the fourth quarter totaled $41.7 million, an increase of $7.3 million versus the year ago period, largely due to a $3 million 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 $2.5 million increase in noncash expenses for stock-based compensation and depreciation and amortization.
Net of these items, operating expenses were up only $1 million or 3% year-over-year. Our GAAP net loss attributable to common stockholders for the fourth quarter totaled $4.5 million or a loss of $0.12 per share. This compares to a GAAP net loss attributable to common stockholders of $12.7 million or a loss of $0.40 per share in the fourth quarter of 2022. Adjusted EPS is a non-GAAP financial measure that excludes interest, taxes, noncash expenses, dividends, stocks and insurance acceptance, readiness, litigation, noncontrolling interest, M&A, financing, transaction costs and foreign currency translation. Reflecting those adjustments, adjusted diluted EPS for the fourth quarter of 2023, was $0.15 per share compared with $0.02 in the same year ago period.
Adjusted EBITDA, which is a non-GAAP financial measure that excludes the same items I noted for adjusted EPS, totaled $5.5 million in the fourth quarter of 2023. This compares with adjusted EBITDA of $1 million in the same year ago quarter. Now turning to the results for the full year of 2023. Consolidated revenues for 2023 were $152.5 million, an increase of 28% compared to 2022. Telehealth net revenues grew 19% versus the prior year, while WorkSimpli revenues grew 50%. Gross margin for the full year was 87.6%, up 330 basis points versus 2022. Gross profit for the year totaled $133.6 million, an increase of 33% from 2022. Our GAAP net loss attributable to common stockholders for full year 2023 totaled $23.7 million or a loss of $0.70 per share.
This compares to a GAAP net loss attributable to common stockholders of $48.6 million or a loss of $1.57 per share in 2022. Reflecting the same adjustments, as I mentioned in the fourth quarter results, adjusted EPS for 2023 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 million in 2023. This compares with an adjusted EBITDA loss of $14 million in 2022. The cash totaled $33.1 million as of December 31, 2023. As mentioned earlier, we are raising our 2024 guidance for consolidated net revenues to at least $200 million while reaffirming our adjusted EBITDA guidance of between $18 million and $22 million. This wraps up our financial results.
I'd now like to turn the call back over to Justin.
Justin Schreiber: Thanks, Marc. 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 a testament to our execution of this commitment. Today, we are stronger than ever before. Financially, operationally, clinically and technologically. 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. 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 first quarter 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&A.
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