LifeMD, Inc.

Good afternoon. Thank you for joining us today to discuss the results for LifeMD's third quarter ended September 30th, 2021. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer, and Mark Benison, Chief Financial Officer of LifeMD. Following management's prepared remarks, we will open the call for a question and answer session. I'd like to remind everyone that today's call is being hosted via webcast and the recording will be made available via the link in today's press release, which is available in the Investor Relations section of the company's website. 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 the company's 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, November 10, 2021. 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.

Thank you, Shamal, and good afternoon, everyone. Thank you for joining us today to discuss our third quarter 2021 results. I want to start this call by giving a huge congratulations to the LifeMD team for launching earlier this week the LifeMD Virtual Care Platform. I believe this launch is a transformational turning point for the company, for our patients, and for our shareholders. Furthermore, I believe the business model supporting our primary care platform will help change and disrupt the U.S. healthcare system and will serve as a model for how exceptional healthcare can be delivered in a virtual environment that is affordable, convenient, and most importantly, results in better outcomes for patients. For those of you who haven't seen our platform yet, I would encourage you to visit our new website we just launched at lifemd.com. Aside from virtual primary care and telehealth, there are two big and important takeaways I think are important for everyone on this call to understand. First, our new platform will enable us to develop deeper, broader, and longer-term relationships with our current patient population and have a bigger impact on their overall health and well-being. As most of you know, we have an extensive and expanding business treating specific conditions like erectile dysfunction, hair loss, and dermatological issues. We're very proud of these businesses, their standalone unit economics, and their growth trajectories. they're likely going to be around for an extremely long time. Nevertheless, I believe the incorporation of our virtual primary care platform will create a tectonic change in our business that will dramatically improve the level of satisfaction and the overall experience of all of these patients. It goes without saying, but I'll say it. Happier patients who are invested in a long-term relationship with an outstanding doctor provided by LifeMD are going to be very loyal and will help generate unit economics and overall profit levels that are best in class in the industry. On a side note, as I've spent time over the past several months with our founding team of primary care physicians, I've realized that our doctors, with their expertise and compassion and the relationships they're going to build with patients, these doctors are without a doubt one of our strongest assets or intellectual property that any company can own. I believe this intellectual property and the deeper relationships we will begin to foster with our patients will be transformative, not only for our new LifeMD primary care offering, but all of our existing brands. Americans crave access to great doctors, and LifeMD is going to be the company that meets this need. The second important takeaway is that our new virtual care platform dramatically expands the scope of our business and the clinical areas in which we can offer telehealth products and services. From urgent medical issues like sinus infections, cold and flu, UTIs, and STDs, to chronic conditions like diabetes, weight management, asthma, allergies, anxiety, Life&V now is a platform supported by licensed providers who can treat a wide range of conditions. And perhaps most importantly, we don't just offer telehealth services. In addition to same-day guaranteed virtual treatment, we offer discounted prescriptions conveniently delivered to the patient's home and discounted diagnostics that can be collected in the patient's home in most major metro areas. As most of you also know, we have a great relationship with Quest Diagnostics that patients can conveniently visit throughout the country. Additionally, we are working on incorporating other in-home tools and continuous monitoring devices like wearables that will truly revolutionize the relationships our patients have with their doctors. As you can probably tell, I'm very excited about this platform and what it can do for our patients. Launching it was the vision we always had for Life in Deep, and I'm extremely excited to watch our proven team of clinicians, technologists, and marketing gurus grow this into a substantial business. All this has been made possible by the accomplishments we achieved this quarter. We continue to see strong order growth with telehealth products and services up 153%, driven by both strong acquisition and, more significantly, by strong retention of our existing patients. Currently, 93% of our revenue comes from recurring subscriptions. I think this demonstrates the high level of satisfaction our patients have with the telehealth services and the products that we provide. Thanks to the closing of our capital raise with net proceeds of $55 million, LifeMD is now in the strongest capital position it's ever been since our founding. Not only was this offering oversubscribed, but we believe that the funds raised from it have sufficiently capitalized our business to reach profitability while continuing our aggressive growth strategy. Mark and I view it as permanent capital for the company. In an earlier call, I mentioned our commitment to preserving and growing shareholder value. I believe this recent raise reflects those commitments. We looked for a minimally diluted transaction to finance the company, and that's exactly what we achieved. The raise allowed us to eliminate all of our debt, which was approximately $15 million. By paying off this debt prior to maturity, we avoided a million shares of additional dilution, We sold 3.8 million shares in the common offering alongside our non-diluted preferred offering. So total dilution to shareholders to permanently capitalize the company was around 2.8 million shares or approximately 8% of the company on a fully diluted basis for $55 million. More than enough capital to propel us through the next stage of growth. Also during the quarter, we made a key appointment to our board adding Naveen Bhatia, Naveen's a highly accomplished investor and private equity professional who has an extensive career in the investing world, most notably with 10 years of experience as a senior member of Blackstone's Tactical Opportunities team and extensive board experience. Thrilled to have him on board as he provides helpful guidance heading into what is sure to be our most exciting year yet as a company and as a provider of exceptional healthcare through telehealth. With that, I will now turn the call over to our CFO, Mark Benetton, who will provide the summary of this quarter's financial results. Mark.

Thank you, Justin, and good afternoon, everyone. We are extremely proud of our third quarter performance. Not only did we achieve record revenue, but we began to successfully achieve operating and marketing expense leverage ahead of our expectations, resulting in a 24% sequential improvement in adjusted EBITDA versus the prior quarter. We also successfully closed the largest financing in company history, raising 55 million of net proceeds led by a preferred stock offering, supplemented by an institutionally led common stock offering. Following this financing, we believe LifeMD is sufficiently capitalized to support both our investment in aggressive growth objectives and attaining adjusted EBITDA profitability. This financing also allowed us to eliminate our previously existing senior secured debt with a permanent source of flexible capital that minimized dilution to common shareholders. Now turning to results for the third quarter. Revenue in the third quarter of 2021 totaled the record 24.9 million, up 127% as compared to the same quarter a year ago. 93% of the total revenues in the third quarter were generated from recurring subscriptions compared to 61% in the same year-ago period. Telehealth net revenues grew over 97% to $18.5 million and 17% sequentially versus the prior quarter. Our Work Simply subsidiary contributed net revenue of $6.4 million, up 309% from the year-ago quarter, with sequential revenue essentially flat. Work Simply revenue was temporarily impacted by approximately $700,000 related to the one-time test of new trial offers, which Work Simply has since discontinued. Following this, Work Simply is back on track with sequential revenue growth in the fourth quarter. Telehealth order volume grew 153% versus the year-ago period to 232,293 orders. Following our continued robust performance, we are reiterating our full year 2021 revenue guidance of $90 to $100 million, reflecting annual growth in 2021 of between 141% and 168% versus prior year. Growth profit in the second quarter increased 113% to $19.9 million, compared to $9.3 million in the same year-ago quarter. Gross profit as a percentage of revenue in the third quarter of 2021 was 80% compared to 85% in the same year ago quarter, with the decrease primarily due to a change in the product sales mix, coupled with the one-time non-cash write-off of legacy product deposits. Our platform contribution, a non-GAAP financial measure defined as GAAP operating loss, before general and administrative expenses excluding payment processing fees, selling and marketing expenses, and other expenses is an important non-GAAP financial measure which monitors our performance based on the direct cost of delivering the products and services we sell across our brands. We believe it is useful to measure how we are controlling our direct variable costs and how effectively we retain our providers, patients, and customer subscribers. Platform contribution in the third quarter totaled $17.5 million compared to $8.1 million in the same year-ago quarter, an increase of 115%. Now turning to operating expenses. Operating expense in the third quarter of 2021 was $32.4 million, up from $29.9 million in the same year-ago quarter. The increase was predominantly due to increases of discretionary growth, selling, and marketing expenses, of $9.8 million, other operating expenses of $272,000, customer services expenses of $275,000, and development costs of approximately $13,000. General and administrative expenses decreased $7.7 million during the quarter and included noncash expenses for stock-based compensation and amortization of $4.8 million. The decrease was primarily due to a $13.3 million decrease and stock-based compensation expense. Additionally, operating expenses decreased by $1.8 million sequentially versus the prior quarter, driven primarily by increased efficiency realized in selling and marketing spend, resulting in a $2.1 million sequential decrease in that category and a 1,900 basis point sequential improvement in selling and marketing expenses as a percentage of total net revenues. Our gap net loss attributable to common stockholders for the second quarter totaled $14.4 million, or negative 54 cents per share. This compares to a net loss attributable to common stockholders of $24.2 million, or $1.65 per share in the third quarter of 2020. Adjusted EPS is a non-gap measure that excludes $3.1 million in non-cash stock-based compensation expense, $118,000 of non-cash depreciation and amortization expense, $187,000 of non-recurring financing transaction expenses, and $1.6 million of non-cash debt discount amortization. This figure totaled the loss of $0.36 per share for the third quarter, as compared to a loss of $0.52 in the same year-ago period. Additionally, adjusted EPS improved 25% substantially versus the prior quarter. Adjusted EBITDA, a non-GAAP financial measure which factors out non-cash stock-based compensation, depreciation and amortization, financing transaction expenses, litigation costs, and interest expenses, totaled a loss of $9 million in the third quarter of 2021, as compared to a loss of $3.8 million in the same year-ago period. Adjusted EBITDA improved 24% sequentially versus the prior quarter. Now turning to our balance sheet. Cash totaled $9.4 million as of September 30th, 2021. As discussed earlier, in October 2021, we completed a preferred equity offering, supplemented with a complementary common equity offering, raising approximately $55 million in net proceeds, which we believe will sufficiently capitalize us to reach our stated goal of achieving adjusted EBITDA breakeven by the fourth quarter of 2022. This wraps up our financial results. I'd now like to turn the call back over to Justin.