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spk_0: the day and think it was gonna buy weapons it's have you a rough healthcare fourth quarter and four year twenty twenty two earning conference call at the time or purchases on a listening mode after the speakers presentation there will be a question answer session that's a question than the session you will need the press star one one of your telephone you was in here an automated message devising your hand it's raised to withdraw your question please for star one one again please be advised subsidies conflict is being recorded oh no of the hand the comforts overseas because day francs their fino senior vice president of of desolation and corporate development
spk_1: please go ahead
spk_2: that morning the detroit filipino of vp of and that the relation and corporate development project of the route the ogre the company that developed out of the bay harbor provisions of the private security build a geisha reform act like ninety ninety five thursday that made during the call will be for looking statements within the meaning of that law the forward looking statements are subject to rip uncertainty and other factors that could cause travel around the of their actual results to differ materially from those express or implied by the forward looking statements these ruth and authorities include our expectations regarding industry and market thread including the expected growth that considered structural change the consolidation in the market for help here in the united states our expectations about the growth of program of all inclusive care for the elderly paid organization or plans the further penetrate existing market and enter newmarket plan strategy and objective of management for future operations teacher capital expenditures teacher economic condition or performance and our estimates regarding capital requirements and need for additional financing or additional information on the roof they they have the raza healthcare please refer to fall into the fcc including the risk factors section of our twenty twenty one pancake filed on february twenty fifth twenty twenty two and are twenty twenty two pancake to be followed shortly when we discussed a result of call a lot indicated otherwise we are referring to results from continue operation for additional information on our results from discontinued operation please refer to the financial statement contained in the earnings release on march six twenty twenty three and a note to the financial statements to be included in our ten pay for twenty twenty two a recording of this cause acceptable to a link on the investor relations page of a website i will now for the call over to grind out president an interim ceo of capital rough that helped her thanks frank good morning and thank you all for joining i'm proud of the tag of a rough the team and what we accomplished during twenty twenty two especially in the second half of the year the number speak for themselves for the full year revenue grew at a rate of approximately fifty percent and the fourth quarter however revenue growth accelerated to twenty percent as many of you know in quite a transformational year on many levels for us we sold our prescribe well this business unit in august to nelson important leadership and board changes in september named april gil was our first cheap commercial officer november and recently completed the sale of the funny oreck than dose me to non strategic asset this is in addition to being recognized as a twenty twenty two champion aboard board diversity by the form of executive women and name's one of america's greatest workplaces for diversity by youth week i'm extremely proud of our nearly seven hundred team members for how they have helped additional as we enter twenty twenty three with strong momentum the important to them and the continued evolution of our business over the past year have brought a number of new individual to the call so i thought it might be helpful to provide a short overview of what we do how do you have often been around two thousand and nine and has developed and expertise for managing the most complex patients in our healthcare system we provide individual i'd care for the correction a personalized medication regimen to reduce risk and optimized africa and help organizations responsible for those patients operate more effectively over the years we have developed a proprietary midwife platform which is are unique murphy drug interaction solution that help predict medication related rick we have numerous peer reviewed publications that showcase the profoundly positive impact from that wide on patient health outcomes and the reduction of total cost of care of very authentic er med white platform had been developed through a collaboration of our our d and software engineering team and contained the robot that a proprietary clinical algorithm the highlight multi drug interaction and help coalition to optimize individual medication regimen for their patience reducing the risk of serious side effects while also promoting maximum effectiveness that wife and also account for person genetic makeup and their individual response to certain medications allowing for a more precise prescribing on a particular know i really enjoy hearing a weekly update thirteen share showcasing the positive effects were having on patient care by using the midwife platform the story that personal and each one is worth celebrating he's are moment that helped motivate our team every day in a program of all include the care for the elderly or picked market which represents the largest percentage of our revenue day today and grew at twenty seven percent in the fourth quarter we have demonstrated a five thousand dollar annual thieving per person when using our midwife platform coupled with our pharmacy services as compared to those not using tag europe for though that he not familiar with pay it is a program funded by medicare and medicaid and designed to allow people to age in the community or at home rather than institutional care like a nursing home it is arguably the most successful example of value valuable care and have demonstrated material reduction in hospitalization rates than he argued all addition compared to those individuals in long term care setting over the years we have added other technology enabled services and software to our sweet a solution to help our quiet simplified their operation and allocate more resources toward patient care we believe a combination of these solutions not only relevant paid but also to adjacent help your market taking on financial risk and serving similar demographic thanks to our efforts to refocus the company around the pollution or cross owing activities are gaining momentum this is evidenced by the average revenue regenerate per piece individual per month which increased to four hundred ninety four dollars in the fourth quarter of twenty twenty two at sixteen percent from four hundred and twenty seven dollars a year ago the total monthly revenue we could generate from each individual if they were to be covered by all five of our services it currently more than twelve hundred dollars the most significant opportunity we have to increase the four hundred and ninety four dollar average revenue per patient up per month it through driving greater adoption of our pharmacy services into our existing paid customer base and we're making progress towards that goal in twenty twenty two we increase penetration of our pharmacy services to thirty eight percent of our overall day for thirty four percent at the and twenty twenty one in addition to the opportunity to provide incremental thirty two existing customers the paste market continues to grow that expanding our total addressable market i want to highlight a few important developments that took place over the past twelve months during twenty twenty two maryland's ohio and new jersey committee to expanding their peak program according to the national papers location of high oh had an estimated sixty six thousand individuals currently eligible for paid but without access to services making it one of the top the in terms of opportunity ohio path to peace expansion build that include fifty million dollars to support start up costs and the faded taking a proactive approach on outreach to drive involvement in their peak program if proactive approach includes identifying eligible individual than notifying them have paid program in the appropriate target area this is important because it will increase consumer awareness one of the key policy recommendations we highlighted last quarter from the bipartisan policy center to accelerate peace adoption vs individuals residing in a nursing facility in addition to these three states expansion missouri and kentucky became the to new estate and twenty twenty two to start rolling pin participant bring the total number of take to thirty and according to p missouri and kentucky have an estimated forty thousand plus individual currently eligible last quarter i highlighted mph eighth two hundred k project and all of the development i noted are important and driving an accelerated rate of market growth to reach the two hundred thousand enrollees by twenty twenty eight using a twelve hundred dollar average revenue per piece in rowley per month that would result if a client you'd all of our paid services and applying that to the two hundred thousand targeted and enrollees would yield an estimated ten of two point nine billion dollars by twenty twenty eight expansion of existing state put new state coming online get with confidence in our expectation for continued strong growth over the next several years in the paper market as we think the increase the market share a toppled it's gotten more detail were making important investment snarky didn't to accommodate fussy anticipate demand and to better serve our customers were also building a dusting class commercial sales organization for profitable feel a growth inside and outside okay as we have discussed in prior called key adjacent markets include health plan network provider group with a focus on the more than twelve million do eligible beneficiary that exists today and drive a disproportionate share of the country total health care spending before i turn the call over to time i also wanted to briefly mention the recent divestitures that symphony orexin dose me the decision to sell non core assets and exit non strategic market part of our continued strategy to realign the organizational structure and allow hagler referred to grow in a more profitable manner while making strategic investment for the future it's strategy has resulted in a sharper focus and this is one of the many reason i'm confident in our ability to execute on our future growth plan to expand our marched in coming years the process did not come without it challenges at we were not able to find continuing role for some of the team members associated with the symphony or it did it i want to thank each and every person associated with symphony or and took me for the important work they did what part of cali the roster and i wish you the best of luck in the future the that that fails along with our four year twenty twenty three guidance represent our commitment to focus on creating long term value for our shareholders when he twenty two with a transformational year for tagging the roster and today we have highlighted a significant progress we've made so far we remain focused on executing on our strategy and we look forward to providing a more folsom view of what you can expect from target iraq the problem into a twenty twenty three and beyond on a future call i will now turn the call a good time to review our financial performance
spk_3: thank you brian and good morning everyone i will from my comments on three areas fourth quarter results
spk_2: the operation that types and twenty twenty three guidance and he thought orange release the company we titled is revenue categories from product revenue and service revenue
spk_3: medication revenue and technology enabled solutions revenue respectively
spk_2: changes have no impact amounts previously reported i will be using our updated revenue lying titles in my comments today
spk_3: one quarter revenue and eighty two point seven million increased twenty percent first year ago quarter and seven percent honest contract basis for the third quarter of two thousand and twenty two
spk_4: how strong revenue performance was primarily attributable to better than expected peace participant
spk_2: and the on warning of another large new piece kind in october
spk_4: the fact is my medication revenue growth of twenty seven percent a year ago
spk_3: prime mention our numbers feet work commitments to paste program expansion this coupled with already robust growth hundred listing shutters is why we expect census grow strong driver revenue growth and quarters and years to come fourth quarter technology enabled solutions revenues flatbush year ago
spk_2: moving mtn fourth quarter technology enabled solutions revenue increased fourteen percent first year ago quarter and six percent on a sequential basis first the third quarter twenty twenty two
spk_3: at cms is ian pm pilot program ended in december twenty twenty one now will no longer be like comparisons going forward adjusted gross margin as percentage of remedy was twenty four point six percent for point color down from twenty eight point seven percent a year ago
spk_4: this was largely due to revenue mix as well as for hire shipping charges which we are working to address honest question faces first third quarter twenty twenty two which to gross margin for such imposed by hundred and thirty face mm my improved technology enabled solutions more
spk_3: we're providing additional not get financial measures starting this quarter earnings release issued yesterday includes descriptions
spk_4: you had when for negatively impacted medication gross margin than twenty twenty two related to revenue myths and higher shipping charges
spk_3: i'm twenty twenty two shipping charges increase significantly
spk_2: and adversely impacted a junkie gross margin by nearly a hundred this
spk_4: we're working to improve both of these factors and twenty twenty three
spk_3: and as noted above did see some improvement and was margins in the fourth quarter
spk_4: while the topic of gross margin
spk_2: we know that a pharmacy business is experiencing significant growth
spk_3: and in order to gain scale as ones to support future demand we plan to invest in automation expansion of a policy left the so
spk_4: while these efforts will take about a apart twenty twenty three amendment we do anticipate roughly three hundred basis points of improvement and the overall gross margin level from twenty twenty four to twenty twenty seven in large part due to these investments in our nation and other issues which will lower our cost of a full orders the coming years we believe are adjusted gross margins can be in the ballpark twenty six and a half to twenty seven and a half percent y twenty twenty seven
spk_3: a gap that loss with a quarter of eighteen point four million
spk_2: compared to a net loss of thirteen million a year ago
spk_3: that includes four point nine million noncash impairment charges related to least terminations and other costs consolidate a real steep footprint as well as one point four million of seven car
spk_2: adjusted even op or point one million from continuing operations for the quarter was flat versa you go or sequential basis first the third quarter of twenty twenty two adjusted even are roughly doubled primarily driven by the just a gross margin improvement noted earlier with respect or key operational metrics we provided a table and our earnings release i provide greater transparency into the performance of it
spk_4: these include pain medication senses which is the ended twenty twenty two increased twenty percent for see year ago
spk_2: driven primarily by same center participant
spk_4: as well as by new pace fun
spk_2: in addition we have provided a pace average revenue per participant come up from education fr technology enabled solutions
spk_4: which increased seven percent and two percent respectively
spk_2: in the fourth quarter first the year ago court a total peace average revenue per participant per month
spk_4: increased sixteen percent to four ninety four during the fourth quarter of twenty twenty two
spk_2: perfect guidance we're introducing first quarter and old here twenty twenty three revenue and adjusted even our guy
spk_4: first quarter revenue from continuing operations eighty to eighty four million represents growth of twenty four percent first the year ago period at the midpoint of the rings
spk_3: and adjusted just that or three or four million for the quarter compared to one point one million a year ago
spk_4: a four year twenty twenty three revenue from continuing operations a three hundred and forty three million to three hundred and fifty four million represents growth of sixteen percent of the midpoint and a just it dog of seventeen to twenty million represents growth of ninety percent of the
spk_2: the point then adjusted ebitda margin of five point three percent
spk_4: i want to provide some additional color for twenty twenty three starting with ready weeks that revenue growth comparisons
spk_2: in the first half of the year to be higher than the second half of the as because we on board too large piece programs in the second half of twenty twenty two with respect to just leave it up i want to provide from added detail with regard to twenty twenty three
spk_3: similar to twenty twenty two weeks expect the fourth quarter of twenty twenty three to be or highest adjusted even ebitda core and we project the second half of the year to account for similar percentage of a whole year adjusted ebitda as in twenty twenty two the fourth quarter may be flattered to the fourth quarter twenty twenty two teach certain season lives and the second quarter of twenty twenty three would be negatively impacted by annual married increases which presents quench will increase to expenses first the first call while we're not providing guidance with respect to cash flow can highlight the few
spk_4: arse
spk_3: we expect total investment in proper equipment the in the range of seven to nine know
spk_2: including five seven million in twenty twenty three to support the automation and expansion initiatives i mentioned earlier
spk_3: weeks that capitalized software for twenty twenty three to be approximately fifteen young
spk_4: the nonrecurring investment in are very and modernize several legacy i feel like
spk_3: total weeks that capital investment and twenty twenty three to be in a range of twenty five to twenty seven doing if you down from a total capital investment twenty nine million and twenty twenty two excluding the nonrecurring investment in our nation
spk_4: tony capitalized software and proper equipment and twenty twenty three is projected at twenty nine we believe over the next several years total investment in software development and proper equipment should averaged fifteen to nineteen million per year
spk_5: i will now trying to call back to brian for some concluding remarks
spk_2: thank god for those updates i'm inspired by the progress we've made with the transformation of death to reposition are upset for long term success
spk_6: i wanted to the typically call out our team members who make a difference in solutions offered to improve patient care every day
spk_2: thank you for the work that you do as we look ahead to twenty twenty three we are well positioned to drive growth and profitability while also investing strategically to deliver long term value
spk_7: with that will turn the call over the operator for q and the operator
spk_0: thank you as a reminder to ask a question please post star one one of your telephone and way for you mean to the announced withdraw your questions please for on one again a symbolic kill any roster
spk_8: i first question comes from the line of stephanie davis was a he securities hill on a them a fall from grace and ago quarter on the ever tried again the profitability
spk_2: brian now that april's for month and the law i was hoping the title of a mob about them her your onto their shift for the new chief marshal after see a hard going to evaluate success for the month the devon effect for the question it's a great one and i am so glad that april it on our team and she'd been an amazing edition so far there's some of the structure that she'd putting in place and another mentioned in my talking point our goal here is really to develop a that and class commercial sales organization and she doing a lot of at work today and so in the first four months of really been about evaluating what we have in place and one of the thing that we've done recently developed in a team that's really focused on commercialization of our products and solution and that's not necessarily something that we had that framework and regular around previously and so i'm excited that the that we have that new i don't know if you'd call it an officer up or whatever but
spk_9: the progressive that really focused on driving the commercialization process and i think you're gonna see a lot of good things come in the second half of this year but in terms of how are specifically gonna measure that you're going to see it in terms of the growth in the pipeline in terms of backlog i enter the new sales are both within the pace market
spk_2: and
spk_8: some of those adjacent jason that i play referendum call now related to that than palm you talk to a relatively a long day that aren't they get back to a pre eminent probability profile if you because you're making investments about bryant has talked about or and you're a thing that could accelerate this timeline like on macro or
spk_4: you know economies of scale hadn't faster than expected i have any pets and thanks for the question now i think your first instinct was correct i think some of these such as the investments in automation take some time to bear fruit it'll take the better part of twenty twenty three to get those in place and so dumb as you saw
spk_2: boehner guys with project
spk_8: margins to be consistent with fourth quarter of twenty twenty two work the bulk of twenty twenty three and then it from twenty twenty four on when we start to get the benefit of some of these investments
spk_7: i album and folks
spk_0: thank you
spk_10: and next question comes on line of credit jones was before want on help and
spk_11: i know you
spk_2: doesn't he did you walk us through a sort of the assumptions around member girls and pnp and girl we think about the top and in the bottom and the your point died a crack thanks for the question that it may be first out of ticket off with some comments around what we're seeing happen in the market right now and then i'll let tom get into some of the specific numbers but yeah i've been ah interacting were frequently with customers in this new role and i have to tell you i'm really excited about that what i'm hearing in in all cases they are focused on quote and you know that really evident in or backlog numbers of you can see those are up significantly from the last time that we reported a lot of that is related to expansions of existing customers and the majority of that it's really focused in the pharmacy faith but on it pretty exciting to see what's happening in the market right now
spk_12: let tom talk more specifically about the upper and lower and
spk_2: yup i'm credit i think growth in the average revenue per participant per month largely tracks with what we've seen over the past year
spk_13: and that how we modeled the in our guidance
spk_4: so you've got a single digit growth in each of the medication and the technology enabled services revenue per participant
spk_11: but for the blend of the to increase because of some of the cross selling at brian had talked about
spk_4: right face and of the medication going too fast and a member bases and listen and make it car the medication for a faster than the tech enabled services that's correct and the blend of the to grow faster than the individual pieces as the next shift and as the cross sell
spk_10: and that bright alluded to with april coming on board starts to bear fruit
spk_5: the eye and then on a primus in the backlog look anything like wage workers measured maybe you know pretty incredible who take it if with uk in my locker to the math and holly how we got them
spk_14: sure fell under all happy to provide a little bit a color on the top and then and then could probably jumped in on feminist pacific but job yet the way that we look at this and measure backlog today is based on the maturity of each of those contracts that we have in place
spk_2: and so did to use an example if we find a pharmacy services contract we're assuming at two hundred and fifty members are protected him for individuals at maturity of that center where location that you're using our average pm pm of roughly a thousand dollars on the pharmacy side multiplying that by the to fifty and then by by twelve months for you get to a little over three million dollar your contract felt that that on an individual or unit basis or if you're thinking about it and then we just build from there so it's really related to specific which contract we have in the pipeline what services they aligned around
spk_4: and we have seen significant expansion over the past few months are coming in from existing customers time i don't know if you have anything to add to that i'll just that the large increase in a backlog it was due to a large national provider that we face provider the that we signed i'm with multiple centers
spk_15: who is taking of the medication services but also some of the technical services
spk_4: other don't that often
spk_0: like crash thank you as a reminder to ask a question at this time please press star one one i it has don't have a phone
spk_16: and next question comes from the line of ryan daniels with william blair killing yourself and a good morning sir jack mulligan for ryan regarding the bit of ebitda expansion has modeling out between twenty three people fighting additional color on which costs lovers you anticipate get you that yikes or two hundred time for the bases point an improvement over the year
spk_2: i know you mentioned some games and gross margin as and twenty twenty two had when he's by any additional your comment on the on a cost optimization effort to be great thank you objectives for the question is brian of darkness turn to town to talk more specific but yelp in twenty twenty two we reference that we had a couple had when that we do expect to a bait and twenty twenty three the cursed with really related to hire shipping costs and we've be renegotiated are in a product of renegotiating more favorable terms with some of our largest shipping vendors we've also identified them lower cost delivery method can plan to use them and then we've finally started to see that surcharges that we experienced and twenty twenty to start to abate all these are going to have a positive impact on our shipping costs and twenty twenty three and then the second area that we mention on the call it really related to revenue mix and deflects was impacted by our medication acquisition dom capers or and tom mentioned are adapting and automation and profit and he admits that will ultimately give it greater flexibility and how we source medications that lower costs
spk_4: come anything you want to add a really either of those yeah his show em roughly nine million dollar increase in a bigger and how do we get there is your question while at the midpoint you doing about forty of midpoint of revenue guidance you doing about forty nine million more than the prior year as we said earlier expect margins gross margins adjusted gross margins to be flat to the fourth quarter of twenty twenty two that knows about twelve million in gross profit
spk_2: and nine of that forced to give it up so what i tell you is we're getting much more operating leverage we've been able to hold as sinead cause relatively flat not entirely fled because we do at twenty percent revenue brought you go get some incremental costs but largely fled because of some of the seat
spk_16: things we talked about previously and as a result of suffered of our focus to our remaining business
spk_17: i've been pretty the detail there
spk_16: hum with affected topline visibility ah i guess mine how much of this incremental field guide the a cluster fifty million near of a year at the midpoint is based on contract and revenue vs ashamed and yourself
spk_2: and a to any additional color what my tried the target either the well and are higher up the guidance range make him i'm up after jack to provide a little bit a color as i was mentioning before i eat or the backlog is extremely healthy right now i and continued to grow and i think that all that we are observing through conversations with customers what we're hearing through of national pick the station is that we would expect to see the acceleration of growth over the next few years the the revenue that that we're projecting we feel it the a very reasonable for what we're seeing happened in the market right now but i'll it can talk a little bit more about the specific
spk_3: yeah check at the high end of the range the growth resembles twenty twenty two with the split of the growth that is to say a little more than half of it comes from same store sales if you will new participants and existing centers and the rest is split between
spk_18: new centers and yell pricing for price increases new contract except at the low end of the range it is almost entirely an existing centers and pricing and very well ascribed to have new new center said
spk_0: i think it thank you i'm sure no further questions at this time thank you for participating this includes these conference call you may now disconnect
spk_19: of and i'm sorry looks like we have one question come the just popped in some jessica to song with piper sailor analyze help him
spk_2: i about that and so can you remind us what the back onto revenue conversion process looks like like how many years of of and projected revenue are included in backlog him and what is the anticipated rate of conversion thanks just a good question could talk to you so the those are all contract that are in place today what's reflected in backlog is at full ramp the want that contractor at maturity and those locations are they have fought census associated with them which on average about two hundred and fifty participants are two hundred fifty members so we would expect overtime and that time it is anywhere between eighteen months to three years
spk_6: we would see that revenue be realized effectively what you're looking at their and or backlog you there are right
spk_2: that that's what we're
spk_19: what were quoting so it does take some time for those location to ramp up i thought it having sent and then just as brian is that a little bit of time in a prepared remarks talking about their drug drug interactions the metlife platform that interested i'm what if the monetization strategy for that platform right now on it and then is the intention to sell their product or the platform outside of faith and
spk_6: and kind of where does that fit in love with in the landscape of physician drug reference products on our understanding as as a poverty has about fifty percent of of market share and the just curious to know if you think about that life as a compliment her an alternative to that operate
spk_2: that a great question we talked a lot about about midwives and i think it's important for everybody that listening to understand that we use midwife today in our pace platform where we're bringing former theater but the to are paid customers we used midwives to analyze those medication regimen for every single individual so on the thinking around up bringing midwives into some of those adjacent market will not be as bringing pharmacy services but in a different capacity though ah april and the strategy team and the commercialization team that really been looking at
spk_6: new wave for us to bring that to market and couple it with some of our existing paid solutions that we feel are very relevant
spk_2: for some of the the jason fees i am excited over the coming quarter that we're going to happen good day to share with you on you know how we plan to effectively to relaunch are or midwives go to market strategy and so
spk_20: yeah i i wouldn't necessarily think of it in the same way that you think about hippocrates
spk_2: is it is a a platform that looking at the a multi drug interactions where it comedies other product or if it's one to one drug it's it's very simple
spk_21: simple process i think we're we're going to come at it from a very different perspective and the value that we can open that we provide by using platform
spk_19: typically higher
spk_2: how to answer that relaunch would be a twenty three relaunch with with impact on twenty four fucking or twenty four revenue can you get kind of frame a timeline of thing yeah i think that's a that's a good time frame in terms of expectations you plan to be back in the market
spk_6: in the second half of the year with revenue
spk_22: being recognized starting to a twenty four
spk_0: thank you
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