LifeMD, Inc.

Good afternoon. Thank you for joining us today to discuss LifeMD's fourth quarter and full year 2020 results ended December 31st, 2020. Joining us today is the Chief Executive Officer of LifeMD, Justin Schreiber, and Chief Companies Chief Financial Officer, Mark Benison. Following their remarks, we'll open the call to your questions. And before we conclude today's call, I'll provide some important cautions regarding the forward-looking statements made by management during the call. I'd like to remind everyone that today's call is being recorded and will be made available for the telecom replay via instructions in today's press release, which is available in the investor relations section of the company's website. And now I'd like to turn the call over to LifeMD CEO, Justin Schreiber. Please go ahead.

Thank you, Christy, and good afternoon, everyone. Thanks for joining us today. 2020 was an incredible year for telemedicine and a stellar year for LifeMD. our top line grew by nearly 200% to a record $37.3 million. Adding back $917,000 in deferred revenue we lost due to our record level of subscriptions, adjusted sales totaled $38.2 million for the year. And we ended 2020 exceptionally strong, with December revenues hitting a monthly record of $5.2 million, up 316% over December of the previous year. In fact, December 2020 alone equips the entire fourth quarter of 2019. 2020 was also a year of unprecedented change caused by the pandemic. Despite the challenges and heartbreaks, perhaps one silver lining to the pandemic is how it catalyzed the rapid expansion and evolution of the telehealth industry for the benefit and well-being of consumers. And we have evolved and expanded along with it. from a branded telemedicine product company into a leading provider of end-to-end concierge telehealth products and services. Our recent name change from Conversion Labs to LifeMD reflects this evolution. Ever since we embarked upon this journey two years ago, our vision has always been to radically change healthcare by making access to the best physicians, diagnosis, and treatment easily accessible, convenient, and affordable. From discreetly treating men's sexual health and men's and women's care loss to the upcoming rollout of our new teledermatology and concierge telehealth services, LifeMD is now at the forefront of the telehealth revolution, improving healthcare for countless Americans. Now, with the first quarter of 2021 nearly closed, we continue to expect more than $17 million in revenue for the quarter, which would be up more than 30% sequentially and up 295% compared to the same year-ago quarter. All of this growth reflects the huge investments we've made in the second half of last year, and especially in the fourth quarter to scale our platform and capture new customers and market share. This has driven record levels of new subscribers and net orders in our telemedicine business. In fact, our subscription rate for new telemedicine orders has grown from 20% early last year to now more than 91%, and we believe these new subscribers are worth far more than the investment we made to acquire them. This also means that our traditionally reported annual recurring revenue from subscriptions is now nearly the same as our top-line annual run rate, with our top-line run rate currently exceeding $75 million based on March's estimated results. As remarkable as this growth and market expansion has been, we believe we've only begun to scratch the surface of what we see as a $600 billion and growing addressable market opportunity. And to capture more of this fast-growing market, we are planning to launch additional telehealth products and services throughout the year that we expect will further strengthen our high-growth outlook. But before getting more into these new offerings and our outlook for 2021, I'd like to turn the call over to our CFO, Mark Benison, who will take us through the financial details for the quarter and the year. I'm going to deviate from the script for a moment to formally welcome Mark to our first earnings call. We talk a lot about the amazing marketing and operations team that we have at LifeMV, which we believe is one of our main competitive advantages. However, having Mark on board as our CFO is truly game-changing for the company and our shareholders, and I'm extremely confident that the expertise and experience Mark brings to the table will allow LifeMD to achieve a lot more than we otherwise would have if we didn't have him on the team. So welcome aboard, Mark, and go ahead. Thank you, Justin, and good afternoon, everyone. It has been about a month since I joined LifeMD, and I could not be more impressed by the energy and passion of the entire team. And this has been evident in the phenomenal growth the company has been driving over the past year. Like Justin, I truly believe we have only begun to scratch the surface of LifeMD's long-term potential. As Justin mentioned, 2020 was a record year marked by substantial growth across all of our products and services. Revenue in the fourth quarter of 2020 totaled a record $12.9 million, up 227% from the fourth quarter of 2019. The growth was primarily driven by a 293% increase in telehealth net revenues to $10.3 million. Our PBS Simply subsidiary contributed net revenue of $2.6 million, up 96% from the year-ago quarter, including $917,000 in year-end deferred revenue associated with recurring subscriptions, total adjusted revenue on a non-GAAP basis, would have been $13.8 million for the fourth quarter of 2020. Annual recurring revenue, or ARR, from subscriptions at December 31, 2020, reached a record $53.3 million, up 443% compared to the end of 2019. As of today, we estimate our ARR from subscriptions has increased to $75.9 million, up 267% year-over-year. We calculate ARR from subscriptions by multiplying by 12 the monthly sum of revenue attributed exclusively to subscription sales. We don't consider single sales to customers that purchase products through the company's regular checkout pages, third-party online marketplaces, or involving the assistance of a customer service representative. Beginning with the reporting of these fourth quarter and full year 2020 results, This calculation includes revenue from the initial purchase of patients who signed up under a recurring subscription plan. We believe this more accurately represents the current annualized value of our subscription customers. For future reporting periods, we are evaluating and looking at introducing additional alternative metrics for tracking our performance. Gross profit in the fourth quarter increased 184% to $8.9 million. compared to $3.1 million in the same year-ago quarter. Gross profit as a percentage of revenue in the fourth quarter of 2020 decreased to 69.1% from 79.6% in the same year-ago quarter. However, the decrease was primarily due to a change in mix of product sales and inventory write-off associated with legacy products, excluding the impact of this non-cash write-off, adjusted gross margin on a non-GAAP basis for the fourth quarter of 2020 would have been 76.1%. Operating expense in the fourth quarter of 2020 was $41.2 million, up from $3.7 million in the same year-ago quarter. The increase was primarily due to increases of selling and marketing expenses of $15.2 million, as well as general and administrative expenses of $21.7 million, other operating expenses of $479,000, customer services expenses of $66,000, and development costs of $93,000. The increase in general and administrative expenses was primarily due to $20.1 million in non-cash stock-based compensation and amortization. The majority of the stock-based compensation was related to performance targets achieved during the quarter that had been granted to to the founders of the company in prior years. The non-cash cost basis of these awards was set at the price of the company's shares at the time of their issuance, which had hit record levels during the fourth quarter. The substantial increase in expenses also reflects our strategic acceleration of investment in patient acquisition and expanding market share as consumers sought out their telemedicine options in record numbers during the period. The result of this investment has positioned us very well for elevated growth in 2021 and beyond due to a nearly 200% increase in new patients in the fourth quarter alone, with about 90% of these new patients signing up for recurring subscription plans. As Justin mentioned, our subscription rate for new telemedicine orders has increased from 20% early last year to currently more than 91%. And based on our analysis, the substantial investments we have made to acquire these committed subscribers have demonstrated a high ROI. Our GAAP net loss, attributable to common stockholders for the fourth quarter, totaled $32.3 million, or $2.56 per share. This compares to a net loss attributable to common stockholders of $712,000, or $0.09 per share, in the fourth quarter of 2019. In addition to the stock-based compensation, our net loss for the fourth quarter of 2020 included other substantial non-cash or financing-related charges, such as interest expense of $355,000, combined democratization expenses of $48,000, non-cash expenses associated with legacy warrant settlements of $914,000, non-cash inventory write-off for legacy products of $903,000, accrued interest of $90,000, and financing transactions expense of $175,000. Adjusted EBITDA non-GAAP term, which factors out these terms, totaled a loss of $9.7 million in the fourth quarter of 2020. This compares to adjusted EBITDA of $492,000 in the same year-ago quarter. Now turning to the full year of 2020. Revenue for the full year increased 199% to a record $37.3 million up from the $12.5 million in 2019. The increase in revenue was attributable to both the increase in telehealth net revenues of 208% to $30.6 million and an increase in PDF simply net sales of 165% to $6.7 million. Including $917,000 in year-end deferred revenue associated with recurring subscriptions Total adjusted revenue on a non-GAAP basis was $38.2 million for the full year. Gross profit increased 185% to $28.4 million, with gross profit as a percentage of revenue decreasing to 76.1% from 79.7% in 2019. The decrease was primarily due to inventory adjustments associated with legacy products as well as due to the mix of products sold. Excluding the non-cash inventory adjustments of $2.1 million, adjusted gross profit on a non-GAAP basis for the full year of 2020 was $30.5 million, or 81.8% as a percentage of revenue. Our operating expense for the full year of 2020 totaled $86.2 million, which was up from $12.8 million in 2019. The increase was primarily due to increases of selling and marketing expenses of $32.8 million as well as general and administrative expenses of $39.8 million, other expenses of $442,000, customer service expenses of $146,000, and development costs of $224,000. General and administrative expenses for the full year also included non-cash stock-based compensation of $37 million. Like with our expense increase for the fourth quarter, the increase for the year reflects our strategic acceleration of investment in patient acquisition and securing market share as consumers sought out their telemedicine options in record numbers during the year. Our gas med loss attributable to common stockholders for the full year of 2020 was $63.4 million, or $444 per share, as compared to a net loss attributable to common stockholders of $3.1 million, or $0.32 per share. The net loss for the full year of 2020 included certain non-cash or financing-related charges, such as interest expense and accrued interest of $514,000, amortization expense of $1.2 million, warrant settlements of $914,000, financing transactions of $237,000, acceleration of debt discounts of $500,000, inventory adjustments that are non-cash of $2.1 million, non-cash deemed distributions of $4.7 million, and stock-based compensation expense of $37 million. Adjusted EBITDA, which factors out these items, totaled a loss of $16.3 million in the full year of 2020 compared to a loss of $685,000 in 2019. Now turning to our balance sheet. Cash totaled $9.2 million at December 31, 2020, as compared to $917,000 at September 30, 2020. The increase was primarily due to a private placement with net proceeds of $14.9 million, completed in November 2020. We believe our current cash position and available funds provide the company with ample liquidity to meet our current needs and plans for growth. In the coming quarter or two, we are planning to enhance our liquidity significantly further through non-dilutive means, and we are actively engaged in this endeavor. We believe greater liquidity will enable us to further accelerate our growth and expand our market share at this pivotal time with the rapid growth and expansion of the telemedicine industry at unprecedented levels. This wraps up our financial results. I'd now like to turn the call back over to Justin. Thanks, Mark. Clearly, the growth we've been experiencing over this past year has been incredible. We nearly tripled our top line in 2020, and now just three months into the new year, we are hitting an annualized revenue run rate of more than $75 million. Our growing recurring revenue stream from subscriptions now represents about 91% of our total revenue. Given that nearly all of our customers are now on a subscription product, either monthly or quarterly, we have much greater visibility into our revenue and future growth rates. We are seeing 2021 already on track to be another record-setting year, even if we fully discount the contribution from new products and brand launches during the year. Our increasing momentum throughout 2020 and into the new year reflects how our telehealth platform has been able to provide accessible healthcare to a rapidly growing number of patients across the country. To date, between just our RexMD and ShapiraMD brands, We treated over 300,000 patients and customers nationwide. Given the many major milestones we achieved in 2020, we now have a foundation for continuing strong growth with a differentiated telehealth business model that offers patients convenient and affordable access to healthcare services, as well as prescription and over-the-counter medications. One of these major milestones in 2020 was the official launch of our LifeMD digital telehealth platform, that represents the culmination of years of development by experts in technology, medicine, and regulatory affairs. Owning our own robust and flexible end-to-end telehealth platform allows us to offer highly customized and targeted telemedicine offerings, which results in better patient care and high levels of satisfaction among our patients. It also gives us the ability to quickly test, launch, and scale new telemedicine offerings. Such offerings include our new teledermatology brand and clinic for women, NavaMD, which we are planning to launch in the coming weeks. NavaMD will initially offer virtual treatment for many common dermatological conditions, such as acne, rosacea, hyperpigmentation, and signs of aging. In addition to prescription products, we signed a key exclusive licensing agreement in 2020 with Distorsi, a leading medical-grade skin care technology platform. It includes patented medical-grade over-the-counter products for treating these prevalent skin conditions. Integrating and restoring these clinically proven technology into our NAVA MD offerings represents a major competitive advantage for us as we enter this high-growth market segment. We have also been finalizing the rollout plan and technology infrastructure for our subscription-based primary care and concierge telehealth services, which will be offered under the LifeMD brand. We believe LifeMD's concierge care offering will revolutionize the way our patients access a healthcare provider, enhance their healthcare experience, and dramatically strengthen our ability to positively impact their long-term health. The platform will combine a low-cost prescription drug offering, discounted access to all of our cash-paid telemedicine offerings, and on-demand access to the same doctor. While the offering will initially be launched in the U.S., we believe it has a global appeal given the high regard for U.S. medical professionals and treatment in international markets. While the rapid emergence of telemedicine reflects a major shift in patient preference for virtual care, it has also begun to disrupt the traditional healthcare commercialization model. Pharmaceutical, medical device, and diagnostic companies will have to adjust their commercial models accordingly. We see this opening up new direct-to-consumer joint venture and partnership opportunities for life and death, and further enhancing our value proposition. These are clearly unprecedented times for the healthcare and telemedicine industry. The stage of the telemedicine industry today is reminiscent of the beginning of the e-commerce era. There were many winners and losers, but the biggest winners were those who made the biggest and timely investments in customer acquisition, customer care, and market share, like Amazon and eBay. We are at a similar stage with virtual healthcare and telemedicine, with the industry still very much in its nascent stage. We have the opportunity to become the 800-pound gorilla in the space, like Amazon is to e-commerce and eBay to online auctions, and this is our vision. We recognize that the future of our company and our fulfillment of this vision will be determined by how our patients and customers experience our telehealth brands and services and how loyal they'll become to our offerings as a result. So, we have and will continue to invest heavily in recruiting, training, and deploying the best people and professionals across our physician network, clinical support team, and customer service center. We will also continue to deploy the strongest marketing campaigns to capture new subscribers and market share. The $14 million strategic private placement we completed in February supports our aggressive growth initiatives for 2021, including further scaling the size and reach of our digital health ecosystem, launching our concierge telehealth service, expanding our suite of brands for men's and women's health, and accelerating overall customer acquisition. We are preparing to launch treatments for new indications under our existing popular telehealth brands, RexMD and ShapiroMD. They have been carefully designed to serve the evolving needs of our patients and especially attract new patients to our platforms. We are now at a stage where we have strong cash flow being generated by a large subscriber base. And besides our need to extend for new customer acquisition, which has a strong ROI, we run a pretty tight ship. So we believe we are now in a strong position to secure additional growth capital as needed through non-dilutive or mostly non-dilutive means, as Mark mentioned earlier in the call. Given our visibility in the future performance provided by our high level of subscription revenue for the full year 2021, we are forecasting revenue in the range of $85 to $95 million. This would represent an increase of 128% to 155% over 2020. Looking ahead, we are confident more than ever that our LifeMD telemedicine platform will continue to drive tremendous growth and opportunities. and especially greater shareholder value over the months and years to come. Now with that, we'd like to open the call to your questions. Christy?

Thank you. If you'd like to ask a question at this time, please press star followed by the number one on your telephone keypad. If you're calling from a speakerphone, please make sure your mute function is off to ensure your signal can reach our equipment. Again, star one to ask a question. And first we'll go to David Larson from BTIG. Your line is open.