UpHealth, Inc.

Greetings and welcome to Uphouse first quarter 2023 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. 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 filing, including the quarterly report, to be filed on Form 10-Q 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. Uphill 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 as except as required by law. Throughout the call today, we'll refer to pro forma revenues, pro forma growth margins, and adjusted EBITDA. These metrics are not determined in accordance with GAAP and therefore are susceptible to varying calculations. Definitions, calculations, and reconciliations for 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 UP Health'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, UP Health's Chief Executive Officer. Sam?

Thank you, Shannon, and good afternoon, everyone. Thank you all for joining us today. Myrna and I are very excited to discuss our first quarter performance with you. When we last spoke in March, we shared our plans to recalibrate our business in 2023 and to implement our three-year plan to right-size the business, providing the necessary foundation to achieve our growth ambitions. We view this work as critical to achieving our mission, which is to enable high-quality, affordable, and accessible healthcare for everyone. Executing our plan will enable us to create solutions that combine technology and services to improve access to care, which is needed now more than ever, as society emerges from the pandemic and deals with unprecedented challenges moving forward. Since our conversation in March, we have focused on executing our plan. You will see from our first quarter results that we made the changes necessary to launch our recalibration year. We acknowledged the macroeconomic realities of the market, and we responded accordingly. We shifted our focus to fewer objectives. We reduced our cash burn and improved our operating disciplines. We stabilized our core businesses and are accelerating the growth of those businesses. We told you that we would shut down any initiatives and businesses that were not working and did just that, ending our managed care and sovereign nations pursuits and closing our provider practice in Missouri. Today, we closed on our deal to divest Innovations Group Incorporated, or IGI, our pharmacy compounding business to Belmar Pharma Solutions. We have reduced headcount by 12% since August, and we continue to decrease contractor and external vendor spend. Our team's commitment to aligning our expenses to our current revenue is best illustrated by the reduction in our operating expenses. As a percentage of revenue, total sales and marketing, R&D, and general and administrative expenses decreased from 46% in the first quarter of 2022 to 40% in the first quarter of 2023. I would like to take a moment to discuss in further detail the progress we have made on execution, starting with the recently completed sale of IGI. Today's closing is a significant milestone toward right-sizing our business and further defining our key focus on the strategic directions for growth. With the sale of IGI, we solidify our balance sheet with $56 million in gross proceeds, providing the company with the necessary financial footing to execute on our current initiatives and future growth plans and to solidify our three-year plan with 2023 serving as our recalibration year. While most of our actions in the first quarter were focused on reducing headcount, cutting costs, and recalibrating the business, we also took steps to pivot to growth. In our U.S. telehealth business, we signed contracts with 29 new clients that will generate incremental revenues over the next 12 months. Additionally, We saw a minute growth of 58% in the first quarter, which contributed to the business achieving $17.5 million of revenue. Our services segment revenues were $20.8 million, representing an increase of 17% compared to revenues by the first quarter of 2022, primarily due to higher census and improved payer mix that upheld behavioral and an increase in the volume and sales price of prescriptions in the pharmacy business. Integrated care management's revenues of $3.9 million, representing an increase of 48% compared to the revenues of the first quarter of 2022, were primarily due to growth in professional services revenue from existing customers as we focused on customer retention and relationship expansion. Additionally, we significantly refined our go-to-market strategy for the integrated care management business, and we engaged an industry veteran to help us improve our positioning in the market. In February, we launched the up health innovation lab to focus on incorporating data and analytics and artificial intelligence to our technology and technology enabled services. We are in the process of developing use cases and reviewing them with some of our strategic clients to validate our hypotheses with the market. All of these efforts have had a very positive impact on our sales pipeline, which increased by 25% over the fourth quarter. Turning specifically to our first quarter results, at a high level, our first quarter was notable. Revenues in the first quarter of 2023 were $42.1 million, representing an increase of 17% compared to the revenues for the first quarter of 2022 of $36 million. It is important to keep in mind the first quarter includes revenues of $8.8 million from IGI, and going forward, we will have 12 months of an unfavorable comparison after IGI closes. Gross margin continued to expand to 54% from 39% in the first quarter of 2022 as a result of improvements across our business and favorable payer mix. Adjusted EBITDA for the first quarter of 2023 improved by $7.9 million to $6.6 million compared to adjusted EBITDA for the first quarter of 2022 of negative $1.3 million. While we are pleased with our first quarter results, and are encouraged by the direction of the company, the path ahead still has its challenges. It is imperative that we leverage our cash position wisely and that we invest in initiatives that will drive growth as we continue our work to turn the company around. Our early indicators are positive, and we continue to drive consistently against our commitments. Repeatable revenue, which is growing appropriately, and converting earnings to positive free cash flow. Most importantly, our turnaround efforts enable us to focus on achieving our vision of driving the digital transformation of healthcare to create a world in which everyone everywhere can enjoy the best health. Before I turn the call over to Martin, I want to thank you for continuing with us on this journey. As evident in our first quarter results and our recently completed sale of IGI, we are making progress on our recalibration, and we look forward to continuing to deliver on our strategic plans and priorities, and most importantly, and 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?