Sharecare, Inc.

Good day, everyone, and welcome to the ShareCare third quarter 2022 earnings call and webcast. All participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. On today's call, we have Mr. Jeff Arnold, Chairman and CEO, Mr. Justin Ferraro, President and Chief Financial Officer, as well as Mr. Joffrey Muhammad, Chief Operating Officer, who will join for the question and answer session. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which includes statements regarding potential strategic reviews and our guidance. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that will occur after this call. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the risk factors section of our Form 10-K for the year ended December 31st, 2021. In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company's website. I would now like to hand the conference call over to Mr. Jeff Arnold. Jeff, please go ahead.

Thank you all for joining us this morning. For the third quarter of 2022, we delivered revenue of $114.6 million and adjusted EBITDA of $7.2 million, reflecting our continued momentum across the business. During the quarter, we executed on our strategy as evidenced by signing a multi-year strategic agreement with Carillon, the healthcare service subsidiary of Elevents Health, expanding our EBITDA margin, reducing our cash burn, and tracking to hit our core KPIs of 12 million eligible lives and 6 million medical records processed by year end. We've previously discussed our plans to support growth through expansion of our sales team and channel partnerships. I'm pleased to report that we've increased our pipeline by 300% on a year-over-year basis and nearly doubled our RFPs, which doesn't account for the upsell opportunities with existing clients across our installed base. Our third quarter performance and the strength of our pipeline across all three channels gives us confidence for 2023 and beyond. With $203 million on our balance sheet, we are very secure financially and well-positioned to fund our continued growth. In the Enterprise Channel, we continued to focus on delivering value to our customers through well-being engagement, lifestyle and disease management, cost of care optimization, and improved quality and access to care. As mentioned, we took another important step in expanding our relationship with Elevance by closing the contract for our multi-year strategic partnership with Caroline. Together, we are integrating our digital-first advocacy solution, ShareCare Plus, into their health guide services for hundreds of thousands of their members, which speaks to our ability to drive member engagement and increase value for our strategic partners. This is one of the largest contracts we've signed at ShareCare, and our hope is that our existing installed base views this large-scale deployment as a vote of confidence in adopting ShareCare Plus for their populations. As a reminder, ShareCare Plus is our digital first comprehensive advocacy solution designed to deliver value through benefits navigation, clinical engagement, virtual care, and chronic case and utilization management. Advocacy is a very intentional and strategic addition to the ShareCare platform. We continue to invest in our capabilities to aggregate longitudinal clinical data through digital connectivity with health systems, advanced clinical cost-of-care analytics, and deliver high-touch care utilizing telephonic and in-home care models through our CareLinks network. We also continue to build out our digital therapeutic ecosystem, including investing in ShareCare's clinically validated programs. Related to that, we continue to invest in retaining and recruiting talent on our teams, including the recent appointment of our new chief medical officer, Dr. Jed Brewer, a renowned psychiatrist, neuroscientist, and co-founder of Mind Sciences, which ShareCare acquired in June of 2020. Dr. Judd is leading the build-out of our digital therapeutics ecosystem. We also see a shift towards payer-agnostic family and clinical advocacy among medium to large employer groups and benefits consultants. We continue to collaborate with Elevance's national accounts team to offer multi-payer solutions to our joint customers. And from a financial perspective, ShareCare Plus moves ShareCare into higher PMPMs associated with the benefits navigation space with the ability to take upside and downside risk on the cost and quality of care. Further, in light of the current macro environment, we have found that the labor market continues to be tight. Talent retention remains one of the top priorities of our employers, and a digital-first health advocacy solution can play an important role in increasing employee satisfaction. Even as uncertainty in these markets may persist, we anticipate we will continue to see increased demand for the value-added and cost-efficient advocacy solutions. Additionally, With our ability to leverage employees' longitudinal data alongside ShareCare's proprietary community well-being data and insights, we can deliver actionable, precision analytics that yield high ROI, helping employers improve well-being and optimize the overall cost of benefits. While these collective strategic efforts and market dynamics are helping ShareCare Plus resonate well with the market, the momentum we are seeing is about more than advocacy. The market is recognizing that the sum total value of the capabilities we have assembled at ShareCare over the last decade is greater than its parts. Our comprehensive interoperable platform is yielding strong demand as we continue to solve for the vendor fatigue that benefit managers are facing, giving you overwhelming number of point solutions available. Simply put, we believe ShareCare is uniquely positioned to deliver the impactful member experience that they're looking for with the ease of implementation and whether onboarding an entire population for the first time or introducing new clinical capabilities within the platform, such as advocacy or home health. In addition to ShareCare Plus agreement with CareAlign, we've experienced diversified growth in our enterprise channel during the quarter with strength in our home health offering. This quarter marks the one-year anniversary of our acquisition of CareLinks, which has been very successful, both in opening us to new markets and data sets and expanding the capabilities we offer to our health plan, employer, government, and provider customers. Since we acquired this asset, CareLinks has delivered excellent results in achieving and exceeding the Medicare supplemental benefit targets for our Medicare Advantage customers. To date, we have grown the Medicare Advantage members we serve from 300,000 to over 1.8 million. And we expect that market to continue to expand as we look to 2023 and beyond. We have successfully integrated CareLinks capabilities into our core advocacy offering, increasing our precision for engagement. We continue to invest in and expand CareLinks' capabilities to deliver clinical services to reduce the cost of care through high-quality transitional care services to optimize readmission rates. And provider This channel is performing very well. This was our largest quarter in the company's history with $29 million in revenue, an increase of 20% year-over-year, and an expansion in margins. We are working on driving additional margin expansion by automating processes and globalizing a portion of our workforce. The third quarter also saw a record number of records processed as we strive to achieve $6 million for the year. It is important to note that we hired Harsha Panyeti-Hundy, who has an extensive payer and provider ecosystem expertise as our chief technology officer in the quarter. Harsha is already making an impact in driving efficiencies throughout the business that will yield higher margins as we look to 2023 and beyond. In life sciences, we saw success in continuing to grow our top 20 pharma clients and brands and maintain solid client retention in the quarter. Like others in the industry, we're seeing reduced media spend for pharma DCCs. According to IQVIA's channel dynamics data from July 2022, pharma DTC promotional spending through July was down more than 14% compared to the prior year. And from what we can see, we'll continue to trend in that direction for the rest of the year. We're also seeing fewer new pharma brands being supported, especially compared to last year, which was a particularly robust year for new brand indications. It's worth noting that the Life Science Channel has historically performed very well. growing organically over 35% in 2021. And that's also grown year over year through the third quarter, even in a challenging macro environment. Despite the headwinds, we're optimistic about growth from our 2023 Life Sciences product suite and confident our positive performance metrics will continue to drive renewals and keep ShareCare at the forefront of buying decisions. Additionally, Capitalizing on assets and talent realized through our 2021 DocAI acquisition, Sharecare recently introduced the next generation of the smart omics platform. Our proprietary no-code solution that enables real-world data collection and digital biomarker creation by empowering researchers, clinicians, and academic institutions to conduct digitally-enabled research studies independently. By expanding Smartomics' capabilities, ShareCare not only broadens the scope of its opportunity in life sciences beyond the point of commercialization, but also plays an important role in advancing relevance, equity, and data integrity in clinical research across the healthcare continuum. Given our expertise in engaging consumers, we will continue to invest in capabilities to bring efficiencies to clinical research for our pharma and non-pharma customers. Regarding our previously discussed strategic review, we continue to actively evaluate a number of potential opportunities to enhance shareholder value. We have seen a lot of excitement around share care, so there remains an array of potential outcomes, but we won't be commenting further unless and until additional disclosure is necessary or appropriate. Additionally, we have $50 million still available in our stock buyback program. With the strength of our balance sheet and our belief in the value of our assets, we will continue to evaluate future use of that alternative to drive value for our shareholders as well. I'm proud of what we've accomplished so far this year, and I feel we are incredibly well positioned to achieve our future growth goals. Now, let me turn the call over to Justin, who will review our financial results for the quarter and share some additional commentary regarding the remainder of fiscal 2022.

Thanks, Jeff, and thanks to everyone for your continued interest. As Jeff shared, we delivered strong results for the third quarter of 2022, for both revenue and adjusted EBITDA. I'll first share the third quarter results and then provide some commentary on the remainder of 2022. A third quarter revenue grew 9% to $114.6 million from $105.6 million a year ago. Growth in the quarter was driven by year-over-year increases in eligible lives on the platform and an increased number of records retrieved. Year-over-year growth was impacted by a previously disclosed decision to sunset certain businesses, which resulted in a revenue reduction of approximately $9 million over the prior year period. When normalizing for the sunsetting of those products, our overall year-over-year growth was 19%. Adjusted EBITDA for the quarter was $7.2 million from $7.9 million for the prior year period. Our adjusted EBITDA performance was due to a combination of factors, including cost management as well as gross margin expansion in both our provider and life sciences channels. Note that the third quarter adjusted EBITDA margin of 6.3% represents a significant increase from Q2 adjusted EBITDA margin of 2%. In addition, we remain in a very strong financial position with $203 million in cash in our balance sheet and over $250 million in available cash. I will note that our cash burn in the quarter was reduced to $9 million, which represents a significant reduction to cash burn from Q2. Last quarter, we suspended guidance for the remainder of 2022 and stated that we would hold an analyst day in Q4. As an update, we've scheduled meetings with all of our analysts for early December and currently plan to provide guidance for 2023 in connection with our Q4 call. To close out my comments, I want to reiterate that we remain confident in ShareCare's long-term outlook. So far in 2022, we have enhanced our product offerings with our home health and advocacy solutions, significantly grown our pipeline, and reduced cash burn. We also have a very strong balance sheet, enabling us to continue to invest in growth. Thank you all for joining us today. We'll now open the call to your questions.