UpHealth, Inc.

Greetings and welcome to Upheld's second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Shannon Devine, Investor Relations. Please go ahead.

Thank you, operator. During today's call, management will be making forward-looking statements. Please refer to the company's SEC filings, including the company's annual report on Form 10-K and quarterly report on Form 10-Q to be filed 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. Uphouse cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaim any obligation to update or revise the statements to reflect new circumstances or unanticipated events that occur, except as required by law. Throughout the call today, we'll refer to pro forma revenues, pro forma gross margins, and adjusted EBITDA. These metrics are not determined in accordance with GAAP 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 Upheld's financial results provide useful information regarding certain financial and business trends and the results of our operations. I will now turn the call over to Sam Meche, Upheld's Chief Executive Officer. Sam?

Thank you, Shannon, and good morning, everyone. Thank you for joining us. I am honored to have the opportunity to speak with you today. My first earnings call as UP Health's chief executive officer in this pivotal moment in our journey as an institution. I'm happy to be here today and want to begin with why I am here. I was first drawn to UP Health because of its strong mission to overcome disparities and access to health care, to empower providers and those who fund health care, and to enable high quality, affordable health for all. This mission, combined with the company's values and the vision of the founding companies, to enable the transformation of healthcare inspires me. I have successfully led large healthcare businesses within leading global institutions and have deep experience in integrating acquisitions and executing transformations. Over my 20-year career in healthcare, my track record is one of building businesses that deliver consistent revenue and earnings growth with a relentless focus on growing shareholder value. I am also a proud veteran, and serving the broader community is deeply important to me personally. From a business perspective, I recognize the challenges that UP Health has gone through over the last year, as it has attempted to integrate six companies into one. The business has started a strategic transformation that will evolve every facet of the institution across product, technology, commercial acceleration, shared services, and talent. The road has been bumpy, but we are solidly on a path forward as we execute our GenStar goals over the next 12 to 24 months, and there is a bright and remarkable future for our company. Before getting to the details of our second quarter, I'd like to take a moment to thank Dr. Balakrishnan. As you know, I assumed the role of Chief Executive Officer on July 11th. Ramesh and I have had an incredibly smooth transition, and I am so grateful for his partnership and collaboration over the last few months. I look forward to working with Ramesh and to his contributions in his new role as President and Chief Strategy Officer. UPEL's revenue for the second quarter of 2022 was $44 million. This represents a 22% growth over Q1 of 2022. The gross margin for the second quarter was 51%, up from 43% in Q1, and the adjusted EBITDA was $4 million, up from negative $1.3 million in the first quarter. Our second quarter performance was driven by many major wins across Uphill. We executed the contract extension and expansion with the California Mental Health Services Authority to continue our work with the LA County Department of Mental Health. This contract expands our work for another 12 months and it increases our revenue by $7.9 million on a run rate basis. We finalized the first of its kind contract with a hospital system to provide an educational program for their staff about the importance of culturally and linguistically appropriate care for underserved populations. We closed 46 new MARTI contracts with over 90 implementations in health care facilities nationwide, which contributed to strong revenue growth and operating leverage for our U.S. telehealth business. And we refreshed the NutriScripta's branding, including label design, and we launched products on Amazon to broaden our direct-to-consumer offerings. With this performance in mind, I spent my first month since becoming Uphill's CEO meeting with our people, our leadership team, our customers, and our investors. There are a lot of very positive things to celebrate so far. First, there's much work being done to strengthen each of our business segments. integrated care management, virtual care infrastructure, and services. The potential growth opportunities for these businesses are remarkable, and we are confident that we can optimize the strategy we have developed so far to execute and grow these businesses. Second, there's a growing interest in the potential for CentraNet, our integrated technology platform, and Hello Life, the core platform underlying our digital clinics and hospitals, to scale and grow. We have an incredible opportunity to deploy a new generation of healthcare infrastructure to help clinics and hospitals leverage digital capabilities to deliver care to communities with limited access to care. With CentroDut and Hello Life, we can make the healthcare systems more accessible, more affordable, higher quality, and better integrated. Third, there's great optimism around our ability to leverage MARDI to become a leading language and teleconsult provider for health systems. We have very satisfied customers with an excellent NPS score of 54 that we can continue to build upon. Finally, there's real potential for UpHealth to package and sell care management solutions and services to payers and governmental entities and to use our behavioral health and personalized medicine capabilities to become a leading player in U.S. value-based care. While we have many positive elements to build upon, the headwinds that hampered our performance in our first year as a public company still need to be addressed, namely volatility in our international business and challenges with delivering more predictable revenue with our integrated care business. The good news is that we are doing the hard work that will position us for consistent, profitable growth in 2023 and beyond. We continue expanding our leadership team. Daniel Mandoli joined last quarter as executive vice president for our services business. As we announced in our press release, Daniel is a seasoned executive with experience in mergers and operational excellence. We will continue to attract and inspire leaders globally to join us on this journey. We set up a transformation office to help us pivot quickly to execute upon the strategy we built for the business. At present, we have already completed approximately 40% of the over 600 transformation milestones planned for 2022, and we plan to execute upon an additional 40% in the third quarter. I want to recognize two of our board members, Dr. Luka Dhanu and Agnes Rajarad for their outstanding support of our business in launching the critically important transformation initiatives. In the coming weeks and months, I'll continue to deepen my understanding of our businesses, visiting with our teams, meeting with our leadership, visiting with our customers, and talking to our investors to get their feedback and to immerse myself in the business. As a management team, we continue to evaluate all of our growth opportunities and ensure the efficient allocation of capital to initiatives that support the highest growth and return on invested capital. We will continue to hire exceptional talent to grow our respective businesses. We will review our mix of assets to ensure that we are getting the most out of our businesses. We will also carefully manage our capital structure to ensure that we successfully execute upon our strategy. Our goal is to set the stage for up health to deliver consistent repeatable revenue, which is growing appropriately producing high quality predictable earnings that are growing faster than revenue and converting those earnings to free cash flow. During our next earnings call I will expand upon my initial impressions of up health and what the focus areas will be for the company at our full year results. For the beginning of next year, we will talk through much more detail about our transformation plans and how they will drive results in 2023 and beyond. With that, I'll turn it over to Martin to go into our financials for the quarter. Martin.