Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to UpHealth's First Quarter 2023 Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Shannon Devine, Investor Relations. ahead. go Please

Shannon Devine

operator. Thank you,

summary call, actual refer management quarterly forward-looking today's those factors for be to risks, statements. statements, uncertainties forward-looking and to will the company's differ Please other a XX-Q, to Form the could filed statements. the SEC forward-looking be the cause During that on making of results filings, report from including materially

disclaims not unanticipated any new on investors to any undue forward-looking undertake not and required company The circumstances occur, cautions revise specifically UpHealth or as reliance does obligation reflect update law. these events to statements. to by except place statements that or

UpHealth's release. Throughout information trends our of margins accordance susceptible results are varying operations. GAAP to refer and these non-GAAP and, measures calculations. included with forma to statements non-GAAP and reconciliations of Definitions, and adjusted the these EBITDA. are financial today, of gross in results be in found for pro tables and We These our business we'll determined the believe certain pro the financial therefore, forma financial in call provide press calculations metrics the can measures regarding useful revenues, not

UpHealth's I call to will Chief over now Executive Sam turn Sam? Meckey, Officer. the

Sam Meckey

necessary with our plans shared our Thank and business, XXXX three-year When Shannon, and we are to performance our good our we implement all the Thank March, I you, us recalibrate rightsize last in our afternoon, you you. plan Martin discuss the business joining quarter growth to achieve first and everyone. spoke providing today. for very to to ambitions. to in foundation excited

with technology Executing now the mission, as for deals services moving critical to pandemic to access needed as from is and forward. high-quality, society care, plan that to enable to and more improve work this us everyone. will than accessible combine enable is emerges solutions which create the health view which achieving and unprecedented affordable to challenges our care our We ever,

in executing have our focused March, Since on conversation we our plan.

quarter made recalibration year. responded We results launch we will market, from You that first and changes necessary to accordingly. of the our we macroeconomic the acknowledged realities the see our

reduced shifted few and stabilized We the and businesses. operating are burn objectives. our improved our We a to growth We cash of discipline. core of our our our businesses focus accelerating those

deal that that you Group, working we told and check Inc., practice pharmacy Today, We our would Innovations just or and provider our to our Missouri. care any were pursuits that, Pharma did businesses divest on business, in sovereign and in initiatives to we IGI, managed nations Solutions. our ending closing on closed not Belmar compounding

reduced XX% and have head count decrease vendor we contractor continued and August, since We external by to spend.

aligning in expenses. commitment illustrated expenses operating our is to Our the our to current team's revenue best reduction by our

As a R&D quarter XXXX total percentage administrative in general and XX% of XXXX. to expenses and marketing, sales decreased the from the first of and quarter revenue, of first XX% in

Today's progress and directions our closing on significant to take toward our have with the IGI. completed sale execution, key the for to on a further growth. in recently starting would is we the rightsizing like detail further I strategic defining made focus business of discuss moment a milestone

solidify and proceeds, future execute on IGI, to sheet $XX to with current footing our plans plan, we the growth of with million company our as year. our and gross sale the solidify with XXXX With financial serving three-year balance in the necessary our recalibration providing initiatives

signed that cutting the revenues Telehealth reducing new months. While business, to recalibrating head business, our XX over were incremental with we growth. quarter will took costs count, focused XX U.S. In of on actions contracts first also clients in pivot most next steps we and the the to generate our

the to XX% of growth which contributed million of achieving business Additionally, we minute a saw the $XX.X in revenue. quarter, first

Our due in revenues primarily an and to the of higher for $XX.X segment and prescriptions sales first improved XXXX, census the were the an Services business. volume of quarter compared and UpHealth representing to increase Behavioral XX% in price million, of payer pharmacy increase revenues mix at

an we management primarily XX% revenues $X.X to care compared of quarter professional the relationship in customer from revenues growth Integrated of on retention existing revenue of million, the XXXX increase customers representing of first were expansion. and to due services as focused

an help significantly the market. strategy improve management for our the us and positioning industry we we refined go-to-market to our care engaged Additionally, business integrated in veteran

analytics launched technology In the intelligence our and Lab technology-enabled February, we Innovation to UpHealth and services. incorporating and artificial data on focus to

some process and with use the in to clients strategic are of of cases validate developing the market. with We our hypothesis reviewing them our

have efforts our the very sales these increased over by pipeline, on impact which a had of All quarter. fourth positive XX%

have to first-quarter quarter a specifically Turning It that of At important million. first the keep $XX first the the of in an for of going will to quarter IGI quarter XXXX $XX.X quarter our million mind of months forward level, comparison is unfavorable in $X.X closes. million, our of first XX Revenues compared IGI was revenues results. representing we high included first an of revenues increase were and notable. XX% to from after XXXX

improvements for in the of margin EBITDA $X.X a payer EBITDA favorable as million. XX% of the quarter first XXXX XXXX Gross result adjusted $X.X for to of compared improved and the expand quarter of the to first XX% negative quarter continued across to of $X.X to million by Adjusted business million first mix. from XXXX

path has that around. the we will cash with we growth drive wisely leverage invest While and continue that our that our It work company, challenges. in our initiatives we still are quarter as imperative results is pleased position turn encouraged direction we the first are its by the the to and of ahead company

to growing free repeatable indicators a earnings is and Our consistently which drive early continue cash positive converting our to are we against revenue, and appropriately; commitments, positive flow.

which vision enjoy can achieving health. the of focus driving a to the importantly, transformation enable on world turnaround everywhere our us best efforts digital healthcare of Most our everyone in to create

the journey. Before you I us Martin, thank I turn want with on over to continuing to call for this

we and shareholders. our recalibration results plans sale importantly completed are look recently of to and on IGI, As our forward continuing in and our strategic for delivering our progress evident our priorities first-quarter on and we most making deliver to in

now Martin? I'll the Martin our call over up to detail turn to in call open discuss questions. we before results for financial the

Martin Beck

Thanks very us much joining Sam. We today. appreciate everyone

first-quarter presentation pertains I results my I the and the to review first on comparison it Before comment our to begin results, release in earnings as periods. of want the

subsidiary, Xst, July reporting Recall financial Glocal, our that XXXX. Indian deconsolidated we effective from telehealth our

the businesses in our US results this while business. infrastructure So, telehealth QX virtual Indian and and QX care quarter's of the results financial both only XXXX include telehealth the US of group, include

representing $XX.X million of QX The company in first quarter completed XX% over XXXX over year-over basis with QX of growth on revenue. -year XXXX's growth of the X% a pro XXXX $XX.X revenues million, and forma

quarter of QX the million XXXX. of and to XX% XXXX, margin in adjusted adjusted of million $X.X XXXX's compared UpHealth QX QX EBITDA forma recorded for Gross million pro XX% XXXX QX XXXX. EBITDA $X.X of and pro in negative forma was EBITDA to $X.X compared In XX% in adjusted

we progress quarterly The represent free and to gross towards positive operating mentioned, do have revenue, EBITDA reach margin as additional company's growth Sam goal cash and sequential flow. our work of to strong our in goals. But year-over-year achieving adjusted

X% again contributor and health was QX by our Looking includes with the pharmacy over and largest QX revenue, from the breakdown total XXXX. the XXXX or company's XXXX segment. which behavioral businesses XXXX $XX.X grew at XX% Services, revenue. in Services to million revenue of revenue QX XX% QX

the recognize to QX second contributed in result in we which IGI $X.X the of quarter, to XX% XXXX. the approximately year. amount course through XX% of will UpHealth's QX to million endeavor expect we that approximately sale IGI revenues will revenue over businesses XXXX recover our growth to other The in a drop starting and in in of

XXXX. only Virtual company's and telehealth the Care QX included QX QX forma was next revenues. worth total XX% XXXX telehealth from approximately million which business of of Infrastructure, XX% or Indian business pro the revenue US with the revenue $XX.X US not grew for

XXXX to $X.X QX management throughout represented X% than total Integrated of which more revenue shift company's the we the in Telehealth to in ICM, company's QX XXXX. had XXXX, business, of US revenues. mix The continue toward slightly and or continued expect trend million that revenues higher-margin care

grew grew X.X% quarter XX.X% revenue services ICM XX% from The first virtual fourth and follows: quarter million XX.X%, quarter as management were XX.X%, approximately XX.X%. $X.X for $X.X and company's in infrastructure the from QX XXXX. XXXX, of was of by integrated and million for segment in the the care gross margins care XXXX margin gross

a from the also gross perspective, margin gross our purposes. being is of for additional Accordingly, overall them color our margins, on within metric view as and framing a useful well comparison as industry for model. me key UpHealth financial some provide let We as context trend

the Virtual US from to contribute quarter, pro business. in telehealth as in utilization gross video operating Care services, we to margins continue and of Gross XX% telehealth XXXX, Infrastructure in XX.X% forma in QX see first to and QX improving leverage XXXX in increasing increased margins the XX%

Gross to in result XXXX strong and as XX% QX from of pharmacy increased margins in a operations. continued and in compounding in XX.X% part the health our performance, services behavioral of segment XX% XXXX QX

we medical more close seasonal and in payer combined our than our group Florida Strong into favorable capacity pharmacy normal mix in volumes in and down with weakness businesses, integrate health Missouri, operations a health performance in our business. as Florida utilization, increases behavioral behavioral those offset

quarter integrated the Gross calls. margins services. a group's with from levels in that The XX% QX to XXXX XXXX, discussed of a management consistent, in first care mix from professional XX.X%, QX previous higher increased the we've as and in are result at on of margins at XX.X% expectations ICM gross

$X.X was million nonrecurring for restructuring up QX UpHealth's $X.X and expenses Adjustments million, first-quarter made including adjusted certain legal were from expenses. XXXX. EBITDA in

Indian with to and for and owners, continue, former with matters expenses litigation various expect the to costs we we consolidate of drive operations, costs. shareholder efficiencies corporate our deal We legal as subsidiary as lower including and restructuring

have press GAAP reconciliation operating non-GAAP adjusted a measure reminder, EBITDA of release. the is EBITDA As loss to adjusted included a and we a in

liquidity to on company's the like Now, I'd detail provide position. more

part position. As the the will unrestricted IGI, an XX be XXXX, cash sheet and reflected cash at including be transaction in of as had will $XX.X which cash the balance of quarter to of company corporate second March swept balance the million,

an in effectively approximately been In held account include by our in in million former $X Glocal addition, does arbitrator against frozen the has that this the action India emergency shareholders. not

raising of an warrants completed issue million X.XX XX, XXXX. million $X.X and X.XX million shares we common prefunded gross proceeds of Additionally, March on

legal payments various consulting and payments impacted business Interest cash fees, EBITDA balance, strong professional post segments continued while expenses, and our revenues and to including for our growth.

earlier sale remarks, As the pharmacy the closed IGI Sam of mentioned his we in business today.

and proceeds funding equaling accordance The the transaction the of transaction million before terms gross $XX expenses. our offer secured to the was the to escrow In changes proceeds with amount of XX% of of the about repurchase will in net $XX indenture sale secured capital million. various IGI adjustments notes the noteholders, of company working an with

the that fees provides the continues which position in business, several the company the we've actions with extraordinary sufficient growth our to trend next liquidity on flow operating The to cash financial adjusted execute to expenses the cash for plans combined such positive of performance for months being future. taken foreseeable legal bolster when our with towards as

in revenue million. growth to forma We million. revenues be million to X% range continue to the $XXX pro of XXXX of $XXX XXXX $XXX of over to XX% represents This expect

the include revenue and $X and exclude approximately be IGI million adjusted gross XX% to estimated XX% both pro operations. we XXXX million. of range For revenue, In EBITDA five expect months XXXX, range Indian XXXX to for and in of to forma margins the comparison the of in operations $XX to be purposes

remarks. concludes ready to Operator, our That prepared we're questions. take now

Operator

go [Operator Mike Instructions] line Latimore from you. Please Capital ahead. Markets. first question our Thank the is Northland And of

Mike Latimore

progress this number? number forma I you the Looks year the good. basis. Martin telehealth Is Yes. far. a the gave XX%, growth or what on rate was Thanks. so Congrats pro on think that

Martin Beck

pro Mike? on basis, Telehealth a forma

Mike Latimore

yes. number, that gave you thought I

Martin Beck

I one second on it. just yes. me did let grab Hang

Mike Latimore

Sure.

Martin Beck

Yes.

it right heard XX%. You

ex-Glocal forma pro So XXXX. QX be just to that's in clear

Mike Latimore

Right.

that's macroeconomic pretty talk can the rate. kind XX% you a of So little a We of that bit so a guess really the hear differentiation? number. just I is much drivers business healthy but headwinds mean I healthy growth about about

why bit so business it's So I that and little a doing talk maybe guess well. about

Sam Meckey

the I for Mike can question. Thank Martin. take you, that

So really driving that are growth of the there's that two things business.

devices of seen an distributed. the we've have First, increase number in that we

facilities So as about in new talked X,XXX over we've the quarter. We this time. at had we're sales first just into several

that utilization proper driving The our making working is the closely doing devices second it. sure been and the we've teams know with of they're customers very the about how

that about talked we saw that you the in So in saw first for we quarter. growth XX% the about of business minutes the

adding We've got and increased then really it's are customers we've a sure you really NPS to and customers new been out customers will. good scores drive market with So and into product. that good same-store our on the new properly if using growth making focused our them devices

Martin Beck

Yeah. the away the I a remarks things transition seen add so in mix and towards from audio What couple this would video a there. drives and revenues mentioned of we just of and Mike is that margins. we've

Mike Latimore

Is a change change? that process technology just a or

Martin Beck

a little a a the superior at to of core its reflection lot A handle both. and the on that many, same product. bit platform many efficiency calls of fact made and is advancements of certainly the We time also the video and ability

Mike Latimore

think just Right. then I you pipeline. Got it. on touched also And

said Is is across category, of growth the largely you board? it sequentially. that in the XX% that telehealth kind think I grew or

Sam Meckey

Mike. is Thanks growth pipeline The the board. across Yes.

sales been a And then, team. added patient a behavioral it's care telehealth growing business business approach to but we've different couple added we've So and also on are that slightly business. of the aggressively volume. to resources for focused health the pipeline leaders helping the our for management drive the improving for pipeline new there then our We've integrated

businesses three pipeline. improvements our all across we've So in seen

Mike Latimore

no if of the or build is then Is seasonality the businesses sort it. you the year, business? IGI is like the Got there business in in natural And of seasonality throughout there there the out non-IGI inherent back year? an throughout a the rest

Sam Meckey

I'm on line. that I question? you sorry, Could repeat broken you're my Mike. up apologize,

Mike Latimore

Yeah.

actually you the it highest? and the the business lowest in If left the that's quarters year the take business out there actually is of natural other the one a IGI seasonality is quarter meaning are

Sam Meckey

bit little utilization. seasonality a of terms natural a of There's in

what towards a end seen down months the come bit of utilization the but fairly with some you've the see back it's historically. during still then year, summer You little build consistent

Martin Beck

just would the Typically in second capacity and a the health. call. seasonality. is Mike are health Yeah. on strongest talked that behavioral And there business I about quarter fourth in weakest. business that little the of the first is of utilization And and add we the on in an last element bit quarters behavioral the the terms

Mike Latimore

it. operating say Got you months? flow last Is positive just you Martin is again did within you one then expect to just be few what And said? very a cash clarification. a that

Martin Beck

Yes.

Mike Latimore

so Great. much. Thank

Martin Beck

Thanks, Mike.

Operator

line our next Bill of Please the And is your Benchmark question. with question Company. Sutherland with The from proceed

Bill Sutherland

the EBITDA Thanks. Good work the the the guys as almost as in EBITDA all respects. Obviously, ask looking at about your quarter, just here? the very at think in we rest from far should I year annual the nice of how of to of end low range. cadence it's want

Sam Meckey

our that's on great say EBITDA. you, we're so to going year. good of of Thank I our IGI really down Bill. would some revenue a the Really, to just take off start We closed question. and sale for some of the

quite fully QX we're the improve QX throughout to yet we're and to can't but with annualize to the number results we So of year. course in drive from continue or really pleased going the that that extrapolate

Bill Sutherland

in think sense was to the not percentage total. the IGI's a of EBITDA I My was, big from past comments that contribution

So from again, a continuing of off margin what ops forward perspective? kind in going falls the

Sam Meckey

one, to? you me or Martin, want handle do would you that like to

Martin Beck

Hey Sure. Bill.

smidge in to a at drops and more a pretty EBITDA much that all maybe contributes IGI about flow. $XXX,XXX So month this point cash

an we insignificant did forward. have that replace strong not have it's We a first very So do going to amount quarter.

quite to be year the rest the maybe level. of not at that to robust expect We continue

the longer we the IGI. reflecting got forecasts we'll guidance then the if And potential to run revise business and feel of the As results and sales no the we've from Sam are rate margin that the accordingly. and replace mentioned,

Bill Sutherland

quarter Well, three it different let if you just the Martin understand better. that first me way see, margins say little sustainable? come for are to at bit little the Did in it the can that ex-IGI gross you a achieved segments a I

Martin Beck

on a EBITDA million that $X.X margin the all at contribution -- Bill. comment margins EBITDA IGI about month. I the gross didn't just business I said the was the was of

margins them. were very terms In gross quarter, the of strong. first we with happy In they were

margins very were think not may that or I may mix those continue. issues which there some positive contributed to

As the is gross range. respect to our we've to with margins in guided XX% guidance longer-term XX%

And normal we've the if those guided. we kind an so we'll the moment make of course But of as what margins. would effect. changes think up perspective steady state with a gross we're and little they're comfortable the shifting to that bit. announcement And Maybe at

Bill Sutherland

Okay. kind curious on to that business the is of Can mentioned that color and for ICM or being a cycle mode? was that us give maybe growth means for I what's little you Perfect. the in go-to-market what sales strategy the refined. you get of back potential changing

Sam Meckey

so into with to actions our the that talk that really and of for Yeah. and members a foremost, business they're that we've business analytics our customers think at of capabilities best the would Management of help example about next looked add serving Happy things, the there's to for SyntraNet data they that be taking can Integrated identify pair to Care lot first couple some with platform. really a platform we the great on clearly our we we've got so some

at We've the great having platform use that developed very, PBM cases are example, where the got good very market HIE and from you the some market beyond when results look leveraging customers we've that. for

they that California digitization starting to plans. healthcare some counties from require add our gotten in of of requirements other in experience the the customers and build that with we've those system into we're states to California the then, of and start their And in the things upon their some

both approach technology-enabled that opportunity to there's customers think our serve to really going to payer technology package how and market. we that be service the we the together an so And in

Bill Sutherland

You're to Medi-Cal think? contract, the alluding I

Sam Meckey

Yes.

Bill Sutherland

So those cycles, the long sort a would it -- sounds sales time. big it of get like feels are That with pretty I right to will like other take engine governance? lift imagine

Sam Meckey

Sorry it Bill, to up. ahead I Go finish off. you didn't and cut mean

Bill Sutherland

ahead. No. I No. Go there. going slow too was

that similar other assume after systems I Medi-Cal. going The like you're

Sam Meckey

Yes.

are So the those. and some we California, focused there's quite in been going retention us. so In pursuing a has first couple the we've of of other for on that really on account quarter, proposals that been for well counties

So the we're progress happy with very there.

sales long cycle. is it really, so a And

additional to is You are on underway. clients new markets clients other upsells sales well our the with focus existing correct. But to and

basically us And really of leverage we're analytics good community-based particular, some so our some work underway we seeing in in can terms data and and that's for in other Medicaid how for data states. exchange

of responses So couple working this RFP we've We're year. a already that. submitted on

initiatives You are SaaS model, think longer it's going architecture data that work support that model bidding a of doing around really to sales incorporate customers and new that analytics our cloud correct full much make bit those more attractive engineering our for a on. we're But we to and some transform us and the business cycle. the we're is that little the to

Bill Sutherland

Okay.

Sounds guys. Thanks promising. the I color. appreciate

Sam Meckey

Bill. Thanks, Yes.

Operator

have at closing no turn questions time. this back queue in the further we And for I it will remarks. now

Sam Meckey

good We're to excited we're recalibrate our the IGI do is about, And very good once taking work we Thank sale excited want and growth something both allowing business. and is us. to to I, today. Martin very the was a pivot focus very it's the quarter company for very the everybody to balance you, us restructuring really closed. thank for the day, joining on that operator. This continue that about And to direction need a getting again, to us and sheet

results. start that with year. goal Again, course strong the to And very throughout our year. the continue We our performance a to happy that and the of objective we're think very first-quarter it's it's

continuing us talking once to on appreciate second you again share it journey. to So for the again, you we We and results thank with after and this quarter. forward look our

Operator

please participation conference and That for your thank your today. ask conclude lines. We that disconnect for you does you your call

UpHealth (UPHL) 11 May 232023 Q1 Earnings call transcript