LifeMD, Inc.

Good afternoon. Thank you for joining us today to discuss the results for LifeMD's third quarter ended September 30th, 2022. 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 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 YFMD 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 10th, 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 this company believes are important in evaluating LifeMD's performance. Details on the relationship between these non-GAAP measures to the most Comparable gap 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 would like to turn the call over to LifeMD's CEO, Justin Schreiber. Please go ahead, Justin Schreiber.

Thank you and good afternoon everyone. Today, after the market closed, we issued a press release containing our third quarter results and uploaded an updated corporate presentation for Q3 2022. I encourage everyone to download and review this presentation on our investor relations website at ir.lifemd.com. During the third quarter, LifeMD made significant progress on multiple strategic and operational initiatives to position the company for its next phase of growth, and more importantly, an imminent path to profitability. I'd like to highlight the following five strategic and operational objectives we executed. First, we significantly bolstered LifeMD's profitability across all business lines and on a consolidated basis, which served to drive our consolidated adjusted EBITDA loss to below $1 million for the quarter. Second, we continue to scale and create significant growth in our virtual primary care business. This strong growth was enabled by successfully launching a host of new features on our primary care platform, such as our prescription drug discount card program, symptom checker, and more. Third, we meaningfully optimized advertising spend and customer acquisition costs. And fourth, We further diversified our telehealth business through the continued scaling of recently launched telehealth products and growth in our B2B partnership business. And fifth, we made extensive progress in both the Work Simply divestiture progress, plus significantly enhancing the long-term fundamentals, revenue, and profit growth potential of Work Simply. Our continued execution of these initiatives further reinforces our commitment to creating long-term value for our shareholders and underscores our drive to deliver upon major areas of guidance that we have provided, mainly in the areas of profitability and the creation of a primary care business with strong patient satisfaction and retention. Perhaps our biggest accomplishment this quarter was the tremendous traction we gained in profitability. We concluded our third quarter with an adjusted EBITDA loss of just $889,000. This represented an 86% improvement versus even the prior quarter sequentially when our adjusted EBITDA loss totaled $6.9 million and is a testament to the tremendous focus we've placed on optimizing our customer acquisition and retention investment while paring back areas that produce growth but not long-term profitability. This, coupled with the tremendous leverage that we are gaining against our fixed operating expenses, is laying the foundation on which we will continue our long-term growth with expanding profit margins. As we undertook this process, we eliminated investment in select product offerings that, while being growth drivers, did not meet our internal profitability thresholds. Now that we have established a solid base to build on, we expect sequential growth to return in the first quarter of 2023 with steadily increasing profit margins. LifeMD also saw continued momentum in the growth of our virtual primary care platform since its launch in the second quarter. I reiterate my belief that VPC, or our primary care platform, represents one of the largest, if not the largest, business opportunity for LifeMD in the years ahead. We eclipsed our previous guidance of ending the third quarter with 2,000 subscribers by nearly 20%. and continue to remain ahead of our previous expectations with growing momentum for this business. In fact, as of today, VPC has almost 4,000 subscribers. Moreover, in recent weeks, we have begun to increase our daily new acquisitions per day from approximately 30 new patients a day to 60 to 90 new patients a day without increasing our marketing spend budget. I'm very encouraged by the continued strong retention we continue to see in this business, which reflects the large unmet need for high quality, affordable cash pay virtual primary care. LifeMD currently offers one of the most comprehensive virtual primary care offerings in the U.S., one where our members gain access to incredible doctors and nurse practitioners, discounted prescription medications, labs, imaging, referrals to specialists when needed, and expert wellness guidance. Our platform not only supports urgent and generalized primary care offerings, but also can facilitate treatment for hundreds of different conditions. And our programs are designed so that patients can see the same doctor over time, which I believe enhances outcomes and the patient experience. As I mentioned earlier, we made major headway in optimizing our marketing spend and CACs in the third quarter. we reduced our blended tax by 18% versus prior year and 8% versus the prior quarter. This is the key driver behind both our ability to significantly reduce our marketing spend as a percentage of revenue and rapidly improve profitability of the business. By operating effectively with these newly reduced tax and focusing our capital on the offerings that drive the best long-term return on investment, we are well positioned amongst our peer group for a balanced combination of growth and profitability, which we believe will be a key driver of long-term shareholder value. Lastly, during this quarter, we continue to make significant progress in diversifying our telehealth business through new telehealth service offerings. As mentioned previously, VPC continues to rapidly scale with increasing momentum. Two recently launched indications, Leap and our proprietary topical pain management offering have also begun to rapidly expand. Following their launch in the second quarter, where they accounted for only about 1% of total revenue and subscriber base, these two offerings have grown to become just under 5% of our total revenue as of the end of the third quarter and combined to become nearly 12% of our total new patient acquisition volume in the third quarter. Beyond our direct-to-consumer telehealth business, we're continuing to successfully build out our business-to-business operation, leveraging our best-in-class telehealth technology platform and affiliated medical group to partner directly with pharmaceutical companies. We recently completed our third pharma partnership, which adds four branded prescription products to our platform. We've built an impressive pipeline of potential deals of which we expect to see several close in 2023, which will help us further diversify our revenue mix with high-margin B2B revenue while providing additional opportunities for cross-selling on our BPC platform. WorkSimply continues to be a tremendous performing asset for the consolidated company, producing rapidly increasing levels of profitability coupled with strong revenue growth. We are currently in the late stage of the divestiture process and actively in negotiations after receiving interest from multiple bidders. Given the extreme value and profit accretion from WorkSimply, which Mark will speak about later, we remain focused on ensuring that any divestiture maximizes value for LifeMD and our shareholders relative to the value WorkSimply can create as part of our consolidated company. We are currently in the late stage of the work simply process and remain in a strong position to create significant value for shareholders with this asset. With that, I will now turn the call over to our CFO, Mark. Who provided summary of our financial results.

Mark, thank you Justin and good afternoon. Everyone. The 3rd quarter of 2022 is a major breakthrough quarter for life. in realizing our pathway to profitability and sustainable long-term profitable growth. We drove our adjusted EBITDA loss to $889,000, which was a 90% improvement versus prior year, and ahead of even our internal expectations. We remain on track to achieve consolidated adjusted EBITDA profitability in the fourth quarter. As Justin mentioned, we have made extensive progress on the WorkSimply process and are currently in the final stage of the process after receiving interest from multiple qualified bidders. At the same time, we are extremely cognizant of the tremendous growth and profit potential of this asset. During the third quarter, WorkSimply not only grew revenue 57% year over year, but also finished with over 1 million of EBITDA on the quarter, which is expected to exponentially grow in the quarters in years to come. In fact, we believe WorkSimply has the potential to produce $20 to $25 million or more in EBITDA in 2023, while producing significant double-digit top-line growth. We plan to provide a further update on WorkSimply prior to the end of this year. Now turning to the results for the third quarter of 2022. Revenue in the third quarter totaled the record $31.4 million, up 26% as compared to the same quarter a year ago. 93% of total revenues in the third quarter were generated by recurring subscriptions. Telehealth net revenues grew by 15% to $21.4 million, while Work Simply net revenues grew by 57% to $10 million. Work Simply revenues grew 23% sequentially as compared to the second quarter. Additionally, Work Simply achieved Q3 EBITDA margins of mid-teens, 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 36% first prior year to end the quarter with over 176,000 active subscribers. We were able to accomplish this subscriber growth while refocusing our efforts on our offerings that meet our profitability thresholds, redirecting investment into new verticals, and reducing our tax by 18% versus prior year. Gross margins for the third quarter reached 85%, up 500 basis points versus prior year. Gross profit for the quarter totaled 26.7 million, an increase of 35% from the same year-ago period. Operating expenses for the third quarter totaled 33.5 million, an increase of 1.1 million versus the year-ago period. Excluding non-cash expenses of $4.5 million associated with stock-based comp, depreciation and amortization, net of these expenses, operating expenses as a percentage of company revenue decreased by 1,900 basis points as compared to prior year. Equally important, we reduced our marketing expenses a percentage of revenue to 55% versus 81% of revenue in the same year-ago period. and improved leverage in this key spend area by 1,700 basis points versus the prior quarter. Our GAAP net loss attributable to common stockholders for the third quarter totaled 8.1 million, or 26 cents per share. This compares to a net loss attributable to common stockholders of 14.4 million, or 54 cents per share in the third quarter of 2021. Adjusted EPS, a non-GAAP financial measure that excludes non-cash expenses, preferred stock dividends, litigation expense, and foreign currency translation, totaled the loss of $0.03 per share as compared to $0.34 per share in the same year-ago period. Adjusted EPS also improved 87% sequentially versus the prior quarter. Adjusted EBITDA, a non-GAAP financial measure excluding the same categories as noted in adjusted EPS, totaled the loss of $889,000 in the third quarter of 2022. This compares to an adjusted EBITDA loss of $9 million in the same year-ago quarter. Now turning to our balance sheet. Cash totaled $5.8 million as of September 30, 2022, and we have reduced our cash burn rate to approximately $500,000 per month, with the burn rate expected to continue to trend down In fact, we expect to eliminate the cash burn on a consolidated basis by the end of this year. This underscores the company's commitment to prudent capital management, growing our profitability, and eliminating our cash burn. In addition to the potential monetization of the WorkSimply asset, LifeMD has secured non-binding offers for attractive non-volutive financing options that can further augment our balance sheet and capitalize the company regardless of the work simply transaction. This wraps up our financial results. I'd now like to turn the call back over to Justin.