MRAI - Earnings call transcript Q2 2022

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Operator

Good day and thank you for standing by. Welcome to the Marpai Second Quarter 2022 Earnings Conference Call in which management will also discuss the Maestro Health acquisition. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Marpai's CFO, Yoram Bibring. Please go ahead I would now like to hand a conference over to Simon Li, Vice President with Marpai. ahead. go Please

Simon Li

Financial everyone acquisition Welcome today second XXXX and quarter Marpai's Thanks call. to With Maestro Chief Gonzalez; Edmundo earnings Executive call Yoram me and Bibring. Chief operator. Officer, our Officer, on are the

forward to the the we that measures Also that statements that we'll risks, to and by please note from turning be Private Marpai there the non-GAAP our are and important are forward GAAP other the when during statements certain Before uncertainties most could release or press cause website. posted materially performance. Edmundo, differ factors financial certain for relationship please Details those these discussing Such on non-GAAP note this on be can results found the to comparable call over expressed Act call will the the implied reconciliation looking statements measures made call. to believe Reform be evaluating is actual Securities subject defined as Marpai's Litigation that measures between in that looking XXXX. on this Of

For the available press call all filings please our release, which in with Marpai's CEO, will to additional over statements with our and refer Edmundo? to our are that, And at information, the marpaihealth.com. of I SEC, cautionary turn Gonzalez. Edmundo

Edmundo Gonzalez

Health acquisition QX joining Marpai you our Simon. our It's a of us. and Thanks of to thank pleasure here morning for everyone, results. discuss Good be to Maestro XXXX and review – Health

a me bit this describe the why later the acquisition a August about we I transformational the will Marpai Maestro probably little acquisition on, tell of and Health. deal on you Yoram for of know, you Xth as but let is believe Now, Marpai. terms announced

are highlights first and some Here foremost.

revenue. our the doubles approximately acquisition First,

getting added we didn't Second, have. we products that value are

and this seller. the EBITDA the beyond. propels synergies $XX will believe realized acquisition this to we planned the sheet is plan. us integration cash Maestro million also on of breakeven the our seller and by closer almost Five, entirely and is balance non-dilutive that Four, with level Third, financed leaving acquisition fund our

about Marpai high employers Like third-party by well rates. who great does customer In is employees. market high a it as quality XX,XXX Now job is approximately administrator very Health. that Marpai. TPA who employees, approximately XX,XXX services retention base a while XX employers that the many their in servicing to a services bit currently Maestro self-insure ways, Marpai a around evidenced Maestro XX known as self-insure its also is similar Maestro

directly Also, of customer's The let currently XX provide compared their third-party needed. In Maestro's third-party annual as Maestro's have services that are contract with added they million terms revenues providers revenues own approximately reason or $XX Instead, trailing two their are to of low These they customers. than lower so. ours is management containment. are they million to and which don't resell important with clinical revenues $XX resources. cost margin, they months value their the our services,

these a to products. these two from and customer by is This is customers third-party include you providing along providing own you When derived services services. revenues third-party of pass proprietary has by until Now, the most its resell paid these these services. third-party the two to of fraction from been XX% very people a now Marpai amount the keep to which resources, are Maestro using two the keeping revenues all Maestro's its service our of service, revenues reselling as close significant of By provider. and that services technology

in lines more bit product a detail. two these into dive Let's

or quitting of a some help where or billed basis. other It need require like working hourly includes a nurses with health require clients is This members monitoring managing which like journeys to wellness clinicians health diabetes management. or other smoking and have plans an weight. is care they losing First, service on disease that health

with One driven AI of that the predictions. reasons I'm so perfectly it this product excited Marpai's about is fits

know, management healthier of doing proactive about Care journey. the is Marpai all less self-insured events in ER could our the lower these of about costly managing predicts means costs costly course and actively you employers. for clients, care As mean This we events. terms of matching for member's visits, something know members members

and high $X,XXX or source savings meaning cost program takes $XXX,XXX to that Again, A on a Aetna lower I as pricing of percent cost. services not of large savings at the specialty settling model. Often a line And its its the that percent for savings as generates a a by a Maestro cost monthly a savings approach same Now month of savings fee. fee bill claims wait categories. like sponsored pharma This drug and to product client settled second moving cannot monetized $XX,XXX and shared containment. a would executed into hard the These drug where network these big the of The drugs client. is client. or Maestro out products are include for Cigna includes largely that get for for base. a network is introduce example real month that fee. our $XX,XXX patient of of that is is assistant claim a for prescription for relevant. $XX,XXX generates member it take say a can of into

all I are terms these think to In synergies, for clear see. obvious and of

both and significant We synergies. expense expect revenue

own into the base to On we the revenue to products Maestro's hope and customers. Maestro to that our we two services homegrown customer value sell side, that have sell added our driven AI hope we

XX to one six which the savings. become company over next On the months, we're lead expense substantial to should to side, expecting

my the and goal plan, – after now the within start teams actual is both soon While of Day. closing. we Labor to contract on after The plan, working for expect integration an to companies closing closing XX right closing calls executing on occur days, management hard are integration the

the of be will stated guidance providing hope we guidance quarters included As estimate resume third for in earnings third for our release, the it revenues We in as difficult not call. is Maestro's to are how quarter providing on we figures. us to the QX much

to higher on our quarter, second came at slightly our guidance. revenues than million, in the $X.X Moving

the customers customers an of termination address to X. issue are their nothing work are related for ensure it's We are that to January of customers, employee want to internal termination growth three have with and new add approximately also account I hard to Together organic that organic do run. stronger effective believe The do opinion, that I a we these who This Marpai; X,XXX failing push that which were of for these products the stress fulfill we customers decided have is will want priority number for to lives. terms you one we as the through that continuing we and with lives. purely in-house long inform in contracts. is a The additional will to continuing to bigger in to strategic termination we reason to meaning new us. to these said Marpai with that of contract to we September are broker. the an with we stronger has contribute post-deal a XXXX, with thousands us excellent terminate our large have X, growth obligated

lose is to right case, hate always I to a thing the customer do. although in this this Now,

lives hard are including growth We by pushing X/ these. the so will from ads of X/XXXX organic our loss new new exceed activities, far

acquisition to deal want and thank all Now, through that before quarterly reality. numbers, a people go I I the hard the hand Maestro over terms to worked extremely Yoram make to the to

Of making transformational. happen starting work just the course, and yet I is the is think deal indeed

and AXA, deal. employees, is seller who to So as the of in you as all well representatives and thank advisors, this employees the Maestro consultants

represents of market over All amazing a Yoram. this truly $XX to and a Yoram? me enabled of forward believe all. happen, And it strategic fulfilling to large billion Marpai of thank for segment. this deal brings to hand now our huge us so this to leap you I slice capturing them closer big goal let you acquisition

Yoram Bibring

everyone. morning, good and Edmundo, you, Thank

acquisition Edmundo start talked the me Maestro with Let about. which

what Number and a which we recap business I'll appealing, we're Maestro minute. describes has that you of are stock assets deal. buying in Edmundo in one, So find extremely XXX% in the we then getting? to Maestro the

at that to Maestro that three, And of eliminated operations sheet should will the its owed closing million read who they also are capital has restrictions free any on owe data Number of X-K, usually available agreed or been will will former to intercompany ignored. certain will that working be have of significance Maestro Marpai in the those at For is range balance cash, and and see buying was outside be finance to that Marpai. will we a which Marpai shareholder be have any now two, will consolidation without Maestro with. Number debt not external debt. agreed the the $XX.XX closing. and economic no operating that closing will it its limitations. and This debt is within it Maestro it's also is This Maestro the the

We're annual we December do the $XX closing to December million If due April XXXX; our X, $XX.X interest minimum payments accruing anything. million payments on $X and we will XX, under $X obligated million that on on with cost of starts on to XX% XX, April $X met have is obligations and The that and deal So $XX.X on we At that are cash. is reason contract, consideration The what the million $X not finance on million make annual of seller the X, of date XX% on XXXX; December XXXX. XXXX; XXXX. minimum a we XXXX. paying? are expect don't a are the which assuming million million we XX, cash the paying have not total XX, December the

payments, proceeds of equity minimum In the listed pay used minimum if In a interest earlier costs. I debt. due payment the these obligations on XX% of in this other To offering we we we extent to such be be reduce the just will addition, factoring must dates, repay any explained. than the make interest, will saving XX% words, which the just I of

$XX.X years XX% do perspective, that lives and [indiscernible] and from Marpai, good are two happy getting products. four to employee very our this of by strategic is is million cash, grew we price believe purchase financed bottom seller the this over our So interest. XX,XXX it. very line transaction in we a at $XX.XX this I is And million for strategic are

of compared Moving of on quarter, $X.X from million of for of quarter were million XXXX our $X.X quarter XXXX million approximately first revenues and XXXX. approximately to in quarter the the revenue $X.X to the second the fourth

$X.X was QX recall, guidance our million As $X.X you to million.

Moving on to employee lives.

quarter therefore employee revenue and fees is our know, the lives, TPA their When indicator say in business. employees mostly of the March are we of employee a self growth that from per you key our per finish XXXX. lives customers we to second at basis, XX,XXX who calculate and XXXX, on As refer We based down XX,XXX administer. the month end employee we XX,XXX employee under with from lives and plan on almost covered unchanged the insurance XX,

you process of out start come decides can to the from during revenues way. the quarter reported. and this in and when part margins. was the – case the to we in by to reason contract may ends. lives or these usually lag contract not The is from of in These the compared was is a revenue in We we self-insured, lost quarter the As of ended part, that QX in change figures, because switch order claims the employee renew have short-term lag declined with typically higher first change is the customer TPA It a to usually contract are actually to customer in which customers quarter. tell some There that the number the the to run the that revenues because appears after revenues. in that call

and processing to customer second third-party Cost comparing expenses the resell for include amounts first claims, on cost service revenues the to to will expenses. be of by the quarter XXXX we charged quarter Moving expenses. adjudication our XXXX the our costs services our customers. and that vendors of of I

profit Gross we impact some out in $X.X The margin had amortization and revenues Our million depreciation for for first XX% quarter. QX higher decline or not quarter. revenues to customers. reason was from of the amortization run and approximately gross margin approximately XX% of the because in cost of the million excluding $X.X revenues revenues was for QX in $X.X expenses compared churn compared of were the including to the the depreciation first million

Our that approximately and first compensation software expenses increase loss the this was decreased for were investments compared $X.X theorization to well other expensed second first $XXX,XXX of of operating while expenses. revenues, quarter. Approximately costs million Operating due The capitalized was to expenses to in other technology, previously product due quarter operating not XXX,XXX increased were including by based marketing, $XXX,XXX as the increased depreciation cost of and quarter. increased marketing expenses. capitalization operating to sales the for compared as million by loss second $X.X quarter and stock in

net per net million first share loss loss share million for $X.XX quarter. the of $X.X second Our or was $X.XX approximately $X.X compared a quarter for to per or the

$X $X.X approximately $XXX,XXX, of compared and EBITDA depreciation compensation a in for $X.X of first adjusted a modernization Excluding million expenses to stock-based second write-off quarter million negative was quarter. of and of negative the the million asset and

terms guidance close to the with which we call told And not acquisition, as Edmundo you, guidance, the QX will the third end due we In quarter. to expect questions. we Operator? are of open Maestro revenue for the that of providing before

Operator

first The Allen from comes go Group. Maxim Instructions] Please Klee [Operator ahead. of question

Allen Klee

and Edmundo for Thank taking Hello you Yoram. questions. morning. my Good

queue, a there's have other just I people get I'll back let I'll if me know and in or the So keep bunch, going.

consider one a that heard had is in and you yourselves and broker went? on choose give your would – first you. Can TPA? sell broker terms What how business got you sell brokers the why the a Thank versus are to The summit who potential offerings. from of some another you you brokers feedback that you've

Edmundo Gonzalez

call Thanks today. our Allen, joining thanks and for

huge So foremost the was a first summit, think ways. multiple and broker I success in

it of America. First, of was XX gathering top in a the brokers

that history purchased TPA its business ongoing Continental clients. the Benefits, remember own XXXX and the we an business you'll in So was with

This just creating brokers the is it's guy some America. course. based a future. or that course. that really knowing national for of the obviously the quite and in is are as It's requests – a TPA payer different my means my brokers normal The right, receiving maybe from the matter a you're that with stature of future, We working in but some brokers That brokers, relationship of you when said quality of and the largest some have the or the in machine, is proposals not goal. executive, business where are we about transforming legacy of a of now the

have significant we in many We this as you at that... will So were XXXX, representing – RFP uptick as where our of last had right? many XXXX seen level month we accounting By know vis-à-vis our industry lives the also year. a did now we beginning understanding in of as RFPs all this

Allen Klee

XXXX? had you lives apologize interrupt many RFPs did to your many that were in as that as XXXX, you. sorry represented I I'm you coverage when as many – employees mean under say as you lives of

Edmundo Gonzalez

and will. at bid, an No. No, I RFP no. – that if What bat, brilliant, right, is to is an mean invitation the you

our all on of that is and XXXX. of that that equal the RFPs of in now number RFPs in right the they represent we lives to all pipeline bid those the So

Allen Klee

Got it.

Edmundo Gonzalez

That's great.

industry, very get started quite beginning, of think sales So driving. one-one, business, the that on business they of right. community that really still a I'm which the really at who you in although I make most that have certainly the – who is for funnels are point end the doesn't. it developing is would last the cycle enthusiasm, in it's the business pleased order right, lot at. bid gets against this from And the the at has the I is to to to is the nicely, broker there. And mean, I That what day, is obviously gatekeepers,

ahead, our So there's over brand to mind say. that Go answer new Allen. your a next lot here Does RFPs months, let's more, the two question?

Allen Klee

Yes, a go think progressing how into Could talked to you call you Thank peers? adjudicate about think that in Then that's to of your that's used to about, efficiency and how compares last great. efficiently. terms you. that relative you've more maybe how I more claims you little technology

Edmundo Gonzalez

in turning service that right. big made Sure. Look, essentially continues, this have into That provider technology pays claims we journey company. a strides

right? a and lot So to a better and of of core technology pay is of the to much introduced journey improvement third-party a claims, what lot function So it's payer lot a we've efficient. more make administrator process that

it, the For X.X three – example, per approximately in had Continental more when Benefits, implemented process our claim that do X that's our same can is that's gain employing it per X in to was a of efficiency will a what times of effect you more Meaning when commitment. you're – the believe in claim core factory to Because that's Why? there, resources. correctly, but cost our we technology times that, there's claims with technology I if lot you cost still bought now. to lot right? we a the what

investing in that at to areas We process especially scale, efficient lot all of more continues. it a make work and this are

Allen Klee

you. you Thank identifying of – and then rolling out maybe that And Can claims that of great. where having? terms machine some of stands of in you're high terms potential in us terms success learning, in That's examples your tell of

Edmundo Gonzalez

and and disease that we've lot made lot our AI and flow. learning claim states. Most the prediction process Not process, on A a only lot been we with of machine right? necessarily actually deal the people of of technology our a that and improvements obviously just operating Its of side of the technology, introduction has have learning made prediction is numbers, focused on that. machine

journey. are population to assess – on and is at a on we who journey So basically certain look able a a

Now, know replacement knee price we certainty? know are variation lot XX, X% a that quality. on X% of a Allen, orthopedic to variations as normally do you a to for times. can journey why want to for procedure? independent the example of is to eight with but be X may to three Well, not who example, For Those an have

that So months and in own the gives the that We here, for health choice can and what with is obviously member right educate company cases, And that for different that before there's to before, there interactions we're incentives. essentially doing to even many event months time the health. because pre-certification, that metrics member already the asking not it our best for help when doctors basically member predicting his is months choice also happens, some are team quality but certain plan. make intervene, use

For to go you example, starts are invest all with to can about the a Dr. continue Dr. is be We'll company given But dollars from B. thousands were of versus to the high A copays, plan journey may the if it meaning of this essentially absorbed ascertain actionable, essentially A choice to B, it savings overall what for some who event, right? waived the cost Why? event and your actually it. in in ability that that and way client. may be Dr. by when something the Dr. when the happens of obviously tens it on seeking We're before is journey we is. do we seeking Because that

a their members does matchmaking scope. key and without me, not the of we think is the focusing So one and so things the, pardon identify that this Maestro cadre in just whole of we me essentially makes the excited selection that by can members that a actually of about pinpoint right? Now, are the AI, care on lot management acquisition

basis, means more that an so what is of revenue. Now, obviously these Utilization monetized more on products. utilization, hourly is utilization more financially

Allen Klee

us degree sense Can the A items? the other related time to or you one to a in transaction it there question. the quarter was potentially financial general Fantastic. give cost of

Edmundo Gonzalez

to turn Yes. Yoram. Yoram? that I will over

Yoram Bibring

substantial the not Yes. not second in any did in of the We deal. quarter, substantial have No had but here we quarter than we to that have – terms thing expenses we want this quarter, and about The there. some have didn't software main one-time we did expenses didn't was and $XXX,XXX. relating not the vendor cost, don't capitalized certain less much prior one-time they're

$XXX,XXX situation wise with expenses. marketing, of the I'm and talking capitalized. this technology, equal we're about – So a basically cash to stock And talking nature. that approximately of compensation, is increased compensation except thing expenses, about I'm the we sales cash as $XXX,XXX not not expenses, product about same are not expenses same and do things where less based gap and has and in stock-based in substantive marketing

every worth three And some them they're these don't one-time tend quarters, but were to so I specifically. of once one-time, mentioning repeat think themselves

Allen Klee

second, That's would have, related a you. revenues and And they sell comment that additional offerings sold Marpai? there the is, Maestro's two that than to then Maestro's two higher of services great. It's imply these is lower from half that third-party employee potential are one about come they to the get a way the gross don't things those And that; around to at solutions business margins if margin. per of think new revenue cross could a likely Thank Marpai's? then

Edmundo Gonzalez

Let Yoram then Go comment chime first, and ahead, in. I'll Yoram.

Yoram Bibring

Yes.

the way to margin, if our regard the gross gross you margins, so with – know look, financials. you way they do their the So

If sold say we at – third-party cost every it's a of we we have bit more the in included And sold. then we you do what's and which side. do goods people how of that's call, customer those lot time and And They just we and operational of basically it cost I financials, look also the processing from I our – explain goods differently. costs, cost you the mentioned. say way and They our service claim in add a the there. do we little just it

could goods accounting, of after one bit like almost could have they you they so for and because technology it better private little guess, lot example, information do, they're management differently. – put and They IT I a company into it call line. in things take all, sold the other of it We a cost this do job, a

gross definitely. to, you margin if if take – yes, they we it it, and up, will yes, adapt do do we what go So

the So answer is yes, yes.

assuming do case, second the we that's words, some, What yet. part? then today, do. adapt the we'll definitely part? XXX% want what up. still the We go they to if the do not likely Do work most we the other about way will what to but sure is gap to that's do case, gross which In second the Assuming was yes, you here talk margin have a

Edmundo Gonzalez

Now I have to remember it.

Yoram Bibring

cross selling... Really

Allen Klee

Oh, the cross selling?

Edmundo Gonzalez

Yes.

Just in background and maybe the cross of you're Allen terms on, while mute to sharing there's ability here I'm just noise. sell

So there's base, amount of to products sell our cross these right. Allen, opportunity to obviously a tremendous

right care So that now don't do thing we execute I'm behalf management, is have meaning, executing our have this cost these functions, we them, have clients. meaning I we actually The only containment. partners of on

the in we want the obviously to do keep products these generated what would that use gross resources, right, of XXX% XXX% profit, activities. from has because that of is we revenue, So here, Maestro that the background

items. that's into brand take what only extremely Again, we want is is do the new slice we new the not is all now We thing about and these excited we a part So only them of these revenue products. all we're and This functions. our small access really The do revenue. can via getting externally these base. revenue of

Allen Kleev

up get to the – goal the is opportunity It's available to X, the for January that, it is selling renewals XXXX to try follow cross on

Edmundo Gonzalez

when a yet, we can And but better mean, we consider are little sorry, Look, not it start, is, there's to. hours background to right. we I cycle in actually but have here, have and officially where it's sales noise again, certainly we

ones believe these September. the in the that at The management. sec exciting do the if the part early again of here, to – right. our deal for of it's book, of we're only the that care market close providing some through again, in ones can vendor. segment we're least section The thing we or some the Because Allan background, for have We sense, is, swaps makes actually I kind is a

So through right. instead vendor will us, a of provide it

just swap – vendors the containment, but side, the care a cost would have to yes, management on on the certainly our there's that's end. So we that clear, there other

Allen Kleev

Okay, great. I have an question. unfair

I were Maestro it – if understand to from pretty I the reasonable exactly, modeling is everything that don't company, similar are bottom but assumption line if we much a a have So results stood So you assume it going the yet, it take to and double to Marpai? top but we line? Maestro's a pretty at as combined answer starting to we results don't reasonable stab to the the is point know

Edmundo Gonzalez

want on that? Yoram, you to comment

Yoram Bibring

We the Unfortunately on already obviously numbers but provided we a business, this of go lot we the cannot and details similarities in comment at yes. beyond We're that that information the point. the what there's into public. same the can't to

gave beyond at provide we within days employee we'll numbers. So point next sorry. financials information at will and financial but you be We – this our more can't obviously and filing revenue after the provide information beyond the additional we giving closing, the XX point, this or this call, so on you the life numbers,

Allen Kleev

the you. was thank that figured I but That answer,

you number that one that tell customers of then employee us related Okay. to to And for mentioned the Can broker. terminating you related three you're lives then?

Edmundo Gonzalez

group parties nothing contract. give so to in decided this underwritten, do not obviously stress, a but we this have This I It their, it's has all Marpai. that's Yes, to is – just obligations with customers issue. Basically this we just their do – is with protect not to approximately Marpai groups for to were the of meeting to not is, actually It want X,XXX. decided order painful more this these termination. it's how does to and

but is lives times in but only not My a we that in – believe interest coming something the of replaced I company. of obviously new the is is with one-one. is even wash, all the not best over take So and but goal this course it's important not that in lightly, here the this fall, and replaced this several hope

Allen Kleev

to sure the made months of brought for announcement there? getting about When want I to talk around Last XX it Maestro, a enough flow, company? the combined understand, strategy cash of potential say or the is for great. so to I make that being you acquisition there or when believe bring in is profitability. question, talked Okay, understand, just months I was that you Could you I new the it believe little Maestro the cash just profitability – you the of just combined about XX

Edmundo Gonzalez

is, about so is talking goal combined our company. new with plan The We're of in Maestro, the the that that integration. Marpai

comment know, the goal overall You you to further have do here. as this? little Yoram, obviously we'll that on want a

Yoram Bibring

saying Edmundo, for us anything I a XXX% said this we we're that. can meet, you we agree but what is which not target believe beyond

months. get transaction So we're saying not to is move but to target towards XX help breakeven anything within going We that us a beyond that. to that, we're think we saying have us this

Allen Kleev

Okay, the congratulations. you great. time. Well Thank for

Edmundo Gonzalez

Thanks Allen.

Operator

There this no This conference remark. turn concludes questions back over at to like session. the Gonzalez Edmundo Instructions] for I time. question-and-answer [Operator would closing are to our

Edmundo Gonzalez

and but Thank thank very a day to you, for so and you look much time good participants, it. participation. this your thank for operator, you meeting forward quarter, We for again much appreciate We you all morning. next wish your very

Operator

presentation. you now has for today's conference concluded. The attending Thank

disconnect. You may now

Marpai (MRAI) 13 Aug 222022 Q2 Earnings call transcript