SOC Telemed, Inc.

Good evening and welcome to SOC Telemed's second quarter 2021 earnings conference call and webcast. All participants will be in a listen-only mode. Please note also that today's event is being recorded. I would now like to turn the conference over to Steve Rubis, Vice President of Investor Relations. Please go ahead.

Good evening and thank you for joining our conference call. Today we will provide an update on SSE Telemed's business as well as a review of financial results for the second quarter of 2021. The news release detailing these results is available on the company's website. A replay of this call will also be archived on the company website. During the conference call, the company will be discussing certain non-GAAP financial measures that they believe are important in evaluating performance. Details on the relationship between these non-GAAP measures to the most comparable gap measure and reconciliation thereof can be found in the press release that is posted on the investor relations page of the company's website. Also, please note that certain statements made during today's call will be forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results for SOC telemed to differ materially from those expressed or implied in this call. For additional information, please refer to the cautionary statements in the press release and filings with the SEC, all of which are available on the investor relations page of the company's website. This evening, we are joined by John Kalix, Chief Executive Officer, and Chris Nibb, Chief Financial Officer, who will be available to answer questions after the prepared remarks. I will now turn the call over to John. Thank you, Steve. Good evening, and thank you all for joining our call.

Today, I will walk through our second quarter performance, provide an overview of the secular growth trends impacting our business, our sales performance during the quarter, an update on access positions, and then close with how Telmed IQ platform is differentiated from our competitors. On a year-over-year basis in the second quarter, our total consult volume increased 98%, or 49% on a pro forma basis. Including access positions, revenue increased 84%, and bookings increased 136%. Our bookings performance for the first half of 2021 was greater than bookings performance for the entirety of 2020. Notwithstanding our strong performance in the second quarter and year-to-date, we have revised our 2021 financial guidance lower to reflect near-term disruption stemming from the COVID-19 Delta variant, which has led to temporary delayed decision-making and slower implementations at hospitals. The rise of COVID-19 Delta variant is placing significant pressure on hospital emergency departments, especially in states such as Florida and Texas. The increased pressure stemming from COVID-19 creates a significant distraction for both our current and prospective hospitals and health system customers, resulting in longer sales cycles and delayed implementation timelines associated with new business and cross-selling opportunities. Finally, we've modeled a weaker-than-normal upcoming flu season, representing additional headwinds. Looking beyond COVID-19, we remain optimistic in the growth trajectory of our business, as bookings remain on track to more than double full year relative to 2020. The current bookings trajectory illustrates our market leadership position, as well as the significance of longer-term growth opportunity for the business. Acute care telemedicine growth and adoption remain in the very early innings. Our broad and flexible solutions continue to gain traction as evidenced by growth with our current customers, which I will discuss shortly. We see firsthand how telemedicine value proposition increasingly resonates with hospital decision makers seeking to standardize their telemedicine needs on a single platform. There are several secular growth tailwinds that continue to drive momentum for our business. The first revolves around the shortage of specialty physicians. In June, the Association of American Medical College published its seventh annual study, The report suggests that the U.S. will face a projected shortage of up to 77,000 specialty physicians by 2034. Access to specialty care will remain a prominent issue, as 40% of physicians are currently 65 or older. Today, these shortages are more severe throughout the middle of the country, but rapidly approaching the coastal regions as well. Telemedicine tools such as TelemedicQ are uniquely positioned to help both rural and urban hospitals and health systems bridge the specialty physician access gap regardless of location. These trends highlight the need for tools like TelmedIQ that can fill this resource gap by fractionalizing and democratizing specialist clinicians for hospitals and health systems. The second is network integrity. Network integrity for a hospital health system is the ability to keep patients within their defined network of providers. Our network integrity value proposition revolves around a comprehensive platform consisting of 11 clinical service lines, as well as the expanded provider network availability through Telemed IQ managed services. The Telemed IQ platform offers hospitals and health systems a tool to increase clinical capacity and maintain network integrity that not only keeps patients in the network and optimizes revenue, but also improves clinical quality. For our clients, network integrity is about keeping patients within the local community, and at the same time, improving ROI through reduction of patient transfers to other hospitals or health systems. Third, our platform provides hospitals a tool to optimize their scarce specialist resources through fractionalization and load balancing of these resources to deliver the most cost-efficient clinical coverage solution. Medical claim share provides a unique lens to assess where we currently stand on the telemedicine adoption curve. Just like the early days of e-commerce adoption, telemedicine claim share represents a relatively small portion of total medical claims. We expected to see significant medical claim share expansion over the next several years. Current estimates from Fair Health suggest telemedicine claims represent just 5% of all medical claims. While 5% may seem relatively low, we believe such share illustrates mainstream adoption of telemedicine. and really vividly illustrates the significant multi-year growth opportunity for acute care-focused telehealth services. In the second quarter, we added several new logos and benefited from several cross-selling opportunities. Our go-to-market strategy focuses on four opportunities, new logos, multi-set expansions, multi-specialty expansions, and enterprise deals. An important partnership expansion involved SEP Health for our Telmed IQ program, managed services platform. In May, we announced in conjunction with SEP Health that TeleMed IQ will serve as the engine of SEP's telemedicine expansion. The multi-year partnership includes annual escalating commitments over a five-year period. The agreement provides SEP the ability to deliver a hybrid clinical approach designed to optimize SEP's clinical workforce, enabling their hospital partners to efficiently provide excellent patient care. As a reminder, SEP operates a portfolio of 7,500 providers across 30 states and 400 healthcare facilities, reaching over 8 million patients. Importantly, our second quarter bookings, being annual recurring revenue, represents only a small portion of the overall contract value. We benefited from several multi-state expansions in the quarter as well, including UnityPoint Health, among others. These multi-site expansion opportunities are primarily driven by proven success through our telepsychiatry offer, leading to a better appreciation of our overall value proposition. Currently, we average roughly two service lines per facility within the existing client base. Full adoption of our 11 clinical service lines across our existing 1,000-plus facility client base represents an approximate $3 billion market opportunity. Achieving full clinical service line adoption across the entire 5,700 hospital market increases the market opportunity to nearly $7 billion. UnityPoint expanded their use of telemedicine offering across four hospitals in the Des Moines and Cedar Rapids markets. That's set to go live in the second half of 2021. The multi-site expansion stems from proven success with our telepsychiatry offering at UnityPoint Health Allen Hospital, which resulted in reduced average length of stay by nearly 12 hours It avoided more than $1.7 million in annualized boarding costs, and it generated an annual ROI of 281%. In April, two customers implemented our Tomat IQ platform to maintain network integrity in rural markets. Bon Secours Mercy, Lord's Hospital, implemented our ICU service line. Our platform affords Bon Secours with 24-7 access to intensivists. As the only hospital in the region with 24-7 access to intensivists, Bonsai Cores can maintain network integrity by keeping higher-acuity patients at their facility. As one final example, the Davis Regional Medical Center implemented our tele-neurology and tele-stroke offerings. Implementation of Telmed IQ platform allows Davis Regional Medical Center to maintain network integrity by keeping more patients within the hospital, as it can better manage complex neurological cases. Additionally, TelmedIQ combined with the physician services we deliver to help improve outcomes and drive higher quality of care throughout its community. Now, regarding Access Physicians, we continue to work through the integration process and remain excited about the opportunity. The team is focused on deepening our relationship across both organizations and building the best team. Early focus has been in identifying and adopting best practices associated with sales processes and sales opportunities across the combined platform. Additionally, we've identified a significant number of cross-selling opportunities that are active in our pipeline. The cross-sell opportunity revolves around moving single facility clients to multi-facility clients, expanding service line utilization from roughly two service lines currently to full penetration of 11 service lines, and lastly, driving full penetration across the combined legacy client base. At the same time, we've identified some initial operating synergies For example, we have successfully completed the transition of the maternal-fetal medicine service line onto the TelmedIQ platform and have gone live with our very first site. Our significant cross-selling opportunity across the combined legacy SOC and access physician platform remains intact and will be a key driver to future growth. Our late-stage pipeline is up roughly nearly 30% since the end of the first quarter. There are three drivers of the cross-selling opportunity across the combined companies. With the bulk of back office contracting work complete, customers can more easily adopt additional service lines. Second, customers already understand the value of telemedicine. And then lastly, the sales process becomes more strategic and consultative in nature. The combination of 11 clinical service lines coupled with Telemed IQ platform enables us to meet multiple needs of the health system and hospital leadership level rather than the individual service line leadership. The addition of several new service lines, such as cardiology, infectious disease, internal fetal medicine, among others, helps strengthen our value proposition among hospitals. Providing a vast array of specialties allows our clients to easily expand their service lines on the Telmed IQ platform to meet their acute care telemedicine needs with minimal operational disruption as their clinical resources change over time. One additional driver of our cross-selling opportunity is vendor fatigue across hospitals and health systems. SLC TeleMed can provide a full suite of clinical services and back-office support, including credentialing and privileging. As hospitals and health systems face constraints, our algorithm simplifies and automates complex management associated with licenses and credentials at both the state and the facility level, which has been extremely attractive to current and potential customers. While increased leads provides a strong validation of strategic rationale and growth opportunity associated with the access to the physician's field. Visibility to conversion timing remains limited given the renewed COVID environment. Hospital decision makers face another wave of new demands, and we are already seeing in-person meetings revert back to remote or being delayed, as an example. SOC telemed remains a multilevel growth story. The first lever revolves around cross-selling into our extensive set of current customers through multi-site, multi-service line expansion. The second lever involves attracting new logos and adding new customers over time. The third lever involves driving adoption of our TelmedIQ managed service offering that allow hospitals to build out their service lines, load balance their current clinical workforce, and supplement capacity needs. And then lastly, as the only scaled player in acute care telemedicine, we will continue to be opportunistic about aggregating small competitors over time. Investors often ask us how Telemed IQ platform is differentiated from other offerings. The competitive advantage lies in the flexibility of our platform's underlying technology, as the flexible workflows driving the secure platform were designed for optimization of clinical resources in acute care. Many of our competitors are trying to take system design for ambulatory, or outpatient settings and bring them to the acute care space. Due to the higher acuity workflow complexities and limited panels associated with acute care, other offerings are simply too inflexible to meet the workflow assurances needed for acute care. We provide life-saving medical care. Furthermore, these competing solutions lack the industrial strength and security of a platform like Telmed IQ. The Telmed IQ workflow aggregates and ranks encounters by acuity. in real time. Specialists are ranked by availability amongst the pool of doctors available who are licensed in the state and privileged at that very specific facility. The result is finding the right doctor for the right patient at the right time. Our TelnetIQ platform accounts for a greater level of sophistication relative to our public and private competitors. Acute care solutions require additional layers of credentialing and privileging for doctors relative to the direct-to-consumer space. In acute care, a physician must be licensed in a specific state and then credentialed and privileged to practice medicine at each specific facility. As of the second quarter, we managed 3,400 licenses and 15,000 privileges at standalone SOC. Furthermore, we continue to implement FHIR-based two-way EMAR integration with Epic and Cerner. This year alone, we've gone live in 36 hospitals across 12 health systems. Such integration embeds our Telmed IQ system within the Epic Consumer ecosystem. Through a single sign-on, medical practitioners can submit a telemedicine consult request within seconds, directly from the EMAR. Additionally, clinician notes captured during the consult become available in the EMAR as soon as the consult is complete. As you can imagine, customers are quite interested in this type of EMAR integration that facilitates seamless workflow and frictionless data exchange. Finally, and in summary, Four key elements differentiate SOC TeleMed from other telemedicine providers in the market. First, we serve the acute care market where the clinical needs we address have greater complexity and risk than direct-to-consumer telemedicine. Second, we manage credentialing and privileging for the doctors and hospitals on our platform. Third, the SOC TeleMed IQ platform allows hospitals to fractionalize scarce provider resources and improve network integrity. Lastly, our high-trust CSF certification represents a testament for commitment to the highest security standards with our Telmed IQ platform. We have stated before and continue to believe the acute care telemedicine space is a post-COVID opportunity, as evidenced in the year-over-year bookings acceleration. We look forward to sharing more and new customer and customer success stories in the near future. And with that, I'll turn it over to Chris to walk you through our financials.