LifeMD, Inc. Q1 FY2024 earnings call

• Key Initiatives: Continued growth of GLP-1 weight management, new launches under RexMD, launch of private and government insurance options, AI initiatives in telehealth. - Weight Management: Added 20,000 new patients in Q1, acceleration in new patient sign-ups to 400+ per day, invested in clinical staff and platform automation. - RexMD: Launching hormone replacement therapy and weight management as asynchronous offerings; RexMD has over 500,000 trusted users. - Insurance: On track to launch initial insurance visits in Q2, working on government insurance capabilities, targeting large untapped market of Medicare beneficiaries. - AI: Pilot AI features launched, 60% greater response throughput for patient inquiries, triaged over 168,000 patient messages.

Weight Management: Added 20,000 total patient subscribers in Q1, ending the quarter with over 235,000; as of March 31, had over 42,000 weight management patient subscribers, and as of the call, over 50,000. Unit economics strong with day 1 return on ad spend exceeding 1x and expected month 12 return on ad spend at least 2.5x. REX: Consistently double-digit growth; planning to launch hormone replacement therapy and weight management as asynchronous offerings. WorkSimpli: Started with softer results in Jan-Feb, rebounded in March, ended Q1 with 8,000 sequential subscriber increase, revenue grew 3% vs prior year. Revenue contribution: Telehealth revenues increased 53%, WorkSimpli revenues increased 3%, total revenue $44.1 million.

• Total revenue guidance raised to at least $205 million from at least $200 million. - Adjusted EBITDA guidance reaffirmed between $18 million and $22 million. - Telehealth expected to turn profitable in Q3 2024, with Q4 2024 telehealth EBITDA expected $3M-$5M, and 2025 EBITDA over $20M.

Q: Congratulations on the quarter. Can you maybe talk about your expectations for profitability of the health care business? Like are you EBITDA breakeven right now or not? What would you expect health care EBITDA to be in, say, 4Q of '24, for example? And then how should we be thinking about an EBITDA margin for health care as we head into 2025?

A: Yes. This is Marc, David. So the telehealth EBITDA is slightly negative today. It is cash flow positive. The only reason it's negative is the deferred revenue from weight management. The EBITDA loss from telehealth this quarter was slightly below $1 million. So not very significant. Actually, it's moving in the right direction. And again, with the sizable increase in deferred revenue of $4.3 million, if you add that to the about $1 million loss, telehealth business is actually a $3 million positive on a cash flow basis. So really moving in the right direction. We still expect the business from a P&L standpoint to turn profitable June, July of this year, which would mean the first quarter that you would see stand-alone profitability for telehealth will be the third quarter. And we expect a pretty steep slope up from that. In the fourth quarter, we do expect between $3 million to $5 million of EBITDA from the telehealth business by itself. And then next year, we do expect EBITDA to exceed $20 million on a full year basis.

Q: So it's impressive growth to 70 physicians. Are you guys still looking at adding about 4 to 5 a month? And I think previously, we talked about there being capacity for about 1,000 patients per physician. So does that mean that you guys are -- have the capacity to go up to about 70,000 weight loss patients with your current staffing levels?

A: Sarah, this is Justin. So we're continually adding providers to the platform. Four to 5 a month sounds like a fairly accurate number. It might be slightly more than that. It's a mix of -- we are adding some part-time providers as well. And then as far as scale, I think we can -- I think we think the number is greater than 1,000 patients per provider. We probably think it's close to double that, especially if our tech is in place and kind of doing what we think it should be doing. But generally, the goal -- our guide for this year, as we've talked about before, was based on that 350 new patient per day range. We do think we're going to end up coming in ahead of that, which is one of the reasons why we've increased the guidance a little bit today. And if we were to scale to 1,000 patients a day, we would have to probably double. We probably have to increase the physician group by at least 50%.

Q: Congratulations with a very nice quarter. So you recently passed the 1-year mark on when you launched your weight management business. Given that I've seen figures of upwards of like 60% of people that use GLP-1 drop off within the -- after the first 12 months, do you have any retention data possibly even for the 6 months that the people -- the first patients who started around this time last year? And then how many have stayed on for 6 months versus maybe even 12 months?

A: Yes. So from a retention standpoint -- this is Marc -- patients that go on therapy. So as we've talked about before, we have that initial drop off due to access issues, people are not getting approved for coverage on the branded, not wanting to go on a compound of the treatment and not being able to afford to cash pay, which obviously many people can't afford. When we started the business in April of last year, on the weight management side, for the first several months, that was about 33% of the cohort would drop off during that period. We're down to 15% to 20% dropping off. Now our prior approval rates have gotten better, our communication, our diligence and our processing has all gotten better. So that's been one win. If you go then to people that get on treatment, which typically you'll know, in most cases, within the first 30 days, sometimes they can extend more because some prior authorizations goes longer. The first 90 days that those people are on treatment, we see over 80%. It's actually about 80% or 83% remain on treatment after 90 days. So really strong initial retention rates. The longest cohorts that we have today that are meaningful -- I mean, the first couple of months is not really statistically significant -- are about 10, 11 months old at this point. What we're seeing is we're seeing retention approaching about 50% of the total. But if you consider the fact that in those cohorts, so say, it started with 100 people, 30 of them dropped off for access issues right away, the retention, long term, of those people that are going on treatment still looks like it continues to be very good.

Q: I wanted to ask, Justin, about the upcoming launch of a weight management offering under the RexMD brand. Can you talk a little bit about how you're going to go after that male consumer? And just how that compares to your existing weight management business under the LifeMD brand? If you could maybe share with us how much of that existing business is male versus female?

A: Yes. Alex, sure. This is Justin. So the initial focus of the RexMD weight management offering will be on like our existing database, which is 150,000 to 200,000 active subscribers, 0.5 million subscriber, formerly active subscribers. And then we have a lot, like millions of prospects in that database as well. So that's the initial focus of those efforts. There's clearly a lot of these people -- a lot of these men that are in 40, 50 years old is kind of the target demo that have erectile dysfunction. We know at least 50% of them have multiple chronic conditions. Obesity is typically -- or being overweight or obese is typically one of them. So as far as how we're going to target them, it's going to be very similar to the way that we targeted men for erectile dysfunction and the other treatment offerings on RexMD. As far as how it's going to be structured, we have a -- we plan to use the same technology platform that we use for our ED business, which is an async platform. There's some sync capabilities in certain states where it's required. But we plan to use -- we use that same platform. It will be a bundle. We're planning to launch a bundled offering, which will include -- which will be basically a therapy provider and the entire program, similar to what we have on the weight management side. It's going to be priced somewhere around $300 a month is the plan. And look, we just think -- we think that there's a big opportunity here within this demographic for weight management offering, and we're really excited about getting this thing launch. We're going to be launching in the next couple of weeks. So it's a very near-term initiative for us.