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spk00: Good afternoon, and welcome to the Up Health second quarter earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal marks. As a reminder, this conference is being recorded. On the call today from the company are Ramesh Balakrishnan, Chief Executive Officer, and Martin Beck, Chief Financial Officer. By now, everyone should have access to the company's second quarter earnings press release file today after market close. This is available on investor relations section of the UpHealth website at www.investors.uphealthlink.com. Before we begin, please note that all the financial information presented on today's call is unaudited, and during the course of this call, management may make forward-looking statements within the meaning of the federal and securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by law. Please refer to today's press release and other filings with the SEC for a detailed discussion of the risk that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Throughout today's press release and on our call today, we will refer to adjusted EBITDA. This metric is not determined in accordance with general accepted accounting principles and therefore is susceptible to varying calculations. A definition, calculation, and reconciliation to the financial statements of adjusted EBITDA can be found in the tables included in our press release. We believe this non-GAAP measure of the Uphelps financial results provide useful information regarding certain financial and business trends and results of our operations. And now I would like to turn the call over to Ramesh Balakrishnan, Chief Executive Officer of Uphelps.
spk01: Ramesh Balakrishnan, Chief Executive Officer of Uphelps. Ramesh Balakrishnan, Chief Executive Officer of Uphelps. Thank you very much, Nai. Welcome and thank you all, everyone, for joining us on the call today. It's been an exciting quarter for us. As you know, our first as a public company. We completed the mergers and business combinations needed to launch our health. And now we are positioned with a unique and comprehensive suite of technology platforms, digital health infrastructure, and services to reshape how we deliver care and manage health globally for individuals and populations. And we are on track to implement our vision for this one upheld platform. Before we get into additional detail on our technologies and services and the industry needs and trends that drive our growth, I'd like to provide a high-level summary of our second quarter results. We are very pleased with our results for the second quarter of 2021. We exceeded revenue estimates. with pro forma revenues of $39.2 million, which represents 28% increase in revenues from the last quarter. And we expect continued acceleration of revenue growth in the second half of the year as we deploy additional working capital and launch the full scope of our integrated solutions. We also met our targets for profitability with $2.3 million in adjusted EBITDA. So we remain one of the few profitable public digital health companies in the market today. And we have about $100 million in cash and cash equivalents on our balance sheet. So the second quarter is a beginning in our journey to create a global digital health leader. We created UpHealth to help healthcare providers, health plans, counties and governments, our customers, and the organizations that are the heart of healthcare to help these organizations implement initiatives to digitally transform their operations. There is a general consensus that the industry cannot survive as it is. And digital transformation will radically alter healthcare as it has in many other industries. And our customers must change and adapt to survive, or they will have to give way to a new generation of organizations that are able to succeed in what is really an emerging new world. So we deliver an integrated, comprehensive suite of technology platforms, infrastructure, and services to help these customers implement initiatives and strategies, and adapt as the industry drives these new models for the kind of healthcare infrastructure we build, how and where we deliver care, and what kind of care we deliver, how we manage health, and also how we fund and pay for healthcare services. And these new models are being driven at the national, state, local, and county levels. So to come to our solutions briefly, our integrated care platform functions as the backbone for OneUp Health. And it is designed to create digitally enabled and connected care communities. There are substantial technology innovations that are embedded in this platform. We've invested over $100 million to create this platform. It's absolutely state-of-the-art, and we've only begun to exploit its full capabilities. And what this platform does is it rethinks how healthcare information systems would be designed and built if we began with different starting points and assumptions, with connected communities rather than individual enterprises. with coordinated and distributed care teams rather than individual providers, with a virtual model for encounter locations and care settings, with a whole person rather than medical view of health, and a view of patients as active participants rather than just the object of care. So what the platform provides is the ability to create these 360-degree views of individuals across a wide range of data sources and systems. The ability to apply advanced analytics and embedded intelligence to understand health status, to stratify populations, to evaluate risk, predict adverse events, and guide interventions and care protocols. And along with this, a wide range of configurable applications for local and remote clinical and community-based teams to coordinate care and implement programs to manage health. And the platform is also radically open, so we avoid the vendor lock-in that is built into many legacy platforms. And ultimately, we designed this platform to support an ecosystem of partners that can expand and add to its capabilities. At the end of the second quarter, we had 6.8 million lives on the platform and 132 organizations participating in these connected digitally enabled care communities. And we expect to double the lives on the platform annually over the next three years. We provide this platform to the largest publicly operated health plan in the country, LA Care. to manage health for its members across multiple lines of business. And so it's a real honor for us to have LA Care as a customer because of their very deep expertise in managing health for individuals with complex needs. And now in the second quarter, we began working with them to support two very important initiatives, the enhanced care management and in lieu of services initiatives that are part of a very ambitious program in California called CalAIM to better manage health for individuals with complex medical, behavioral health, and social needs. And this is a massive program. And CalAIM will set the trend across the country for how we manage health for now the almost 90 million Medicaid and dual eligible beneficiaries under a resort whole person model of care. And so our goal going forward is to provide the most comprehensive and compelling platform for health plans and healthcare providers that are contracted with these health plans for CalAIM and similar initiatives that are proliferating across the country. And we are extremely well positioned to do this and innovate and lead in this area. The platform also supports Alameda County's Whole Person Care and other initiatives to manage health. And here in Alameda County, we've created probably the largest social health information exchange in the country. The care community across the county that we've enabled includes hospitals, clinics, health plans, behavioral health providers, emergency transportation providers, housing and social services, public health, and also the county jail. So what we're building in California is a model to address a critical gap in how we deliver care and manage health in the United States. Essentially, these provider networks that are contracted by health plans And the provider networks that are contracted by counties and public health departments do not collaborate or coordinate. And especially for individuals that have complex medical, behavioral, and social needs, it is critical that we create integrated systems where these provider networks can share information, can coordinate services, and collaborate around shared care plans. So there's huge company, there's huge opportunities for companies that can create these integrated systems. And with our work in California, our goal is to lead innovation in this area. And it's a big area for growth as we go forward into the second half of this year and next year. The platform is also today enabling a unique model for a value-based management of pharmacy benefits. And we're implementing this model with a customer to manage pharmacy benefits for over 70 self-insured employers. And an important element of this new model is the ability to use integrated information, including pharmacogenetic data, and coordinate care teams with embedded intelligence as a system. And partnering with companies to manage pharmacy benefits for us as a first step in becoming a partner to managed care organizations and provider groups to manage outcomes, quality, and cost as they move into delegated and value-based contracts. So we're putting together the building blocks to become such a partner to managed care. Now we're also integrating and the work is well underway in the second quarter. Our telehealth platforms and digital health infrastructure, which we deploy now across the U.S. and internationally with the integrated care management platform to deliver what we believe is the most advanced and comprehensive solution in the market today to manage population health, improve access to care, and onboard provider networks and resources and make them available at the point of care to augment care teams. And I'd like to say a little bit about the digital health infrastructure with pioneering in the international market, because it really represents what a digital first healthcare infrastructure looks like. And it's quite revolutionary. There are many parts of the world where healthcare infrastructure is still underdeveloped. And these countries today spend a very low percentage of GDP comparatively on healthcare, but they're ramping up these investments. And as these countries launch national initiatives to improve access to care, they are very keen to leapfrog to new ways to build and deploy infrastructure and deliver care this is a lot like what happened with telecommunications and even financial services where old legacy gave way to a more flexible distributed and nimble infrastructure so in these countries that are building up healthcare infrastructure we deliver digital clinics that provide much more than simple virtual consultations we provide a complete diagnostic care encounter with a virtual exam room that's connected to remote devices and IoT with the ability to do automated lab tests and imaging onsite, prescribe and also dispense medications. And so we partner with organizations in these countries to staff the clinics with community workers and nurses, and we connect these clinics and these community workers and nurses remotely to networks of primary care physicians and specialists. And this is really bringing in, with these digital clinics, a new model for how we can rapidly build healthcare infrastructure and serve communities that otherwise have very little access to care. And demand for these digital clinics is nothing less than explosive. And our potential for growth is limited only by the amount of working capital we can deploy. At the end of the second quarter of 2020 last year, the population we served with these digital clinics was about 4.5 million. By the end of this year, we expect these clinics will be serving a population nearing 20 million, a substantial growth in the population we serve. Now, in the United States, we've been deploying the telehealth platforms, which are now being integrated with the integrated care platform, to bring specialized resources, language interpreters, physicians, specialists, remotely to the point of care. And this is a very different model for telehealth than companies that are in the market that function more or less as a technology-enabled medical group. And so a first driver for our telehealth platform was a need for medically certified language interpreters to support patients in various facility settings. A sort of somewhat less known fact is that more than 20% of individuals admitted to hospitals nationwide do not speak English and suffer very poor outcomes as a result. And this percentage increases dramatically in communities that are more diverse And what we do with the telehealth platform is we provide very robust capabilities to onboard resources of various skills and make them available remotely at the point of care where they can collaborate with and augment the care teams that are there with the patient. So we initially just support this need for language interpretation. We onboarded a worldwide network of language interpreters. But we have expanded the kinds of resources we can bring to the point of care and the kinds of virtual care use cases we support. But combining this with the digital health infrastructure we're deploying in the international market, we have the most robust platform in the market today. to deliver high levels of care in these virtual care models and support initiatives like the CMS Hospital at Home program and other initiatives that really deliver very high levels of care in home and community-based settings. The utilization of our telehealth platform in the U.S. increased from 8 million minutes in the first half of 2020 to 11.4 million in the first half of this year, which represents a growth of over 42%. And the platform is now deployed in over 2,000 healthcare venues in the United States, performing over 2 million minutes of consultation a month. We actually have the largest footprint uh largest installed base at healthcare providers of any telehealth platform so if you look at what we have with the integrated care platform the digital health infrastructure and the telehealth platform we provide a comprehensive solution to transition to these new models to how we deliver care and manage health and essentially power the digital transformation of healthcare and our goal is to support our customers to deliver these higher levels of care in home and community-based settings, and to implement various programs where you can manage health with distributed and coordinated care teams. So in the second quarter, we continue to execute on our roadmap to unify the integrated care infrastructure and telehealth platform into this one upheld platform. we are bringing the full capabilities of OneUp Health now to our customers and educating them on the full scope of what we can provide. Now, early on, we also recognized another area of critical need, and that is a better way to manage medications, especially medications that require personalization. We have a pharmacy licensed in all 50 states And with our compounding pharmacy, we have the ability to deliver generic and customized medications anywhere in the country. What we are not doing is trying to compete in the commodity delivery of generic medications directly to the consumer. What we're doing with our pharmacy services is partnering with physician groups to better manage medications for their patients, especially compounded medications. And so we currently have over 14,000 physicians that are part of a network. We're continuing to grow this network. And our pharmacy teams collaborate physicians to better manage medications and support these physician practices. We're onboarding physicians, and these onboarded physicians also are available as resources that can be made available at any of these points of care where we present. So as we go forward, our strategic direction with the pharmacy services is to use our capabilities with technology and the pharmacy teams to help employers, health plans, and like one of our customers, a new generation of pharmacy benefit managers to better manage the efficacy and cost of medications. and better manage programs for improving adherence. And finally, what I wanted to say is that in addition to working with our pharmacy teams to manage medication, we also have capabilities to manage behavioral health. And as everybody knows, mental health is emerging as a national priority. The pandemic has obviously exposed a great need to improve access to behavioral health services. and better coordinate these services of medical care. And what we have with our core team of psychiatrists, nurse practitioners, and counselors is the ability to manage a wide range of behavioral health needs with virtual in-person visits and outpatient and residence programs. And in the second quarter, what we have started is a process to onboard these behavioral health providers to the integrated care platform and begun conversations with behavioral and mental health plans to partner with them to augment and manage their behavioral health efforts. There's some very large initiatives underway today around better coordinating behavioral health across mild to moderate and serious mental illness, and also better integrate behavioral health with medical care. And we are, you know, the combination of our platform and our behavioral health network, we are positioning to help in addressing this very critical need. So we're combining technology platform, the behavioral health network, to become a partner with these mental health plans and behavioral health provider network to improve access quality outcomes for individuals who have behavioral health comorbidities. This is a different model from a simple behavioral health consult, and we're managing a much higher acuity of care. So there are many innovations going forward that we will complete to improve, reshape how we deliver care and manage health. connecting and sharing information, powerful tools to digest and organize this information. We will also continue to evolve our analytics to get deeper insights into data and information, our predictive models to be able to stratify populations, identify risks early, and intervene proactively. And we will be on the forefront of applications and information interoperability and the ability to support distributed cross-sector teams to collaborate and coordinate so we can really prevent patients from falling through the cracks. We are actively involved and will continue to be in conversations on policy initiatives at the national and global level. These are conversations that recognize the vital importance of healthcare infrastructure on economic prosperity and even national security. And of course, the urgency to reduce disparities to these critical healthcare resources, you know, resources that are, in our view, as important as air and water. So in summary, we are pleased with our performance in the second quarter and how far we have come. We will continue to accelerate growth in the second half of the year. We're on track to meet our 2021 pro forma projections. Of course, what animates us is this desire to reshape healthcare in a better direction. We're very well positioned to do this with a comprehensive set of platforms, infrastructure, and services. And we are on our way to creating a leading, valuable digital health company that is committed to improving the experience of healthcare globally. So with that, I'd like to ask Martin Beck, our Chief Financial Officer, to give us more detail on our financial performance.
spk04: Martin. Thanks very much. We appreciate everybody joining us this afternoon. Before I begin my review of our second quarter results, I want to first comment on the presentation as it pertains to the absence of results in comparison periods. Recall that we completed the merger with Gig Capital II on June 9th. And so it was only from that day forward that we have consolidated results that we can report on a GAAP basis. In addition, due to timing factors related to the various business combination transactions encompassing multiple entities, as well as the global scope of our operations, it was not possible to provide consolidated results on a GAAP or pro forma basis that was sufficiently complete for the year-earlier periods. Accordingly, we are only able to share results for the three and six months periods ending June 30th, 2021 with you today. However, I will provide some additional context where possible to help you better understand the company's overall performance. I'll start with a review of our results on a GAAP basis. Revenues for the second quarter of 2021 was $31.9 million. This includes the integrated care management segment and behavioral health segments the entire three-month period. However, results from our global telehealth segment and digital pharmacy segment were only for a portion of the quarter, depending on when the related business combinations closed. Looking at the breakdown by segment on a gap basis, integrated care management was the largest contributor with $11.3 million of revenue, or 35% of total revenues. Behavioral health was next at $8.3 million of revenue, or 26% of the total. Global telehealth had gap revenue of $7 million, or 22% of the total, and digital pharmacy revenue of $5.3 million represented 17% of total gap revenue in the second quarter. On a geographic basis, 63% of second quarter revenues came from the United States, 24% from Europe, and 12% from Asia. Gross margin on a gap basis was 36.4%, and margins by segment were as follows. Integrated care management, 40.9%. Behavioral health, 28.4%. Global telehealth, 37.8%, and digital pharmacy, 37.4%. Second quarter net loss on a GAAP basis was $32.8 million, including $32.6 million of acquisition-related expenses, and adjusted EBITDA was $2.1 million. As a reminder, adjusted EBITDA is a non-GAAP measure, and we have included a reconciliation of GAAP net earnings to adjusted EBITDA in the press release. Now I'll review our second quarter results on a pro forma basis. which assumes all operating entities had been acquired prior to the beginning of the period. Consolidated pro forma revenue for the second quarter was $39.2 million, which was in line with our expectation, and up 28% sequentially from the first quarter. Global telehealth had pro forma revenue of $12.4 million on a pro forma basis, or 32% of total pro forma revenue, reflecting the combined operations for the full three-month period. Integrated care management revenues were not impacted by pro forma adjustments for the quarter, so revenue remained at $11.3 million, which represented our second largest segment on a pro forma basis at 29% of total revenue. Behavioral health revenue was also consistent with gap results at $8.3 million, accounting for 21% of total pro forma revenue. Finally, the digital pharmacy segment had pro forma revenue of $7.2 million in the second quarter, or 18% of total revenues, reflecting the full three months of revenue from IGI MedQuest. While we are not able to offer year earlier pro forma revenue figures for comparison, let me provide you with a little color on the trends we saw within the various segments to give you a better sense of our overall performance. On a pro forma basis, total revenues increased 28% from Q1 2020 to Q2 2022. The company's second quarter 2021 pro forma revenue of $39.2 million is approximately 38% higher than the combined unaudited revenues of the companies in the second quarter of 2020. Gross profit margin was 36.4% on a pro forma basis in the second quarter of 2021. By segment, pro forma gross margins were as follows. Integrated care management, 40.9%. Global telehealth, 36.7%, digital pharmacy, 38%, and behavioral health, 28.4%. We view gross margin as a key metric for up health and a useful metric for comparing our results to our peers. Accordingly, let me also provide some additional color on our pro forma gross margin, the trend perspective, as well as framing them within the context of our overall financial model. Gross margins decreased from Q1's 43.4% level, partly as a result of volumes, particularly in behavioral health and in the U.S. telehealth business, and as a result of mixed factors in integrated care management. We believe that the volume trends in behavioral health and U.S. telemedicine are increasing, and we've seen higher volumes in July. The integrated care management group during the second quarter ended into new phases of a population health management contract in Europe. The first phase of that contract had lower gross margins than the overall margins of the integrated care management group, while the second phase of that contract, which is expected to begin next week, has considerably higher gross margins. Upheld's second quarter pro forma adjusted EBITDA was $2.3 million, in line with our expectations. In addition to transaction-related expenses, adjustments were made to non-recurring expenses, including transaction bonuses and Gig Capital II-related operating costs. I'd like to spend a few minutes discussing the company's fundraising at the closing of the transaction on June 9th, 2021. At the closing of the transaction, UpHealth raised a total of approximately $245 million, consisting of proceeds remaining in the trust, a $30 million pipe offering, and a $160 million convertible mode offering. In accordance with the publicly released business combination agreement, the company issued approximately 2 million fewer shares to shareholders of Uphelf Holdings to offset higher closing debt balances pertaining to additional working capital that was incurred by the various entities as a result of the longer than projected combination closing duration. At June 30th, the company had approximately $99 million in cash against short-term debt of approximately $67 million, excluding the current portion of the derivative liability associated with the convertible note. I should note that, as detailed in the 10-Q, we recently extended the maturity of two seller notes totaling $19 million to September of 2022, which reduces our short-term debt. And we also extended the maturity date of our forward share purchase agreement. We are confident that our cash position provides us sufficient resources to fund our working capital and capital expenditure requirements. The company has made excellent progress in terms of establishing and integrating its financial systems and reporting capabilities. We've hired a strong finance and accounting team and have completed the first phase of our workday implementation at the up health level. Turning to our outlook, we continue to expect accelerating growth in the second half of the year with the deployment of additional capital to meet increasing demand. And we are reiterating our guidance for 2021. That concludes our prepared remarks. Now we're ready now to take questions.
spk00: Certainly. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to generate in queue. The first question is from Mike Widerhorn with Oppenheimer. Please proceed.
spk03: Thank you. Congrats on your first quarter, you know, out of the box here. Can you just, you know, start off one question on that contract, an integrated care management business. Can you just give us an idea, you know, some color on that from a size and margin perspective and how we should think about that going forward? Then I'll have a couple more I'll follow on.
spk01: You're talking about the contract in Europe? Yes, exactly. So what we're doing there is part of a fairly substantial initiative that we're embarking on. It is part of an effort to use the platform to modernize public health infrastructure, particularly in terms of what's required to help manage the pandemic. And the First phase of it focuses on integrating COVID tests, vaccine status, alerts, and analytics to support the opening up of travel and business in the EU. And we're working with a partner in the EU to do this. So the scope of the project ultimately is to provide infrastructure that ties into health information, labs, and also public databases to provide ultimately in the form of a QR code the ability to support opening up of travel, business, events, and other things. But while the initial driver is around the pandemic and COVID, it really is ultimately an attempt to modernize how we create, use, and deploy public health infrastructure.
spk03: Appreciate that, Collier. Thank you. Another question. On the 2021 guidance, I know I think you reiterated the 180 to 190 in revenue and the 16 to 20 in EBITDA. If you can give us some further color on the trajectory assumed to the backup of the year from a modeling perspective. Additionally, as we looked in our models for 2022, I think you guys have revenue in EBITDA targets of 329 and 66 million. Just want to, you know, make sure, you know, kind of feel if you're still comfortable with that and have the visibility of that, you know, of that going into 2022.
spk01: Sure. Did you want to take that?
spk04: Yeah, absolutely. Hi, Mike. Hi, how are you? Yeah. I'm good, thanks. Yeah, thanks for the question. Yeah, as we've discussed and as we've projected, the second half of the year will make up a greater percentage of revenues in EBITDA than the first half. And we seem to be tracking very well on a quarterly basis, on that basis. So we're still comfortable with the guidance there. wouldn't change that at all. With respect to 2022, we've obviously got more visibility now that we're several months closer to it than we were when we put out that guidance. And at this point, we're not altering the guidance at all for 2022.
spk03: Great. One last question, then I'll jump off here. Obviously, the combination is still early in its early stages here. You can tell us about how the integration is going. Are there any surprises that you've seen, you know, at this point in time? And, you know, as you're also beginning, you know, dealing with your partners and doing the cross-selling, how are you seeing the response in the marketplace?
spk01: I'll take the first part of it, and then maybe, Martin, you can talk about the system. So in terms of the – companies coming together and functioning in an integrated manner, there have been no unexpected surprises and there have actually been some very positive discoveries. So, you know, just to remind everybody, these are companies that were doing very different things and we were bringing solutions to the same set of customers, you know, healthcare systems, physician groups, health plans, governments, but coming at it from different angles. So, Although we shared a set of customers, the solutions that we were bringing were complementary. And so what we've done, and a complementary along two dimensions, both in terms of technology and the ability to interoperate with the different pieces of technology coming from these companies, but also complementary in that they combined to form a solution that our customers required. So these are things that our customers needed to bring together, and either we did that already pre-integrated as part of one upheld, or they would have to do it themselves. So we found tremendous receptivity in the customer base to the broader scope of solutions that we bring. So for example, in the large footprint of healthcare providers where the telehealth platforms are deployed, there is great interest in the ability of the integrated care platform to support a number of initiatives, you know, from programs to reduce readmissions, providers that have gotten into bundled payments or in delegated contracts or have launched some form of an ACO-type organization where they need to manage cost and quality and outcomes, a tremendous interest in being able to bring in other parts of the UpHealth platform as well. And that's across the board with all of our customers. Even in the international market where we are deploying these digital clinics, each of which becomes this kind of connected point of care, there's a tremendous interest in the integrated care platform and the population health solution sitting on top of these points of care and providing a ministry of health or a provincial government the ability to implement various population health and public health initiatives. So very positive reaction from the customer side, good integration of technology capabilities. And then on the system and process side, I'll let you comment, Martin.
spk04: Sure, thank you. Yeah, Mike, as you know, the combination was not about the wholesale integration of the entities. All the businesses were very well run on a standalone basis. And so what we've been doing to generate both revenue synergies and cost synergies is really focusing on the sales, marketing, and finance and accounting functions. So on the sales side, Ramesh touched on that. We've hired a chief revenue officer who's coordinating the efforts of the different sales teams in the business units. We've made a tremendous amount of progress on the marketing front. And then finally, in terms of finance and accounting, we've hired a chief accounting officer. We've built out that team to be able to report and monitor compliance reports. aggressively. We've rolled out Workday first at the upper corporate level, and they're taking that into the business units, and we'll be using it on both finance and an HR basis going forward. So we're happy with the pace of the integration that we've outlined so far.
spk03: Thanks a lot. I'm going to jump off now. Thanks for the call. I appreciate it.
spk06: Thanks, Mike.
spk00: Thank you, Mr. Weiderhorn. The next question is from Mike Lattimore with Northland Capital Markets. Please proceed.
spk02: Great, Hannah. Thanks a lot and congratulations on the first call here and strong growth in the quarter. You know, as you look to the second half of the year, I guess, should we assume that you get sequential growth sort of every quarter, meaning, you know, fourth quarter is probably higher than third? And then what would be the, say, biggest drivers of that growth in the second half of the year? Hi, Mike.
spk04: Go ahead, Martin. Yeah, happy to take that one. Yeah, you're right, Mike. You should think about it as sort of sequential quarter-over-quarter growth. You can see that growth from the first quarter to the second quarter. We would expect that to continue and result in meeting our guidance requirements. I would say the drivers of that growth continue to be the integrated care management segment and the global telehealth segment, where, as you know, our margins are the highest. That helps to contribute to the pickup in EBITDA. We also expect strong growth in the digital pharmacy space, as well as we invest more in sales and marketing and business development professionals there. Ramesh, happy to have you comment on that.
spk01: I think that captures it, Mike. And there are some much larger kind of combined bundle deals we're going after that we've not factored into anything right now yet. But we are, as I mentioned, approaching these large initiatives in California around CalAIM as well as the integration of behavioral health and medical care that will contribute to driving growth. But the digital health infrastructure, integrated care management, pharmacy, through the introduction of some new product lines, are where the growth is coming from.
spk02: Got it, got it. And she mentioned these, you know, large bundle deals that are not factored in. But, you know, how long has the sales cycle been going on those? You know, did they kick off prior to the deal closing? Just, you know, a sense of how long you've been working on this?
spk01: Yeah, the sales cycles are underway. And, of course, these are initiatives that have sort of deadlines for launch. So they won't drag on indefinitely because they have to be launched immediately. uh you know many of them in the first half of next year uh so that's that's the nature of these these initiatives we're going after but for some of the others such as the introduction of the integrated care platforms into the health systems where the telehealth platforms are already there uh that cycle sale cycle you know that's a that's a few months sales cycle and uh And those, you know, we've launched those as well.
spk02: That makes sense. And then on the, just the revenue mix in the second quarter, you know, integrated care on a pro forma basis was just a little bit below the telehealth segment. I guess, how should we think about that mix over the next year? You know, the integrated care is a little higher than it was last year, let's say.
spk04: Yeah, I think if you look at the models, Mike, we'd expect the global telehealth business to grow a little quicker than the integrated care management business. But both those businesses are growing rapidly. Yeah.
spk02: Okay.
spk01: Great. Thanks a lot. Good luck. Thank you, Mike. Thanks, Mike.
spk00: Thank you, Mr. Lattimore. The next question is from Bill Sutherland with Benchmark Company. Please proceed. Bill Sutherland Thank you.
spk06: Nice start to your public life, guys. I wanted to drill in a little bit more on kind of what's happening in the telehealth business in particular vis-a-vis the Delta variant and whether there are any issues in the in the U.S. business with selling cycle and implementations, and then, of course, wondering about, you know, GoCal's focus in India and where that stands. I don't know if Jamie's on the call. Is he available?
spk01: No, but we can address the impact of the pandemic Delta variant on the U.S. business is, at least what we've seen so far, there's been no downside impact to that. The use cases around which the telehealth platform is deployed continue to grow, and the minutes of consults continue to grow, and we don't anticipate any slowdown or negative impact, if any at all, there is further demand for the additional use cases that we've launched where virtual care, remote monitoring of individuals that may be quarantined or whatever else are in greater demand. In the international deployment of the digital clinics, the Delta variant has actually accelerated tremendously demand. In fact, our India operations have some of probably the leading expertise in the world in managing the Delta variant because they dealt with it early on in India in March of this year, well ahead of it arriving anywhere else. And in fact, one of the innovations that has fostered, which we didn't talk a lot about, is we have expanded the model of the digital clinic into what we call a digital hospital that actually has the ability to provide in a virtual remote model acute care and that was developed really partly in response to the need for icu care to manage the delta variant and the first of these hospitals is being deployed right now and will be live this year but there's tremendous demand for this expanded version of the digital clinic as well at a much higher price point which is just increasing the demand for this digital first infrastructure now to not only manage primary care, but also specialty and acute care. So we don't see the Delta variant right now as a, if at all, it's an accelerator of demand for us.
spk05: So the big, the big rollout in Maja Pradesh isn't getting held up? Oh, not at all. Okay. No, no, in fact, Okay.
spk01: What I was going to say is it's actually accelerating not only the demand to roll these out, but there's a whole new product line that is being rolled out to address a higher level of care in this digital model.
spk06: Okay. And so, yeah, I was just looking at the somewhat, at least versus my model, the sequential trend, 2Q over 1Q for global telehealth was – not quite where I thought it would be. So I guess just there's a lot of bookings that fall into the back half.
spk01: Yes, there is. There's kind of working capital ahead of some of that. So I don't know what your model was, but we see. One dollar.
spk04: One dollar. Certainly you can sell it. Yeah, so just one comment on the back-off. So in MP in particular, they've deployed 300 digital health nodes that they're ramping up right now. So the full number of healthcare points has been deployed. So very much back-off oriented, but on track.
spk06: Great. And then, Ramesh, in your group, where should we think about gross margin without the distortion of 2Q? I mean, 80% to 41% is quite a delta.
spk01: No, I think we're talking about gross margins for the integrated care still being in the 50-60% range. Okay. Okay.
spk06: Given how strong the integrated care quarter was, was there a pull forward of some sort? I mean, do you expect that kind of sequential momentum?
spk01: It may not be the same level of momentum, Bill. There was some pull forward because we accelerated some of the – in Q2, some of the building out of the foundation for doing what we're looking to do to support the European projects. There's a very, very substantial opportunity with this modernization of public health to support economies and business And we're monitoring that because that growth on that could be quite substantial. But we're monitoring that at the moment. Great. Okay.
spk06: That's it for me. Thank you both. Thanks, Bill.
spk00: Thank you, Mr. Sutherland. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation, and have a great day.
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