UpHealth, Inc.

Good afternoon and welcome to the Up Health Third Quarter Earnings Conference Call. I will now turn the call over to Reed Anderson from ICR.

Good afternoon and welcome to the Up Health Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal remarks. 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. During today's call, management will be making forward-looking statements. Please refer to the company's SEC filings, including the company's quarterly report on Form 10-Q and its various registration statements on Form S-1 and Form S-4 for a summary of the forward-looking statements and the risks, uncertainties, and other factors that could cause actual results to differ materially from those forward-looking statements. UpHealth cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaims any obligation to update or revise the statements to reflect new circumstances or unanticipated events that occur, except as required by law. Throughout today's call, we'll refer to pro forma revenues, pro forma gross margins, and adjusted EBITDA. These metrics are not determined in accordance with generally accepted accounting principles and, therefore, are susceptible to varying calculations. Definitions, calculations, and reconciliations to the financial statements of these non-GAAP measures can be found in the tables included in our press release. We believe these non-GAAP measures of Uphill's financial results provide useful information regarding certain financial and business trends and the results of operations. Now, I'll turn the call over to Ramesh Velakrishnan, Chief Executive Officer.

Thank you, Reid. Welcome, everyone, to Uphill's Third Quarter 2021 earnings conference call, please refer to our website to review the presentation that captures our discussion today. Our first full quarter as a public company has been a time of tremendous growth and success as we boldly push the integration of our operations and consistently pursue our transformation to a global leading public digital health company. I am incredibly proud of what our team has achieved during an exceptionally strong third quarter. Our success is attributed directly to the hard work and dedication of all our people and the support of all our investors, clients, and partners. So I would also like to thank everyone who has been a part of the Up Health journey so far with us. Our CFO Martin Beck will go over financials in more detail At a high level, though, our third quarter results exceeded projections, and we also convincingly demonstrated the clear value and differentiators of the Uphold model as we come together as one company in our first full reporting quarter as a public company. Some highlights. Our revenues exceeded expectations. and we report $49.1 million, a 25% increase over last quarter's pro forma revenues. We expanded gross margins from 36% to 40%, an 11% improvement from last quarter. We continue to be profitable with adjusted EBITDA of $5 million, an increase from $2.3 million last quarter. And with our recent capital raise in October, we strengthened our balance sheets, secure the working capital we need for continued and ambitious growth through all of 2022. So we are now focused on continuing to execute on our core mission to create a new architecture for healthcare internationally with a unique, unparalleled offering in the market and bringing value to our shareholders. This is our focus. And we also expand globally and continue to drive meaningful growth and enhance profitability. So we reiterate our financial projections for 2021 to meet and exceed revenue of $180 million and adjusted EBITDA of $16 to $20 million before public company expenses. With more than 50 percent revenue growth expected this year versus last year, from $117 million to $180 million, we are confident projecting continued revenue growth of approximately 50 percent again next year. Before I turn the call over to Martin, I'd like to touch on three things, our key offerings, our growth strategy, and integration status in that order. At its core, UP Health provides technology and technology-enabled services to manage health. Our approach brings together three highly scalable offerings as part of one comprehensive suite of solutions, integrated care management, virtual care infrastructure, and service. There is no other provider in the market that delivers these full capabilities in one combined offering. a comprehensive foundation to transform how we deliver care and manage health here in the U.S. in emerging economies and at global scale. Unlike many digital health companies that are attempting to create alternative delivery systems on the side, we come as partners to manage care organizations, providers, and governments in the digital transformation of healthcare. So there are companies that intersect with some of our solutions, but UpHealth is unique in the total scope of what we bring, in the breadth and the comprehensiveness of the technology infrastructure and services we can deploy to create integrated systems of care. The first of our core offerings is our integrated care platform called Centronet. The platform is designed to enable our clients to create an integrated care community, and it serves as the technology backbone for Op Health. Centronet integrates information to create 360-degree views of patients and providers, uses advanced analytics to stratify populations, better understand what is happening with their health and other needs, and coordinates care teams to manage a wide range of health programs. Centranet integrates with our other offerings, with our virtual care infrastructure and services, and this integration will allow us to significantly expand cross-selling opportunities. In Q3, we want a significant contract in California to deploy Centranet for the largest specialty mental health plan in the state. Some of our clients using CentraNet already include the County of Alameda, LA Care Health Plan, and the California Mental Health Services Authority. In Q3, we also completed platform extensions to CentraNet that support a very ambitious initiative in California called CalAIM to better manage health for individuals with complex medical, behavioral health, and social needs. And we grew the population of the platform from around 6.8 million to almost 7.1 million. Our second offering is our virtual care infrastructure. This infrastructure allows clients to extend access to care and care teams with video endpoints, complete exams with connected IoT, diagnostics, and advanced clinical decision support systems. For our domestic business, we package and deploy this infrastructure as our multi-platform with video endpoints that will include remote monitoring and diagnostics as well. For our international business, we package the infrastructure with our Hello Life platform with standalone digital clinics and acute care digital hospitals with substantially expanded capabilities to support full diagnostic primary, and acute care visits, including imaging, labs, and medications. In Q3, we expanded the U.S. footprint for the HIPAA-compliant MARTI virtual care platform, and we currently support 168,000 encounters per month, over 26,000 video endpoints, at over 2,100 health locations in the U.S. We also recorded our largest volume of use of MARTI with over 7.4 million minutes of consultations. This is compared with 6.1 million minutes in Q2 and 4.6 million in Q3 of 2020. With our domestic virtual care infrastructure business, we added contracts with Robert W. Johnson-Bernabas, IU Health System, and AccessPoint Health, with an annual contract value of $5.5 million and a total value over 26 months of $16.5 million. We also opened Spanish interpretation operations in Colombia and expanded operations in Peru to meet increased demand. With our virtual care infrastructure, we completed installation of 550 digital clinics in Madhya Pradesh, and 250 of them are currently operational. With these clinics, we will eventually serve a population of almost 25 million. We are also very proud to report that we deployed our first Hello Life fully digital hospital in this quarter in Nagaland, India. This is a truly revolutionary offering. And with it, we extend our virtual care infrastructure to include acute and critical care in inpatient settings. So Hello Life, the Hello Life infrastructure allows seamless delivery of health from the home of the patient to hospitalizations and post hospitalization. The digital hospital is the first of its kind. It allows physicians to remotely examine patients, not just with consultations, but with much expanded capabilities to view infused medications, monitor ventilator flow, conduct physical examinations with connected endoscopes, EKGs, other diagnostic devices, complete bedside tests, and prescribe medications remotely. In Q3, we also contracted to install and deploy 260 digital clinics in the Democratic Republic of Congo and are underway with the build-out of these. The DRC contract value was $66 million over five years. So UpHealth digital clinics offer the ability to provide a full patient encounter complete with physical exams, diagnostic testing, and pharmacy dispensing, and it is a clear example of how A telehealth-enabled, digital-first, reproducible model can improve quality of care very efficiently globally. Our third offering is our services line. The uphouse platforms and infrastructure are designed to onboard a wide range of provider networks and make them available virtually at the point of care. Today, we provide a core set of in-house services, and these include, first, market-leading language interpretation with our HIPAA-compliant market platform and medically-trained interpreters. Second, medications with a full-service retail and compounding pharmacy licensed in 50 states and D.C. In Q3, we introduced new prescriptive direct, a new service to deliver physician-recommended supplements that extends our leadership in the management of health with personalized protocols. A third service area for us is behavioral health services, where we are in the process of integrating psychiatry and medical services with a full continuum of mental health treatment capabilities to create a comprehensive care model for behavioral health. This is what we offer the market. In Q3, we expanded contracts to deliver behavioral health services to include community care, life and health care for first responders and other groups. We also credentialed additional facility to deliver mental health programs for veterans. Turning now to our growth strategy, we continue to advance growth at a significant pace with five key focus areas. First focus, we are continuing to implement contracts across all our solution offerings. Second focus, we will include the communication and collaboration infrastructure provided by MARTI, the virtual care platform, with the CentraNet integrated care platform. And the first use case for this will be to bring language services to existing clients who are on the integrated care platform. Our third focus is to capitalize on cross-selling opportunities. We will combine the integrated care platform, CentraNet, with our expertise to manage health programs and For example, use our experience delivering and managing behavioral health services to support health plans, manage whole person care programs, and other similar initiatives. We will also bring additional value to our existing client base across 2,100 healthcare facilities, specifically in areas of information integration, deeper analytics, and care management with prescriptive guidance. A fourth focus area for growth is to develop strategic partnership opportunities to deliver services such as language and medication management to other digital health company partners. Near-term focus will be on embedding language services for delivery into the acute care space and expanding medication management for health plan clients. And final growth focus area As an expansion of our business model, we will broaden the virtual care infrastructure to create a very compelling, reproducible model for emerging markets to deliver acute care with fully digital hospitals and hybrid clinical teams. As part of the consolidation and building of our global Upheld offering, we strengthened the leadership team and added two new members. Mike Roller joined us from the Livongo side of Teladoc as Chief Revenue Officer. Sarah Unquest joined us from Beacon Health Options as SVP of Integrated Behavioral Health. We are really delighted to have both of them on the team. Each of them will significantly advance and transform their areas of business focus. In close partnership with our Board of Directors, We also engaged top advisory industry leaders, Ketchum, global marketing and communication firms, to help us bring up health message in a compelling way to the market and to increase our visibility. Mazars to implement a comprehensive compliance program across all of up health. And the national leading management and transformation firm, to accelerate our integration and go-to-market initiatives. The goal of these engagements is to continue to enhance the integration and consolidation of our global entities and to maximize the synergy and creation of value across all of our countries. So to summarize then, our third quarter has been exceptionally strong, financially exceeding projections on revenue growth, and profitability and continuing the transformation of the company into coherent global public enterprise. I can say confidently that we are solidly positioned to execute and meet financial targets for the rest of 2021 and drive continuous and profitable growth into 2022. We increased our number of clients, contracts, and revenue. We introduced new breakthrough products and we continue progress on our integration initiative. We are excited about the future. We are well capitalized to become a leading force in digital health and have an unmatched combination of technology, infrastructure, and services that we bring to our clients. With that, I will turn the call over to Martin to go into more detail on our financials.