LifeMD, Inc.

Today, thank you for joining us today to discuss the results for LifeMD's second quarter ended June 30, 2022. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer, and Mark Benison, Chief Financial Officer of LifeMedMD. 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 available 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'd 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, August 11, 2022. 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'd 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, and good afternoon, everyone. Today, after the market closed, LifeMD issued a press release containing our second quarter results. Additionally, and for the first time ever, we've also made available a Q2 Supplemental Investor Highlights presentation, which is available on the LifeMD IR site. I would encourage everyone to download and review this as it summarizes why our second quarter was really what I believe to be a pivotal period in the 2022 transformation of LifeMD. During the second quarter, LifeMD made significant progress on several important strategic initiatives to position the company for its next phase of growth. We believe that our growing profitability and expanding margins will be key to our continued transformation from a seller a prescription and OTC product, into a rapidly growing and highly profitable telehealth services company. There are a few key accomplishments I'd like to highlight for Q2. First, in the second quarter, we began nationwide direct-to-patient marketing for our virtual primary care platform, and it's been extremely successful. We're seeing some of the best acquisition costs we've ever seen, and our technology platform and clinical operations are working beautifully. We've also proven that we can cross sell this to our indication specific patient base, which is a very big deal. I'm more confident than ever that this platform will be a very big growth driver in the years to come. Second, we introduced several new telehealth treatment categories to compliment our primary care and existing treatment offerings, which we believe has to have significant growth potential. Third, We drove meaningful improvements in our margin performance and profitability. And lastly, we are streamlining our overall company into a telehealth-only business through the impending divestiture of WorkSimply. Given our intense focus on profitability, growth of new telehealth offerings, and enhancing long-term scalability, we expect a short-term slowing of sequential growth for the next two quarters after which we will resume a more aggressive growth trajectory at substantially higher levels of profitability. What excites me the most about our second quarter is the strong traction we're beginning to see with our virtual primary care platform. Since launching in late Q1, we now address over 200 of the most common medical conditions across all 50 states. We've built a highly differentiated and now proven technology platform that is staffed by some of the best doctors, nurse practitioners, medical assistants, and operations personnel in the country. What's even more amazing to me is the difference this platform and our affiliated physicians and the entire medical team are making in the lives of our patients every single day. While still very early on in the growth of this platform, patient feedback about their VPC experience Their experience with our virtual primary care platform and our affiliated physician network has been tremendous. It's been better than any product this company has ever offered. During the second quarter, we saw 1,500% growth versus the prior quarter in our VPC patient count. Currently, we have over 1,200 active patients on the platform, and we are adding about another 20 to 30 new patients per day net of attrition. I expect this number to grow very, very quickly. Retention is strong with early attrition rates in the low single-digit percentages. We continue to believe that the VPC platform is one of the most significant, if not the most significant launch the company has done to date and will be a key driver of both top and bottom line growth going forward. We also introduced several new treatment areas during the quarter that have been well received by our new and existing patient populations. These offerings include a proprietary topical pain management treatment called Proteran, sleep treatments, and over-the-counter dermatology treatments that complement our existing RX offer. These additions enhance our revenue mix with 38% of new patient order volumes coming from non-erectile dysfunction treatments during the second quarter of 2022, which compares to 22% during the same period last year. We remain on track to achieve consolidated adjusted EBITDA profitability by the fourth quarter of this year. As an important stepping stone toward profitability, we continue to drive improved unit economics through higher gross margins and improved returns on our ad spend. As noted in our press release, we achieved record gross margins in the second quarter on both a consolidated and telehealth-only basis, while also driving an 8% improvement in the blended first-year LTV to CAC for our telehealth platform. Finally, I am proud to report that we have made solid progress in the process to streamline our overall company into a telehealth-only business through the impending divestiture of Work Simply. Despite challenging market conditions, we have received significant interest in WorkSimply from a broad range of buyers. We believe we remain on track to consummate a transaction prior to your end. With that, I will now turn the call over to our CFO, Mark Benison, who will provide a summary of our financial results. Mark.

Thank you, Justin, and good afternoon, everyone. As Justin mentioned, the second quarter of 2022 was a pivotal quarter for the entire company, as we executed upon the early phases of several key strategic initiatives. While the focus on these critical long-term areas of growth and profitability will mean our sequential growth will slow for the balance of 2022, our continued execution will position us for heightened growth in the year ahead with strong underlying profitability and be in the best interest of creating long-term value for our shareholders. While we continue to reiterate our previous guidance on adjusted EBITDA and consolidated profitability by the fourth quarter of 2022, we are advising our revenue guidance to be in the range of $122 million to $128 million to reflect slower growth in the back half of the year as we focus on these critical long-term strategies followed by a return to elevated growth with consolidated profitability in 2023. Now turning to the results for the second quarter of 2022. Revenue in the second quarter totaled a record $30.5 million, up 37% as compared to the same quarter a year ago. 93% of total revenues in the second quarter were generated by recurring subscriptions. Telehealth net revenues grew by 41% to $22.3 million, while work simply net revenues grew by 26% to $8.2 million. WorkSimply revenues grew 27% sequentially as compared to the first quarter, following the execution of several key strategic initiatives we previously discussed. Importantly, WorkSimply achieved EBITDA margins during the quarter of mid-teens for the first time in its history. We expect WorkSimply's growth and rising profitability to continue at a rapid pace. On the telehealth side of the business, we increased our active subscriber base by 53%, versus prior year to end the quarter with over 168,000 active subscribers. More importantly, we continue to transition more of the patient base to longer term subscriptions with 71% of active patient subscribers on multi-month subscription plans as of June 30th, 2022. While this caused some impact to the timing of rebillings this quarter, as well as the next one to two quarters, Multi-month subscribers drive faster payback and significantly higher unit economics as well as stronger retention. By being able to link this data with detailed analytics on patient acquisition, marketing efficiency, retention, and product, we are driving record performance in our unit economics. This is already playing out with an 8% increase in first year LTV to CAC in the second quarter versus the same year ago period. Gross margins for the second quarter reached record levels at 85%, up 300 basis points versus prior year, with our telehealth-only gross margin reaching 80% for the first time. Gross profit for the quarter totaled $25.8 million, an increase of 42% from the same year-ago period. Operating expenses for the second quarter totaled $41.5 million, an increase of $7.1 million versus the year-ago period, Our second quarter 2022 operating expenses included $7.8 million of non-cash expenses associated with stock-based compensation, the revaluation of the earn-out related to the cleared acquisition, and depreciation and amortization expenses. Net of non-cash expenses, operating expenses decreased as a percentage of company net revenue by 2,200 basis points. Equally as important, we reduced our marketing expense as a percentage of revenue to 72% versus 100% of revenue in the same year-ago period and improved leverage in this key spend area by 300 basis points versus the prior quarter. Our gap net loss attributable to common stockholders for the second quarter totaled $13.8 million for a loss of $0.45 per share, This compares to a net loss attributable to common stockholders of $16.8 million, or $0.64 per share, in the second quarter of 2021. Adjusted EPS, a non-GAAP financial measure that excludes non-cash expenses, preferred stock dividends, litigation expense, severance, and M&A expenses, totaled a loss of $0.22 per share as compared to a loss of $0.46 per share in the same year-ago period. Adjusted EPS improved 12% sequentially versus the prior quarter. Adjusted EBITDA non-GAAP financial measure excluding the same account categories as noted in adjusted EPS totaled the loss of $6.9 million in the second quarter of 2022. This compares to an adjusted EBITDA loss of $12.2 million in the same year-ago quarter. Now turning to the balance sheet. Cash totaled $11.7 million as of June 30th, 2022. Importantly, and as noted in our second quarter investor highlights presentation, through many of the efforts highlighted earlier on this call, we reduced our adjusted EBITDA loss in cash burn to under 1 million in the month of June and expect meaningful improvements in our balance of the year cash burn, including achieving consolidated adjusted EBITDA profitability by the fourth quarter. Additionally, as Justin noted, we're receiving strong demand from prospective buyers of Work Simply and continue to expect the consummated divestiture transaction of the business prior to year-end 2022. We believe the combination of LifeMD crossing into profitability plus estimated proceeds from this potential divestiture will capitalize LifeMD extremely well and strategically position us for the company's next leg of growth and margin expansion. This wraps up our financial results. I'd now like to turn the call back over to Justin.