UpHealth, Inc.

Greetings and welcome to the Upheld Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Shannon Devine. Thank you. You may begin.

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 to be filed on Form 10-K before the end of March for a summary of the forward-looking statements, 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 these 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 all for joining us today. Much has occurred since I first joined the company in July of 2022. When I first addressed you, I was merely weeks into my tenure as Uphill's new leader. I was optimistic about Uphill's mission to enable high-quality, affordable, and accessible healthcare for all. The good news is that eight months later, I am even more enthusiastic about our mission and remain optimistic about our company's ability to succeed in this space. During that first call, I committed to expanding upon my initial impressions of UpHealth by the end of the year, commenting on what I think the focus areas will be going forward. And after our full year results, I said we would talk through in more detail about our strategic vision and how they will drive results in 2023 and beyond. Today I'd like to expand upon my initial impressions of Uphouse, comment on what occurred in the second half of 2022, particularly in the fourth quarter, and begin to comment on the start of 2023. We shared 2023 guidance in today's earnings release, and Martin will expand on this in his comments. Since we first met, I have spent a great deal of time diving deeply into our business. I have visited with our customers, our employees, our investors, our analysts, our partners, and the people whom we have the honor to serve. It was immediately apparent that there was work to be done to improve the state of the business. In the past eight months, I spent time immersing myself in all parts of Uphill and conducting an exhaustive review of the business and our leaders. As I reviewed the asset mix, we set a goal to ensure that we are getting the most out of our businesses. It was imperative to understand what was working well and what we needed to rationalize. My goal is to set the stage for up health to deliver consistently against our commitments repeatable revenue, which is growing appropriately and converting earnings to positive free cash flow. In early 2022 we focused on building a cohesive strategy and a plan to make up health vision a reality we reinforce our thinking about virtual healthcare integrated care and international is key areas of focus. We adopted a two-pillar approach to growth, investing in growing our existing capabilities and integrating our capabilities to solve our clients' most complex problems. Our initial thesis and strategic pivot in early 2022 were good, but were faced with significant challenges. Our growth ambitions required more capital than our budget allowed, leading to overly optimistic revenue targets further impacted by the evolving broader market environment. Significant contracts, particularly in Europe and Africa, did not materialize. The technology integration was more complicated than expected. And finally, legal issues and shareholder activism consumed resources, further limiting our ability to execute on our strategy. Additionally, market conditions changed. Inflation and recession fears slowed investments. Labor shortages continue across healthcare post-pandemic, and our customers, particularly payers and providers, are struggling to drive performance in this increasingly changing macroeconomic environment. That is not to say that we only see headwinds. Many things are going well for Up Health. Our fourth quarter and full year results are notable. Revenue for the fourth quarter of 2022 increased 19.5% to $40.5 million compared to revenues for the fourth quarter of 2021 of $33.9 million. Adjusting for the deconsolidation of Glocal, fourth quarter 2022 revenues increased 32 percent to $40.5 million compared to $30.7 million in the fourth quarter of 2021. Gross margin expanded from Q45 percent from 18 percent in the fourth quarter of 2021. The Q4 2021 gross margin was extraordinary because it included the recognition of various expenses at integrated care management without the benefit of corresponding revenue recognition. Gap revenue for the year ended December 31st, 2022 was $158.8 million, a 28% increase compared to gap revenues for the year ended December 31st, 2021 of $123.8 million, and a 7% increase compared to pro forma revenues for the year ended December 31st, 2021 of $148.9 million. Gross margin for the year ended December 31, 2022, expanded to 44% compared to pro forma gross margin of 33% in a comparable year-ago period. Additionally, several of our business segments had very good years. Our U.S. telehealth business exceeded its revenue and margin goals for the year and achieved record-minute growth. We had strong even down margin growth in IGI, and our behavioral health services business also outperformed its targets. and we recently treated our 10,000 clients and continue to expand our work with veterans and first responders. We serve our long-term customers in the state of California, delivering data integration and interoperability for two of the most significant counties in the state, and we stand committed to executing additional business and deepening our relationships for mutual growth. We achieved over $2 million of savings from G&A consolidation and over $1.5 million of savings from external spend reductions as part of our integration and transformation work. But the fact remains that despite all of the good things we accomplished, we missed our targets. What all of this means for Uphold is that we are in a different place today. Because of this, we are recalibrating our business. We are focusing on fewer objectives. We have acknowledged the macroeconomic realities of the market, and we are responding to them accordingly. We are reducing our cash burn rate, investing wisely, and improving our operating discipline. We will stabilize and accelerate the growth of our core performing businesses, and we will shut down any initiatives and businesses that are not working. Our objective is to move as quickly and as efficiently as possible, identifying the areas of the business that are not in line with our go-forward strategic vision of building a fully integrated platform to drive growth beyond 2023. Earlier this week, we announced that we reached a definitive agreement to divest Innovations Group Incorporated, our compounding pharmacy business, to Belmar Pharma Solutions. We consider the sale of IGI the jumping off point for our recalibration year. We are focused on right-sizing the organization. We reduced headcount by over 6% since August. We have decreased contractor spend, and we will continue to reduce our SG&A further through the first quarter. We completed a thorough strategic business review of all up health business lines and we narrowed our focus to those businesses that present the largest opportunity. Telehealth, which is part of the virtual care infrastructure segment, behavioral health, which is part of the services segment, and integrated care. We worked extremely hard to determine our clear achievable plan to turn the company around. We created a three-year plan that focuses on recalibrating the business in 2023 and building and scaling for growth in 2024. We will recalibrate the baseline of the business this year, and we seek to double the size of the business within three years. It is a pragmatic and practical approach that acknowledges the reality of the markets we compete in, and it leverages wisely the capital on our balance sheet. At this point, we have touched on where we started and where we are today, but I'd like to spend some time on our strategic plan and near-term execution milestones. First, it'll come to no surprise that as part of our strategic efforts, capital conservation is a top priority. In the fourth quarter, we identified additional cost savings of $3 million, the majority of which are being implemented in the first quarter of 2023. These identified cost savings were a direct result of restructuring the overall business based on our current revenues and the visibility we have into our near-term pipeline. We are conserving capital as we work toward closing the sale of IGI, which will deliver $56 million in gross proceeds to our balance sheet, ensuring our current capital needs are solidified. Second, we will focus on the telehealth, behavioral health, and integrated care businesses. This will require us to take a step back, ensure we have the necessary foundation for a technology and technology-enabled services business, that can sustainably scale. While we build our technology foundation in 2023, revenue growth will be moderate, and we will be aggressively managing our cash with the goal of working towards delivering positive operational cash flow. Lastly, while growth is in the foreseeable future, we want to temper expectations and ensure the proper foundation is built to set us up for go-forward success. Our breakout years will come in due time. Assisting in building the groundwork and responsible for revenue, product, and product marketing is our newly appointed Chief Growth Officer, Melissa Frieswick, who brings a tremendous record of driving growth across the healthcare continuum, bringing more than 25 years of healthcare experience to Uphill. Additionally, we hired Timothy Wild as our Chief Technology Officer. He comes to us with 30 years of experience leading business transformations and innovative approaches to technology. Finally, we hired Dr. Mahesh Inder Veer Singh to lead Up Health International. Mahesh began his career as a practicing physician and comes to us with 25 years of experience and is a visionary and expert leader in health management. Before I turn the call over to Martin, I want to thank you for continuing with us on this journey. I fully appreciate and acknowledge your support and continue to believe there is a bright and remarkable future for this company. As evident first in our announcement with IGI, the recalibration year is well underway, and we look forward to continuing to deliver on our strategic plans and priorities, and most importantly, to delivering for our shareholders. I'll now turn the call over to Martin to discuss our financial results in detail before we open up the call for questions. Martin?