Sharecare, Inc. (NASDAQ:SHCR) Q1 2023 Earnings Call Transcript May 10, 2023

Operator: Good day and welcome to the Sharecare First Quarter 2023 Earnings Call and Webcast. All participants are in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Today’s call is being recorded and will be available on the company’s website. On today’s call, we have Mr. Jeff Arnold, Chairman and CEO, and Mr. Justin Ferrero, President and Chief Financial Officer as well as Mr. Jaffry Mohammed, Chief Operating Officer, who will join for the question-and-answer session. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, which includes statements regarding strategic reviews and our guidance.

These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that will occur after this call. Descriptions of some of the factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including the Risk Factors section of our Form 10-K for the year ended December 31st, 2022. In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance.

Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company’s website. I would now like to hand the conference call over to Mr. Jeff Arnold. Jeff, please go ahead.

Jeff Arnold: Good morning. Thank you for joining us today as we present Sharecare’s Q1 2023 results. As our overall strategy and focus remain consistent with our previous quarterly update, we will keep today’s remarks brief before opening the line for Q&A. We began the year on solid footing with first quarter revenue of $116.3 million and adjusted EBITDA of $2.1 million and are pleased to report robust performance across our enterprise, provider and life sciences channels. During the quarter, we demonstrated our commitment to sustainable growth and profitability while making forward progress toward achieving our year-end goals, including our core KPIs of 12.9 million eligible enterprise lives and 6.5 million records processed.

Our enterprise business experienced 17.4% year-over-year growth for the quarter, generating $70.2 million in revenue supported by the successful launch of our advocacy product Sharecare Plus, which is receiving positive customer feedback and engagement as well as our home care offering, CareLinx. This accomplishment underscores the value of our exceptional clinical and non-clinical operations as well as our comprehensive technology platform in which we continue to integrate AI to better predict customer needs and optimize service delivery. The combination of our advanced analytics, AI driven insights and proactive engagement through our advocates have significantly improved the quality of care we provide while maintaining cost efficiency. Further, our investment in sales is showing positive progress as we signed contracts totaling more than 275,000 new eligible lives in Q1, marking a significant increase from the same period last year.

As a recent example, our expanded public sector team has helped broaden our market reach, winning the RFP for a large state employees wellness program set to begin in January of 2024. In our provider channel, we processed 1.7 million medical records, delivering 17.2% year-over-year revenue growth and a 19% increase compared to Q4 2022. This growth can be attributed to new client contracts with large national payers and increased demand for record retrieval and release of information particularly for Medicare and commercial risk adjustment. Through globalization efforts and increased digital medical record delivery, we began to realize operating expense savings and are tracking towards our anticipated annualized cost savings goal of 14 million in the channel by the end of the year.

Turning to our Life Sciences channel, we experienced a modest but promising 5.6% revenue growth year-over-year in Q1. This channel continues to add significant value to our enterprise channel, bringing advanced member targeting capabilities, including a zero-party database of over 100 million individuals for precision targeting and an extensive catalogue of award winning content. Looking forward, Life Sciences pipeline for the year is showing a healthy increase, currently up 20% compared to the same period last year. We continue to thoroughly pursue our strategic review process, exploring all options to maximize shareholder value. At the same time, we remain focused on driving organic growth across our platform and executing on strategic cost saving initiatives to drive near and long-term value to shareholders.

In summary, Q1 2023 has been a solid quarter for Sharecare with consistent growth across all our key business channels. Our dedication to leveraging technology against our extensive datasets for continuous improvement and innovation gives us confidence in sustaining this momentum throughout the year and into 2024. Now, I’ll hand it over to Justin to provide more details on our financials. Justin?

Justin Ferrero: Thank you, Jeff. We had a strong start to the year with first quarter revenue of $116.3 million, representing 15.5% growth from $100.7 million a year ago and adjusted EBITDA of $2.1 million versus $0.2 million a year ago with both exceeding the high point of our guidance. Positive performance is due to growth across enterprise, provider, and life sciences channels, yielding momentum toward achieving our core KPIs as we secure more eligible enterprise lives and increase the number of medical records retrieved. Sharecare also continues to maintain a strong balance sheet, ending the quarter with 155 million in cash on hand, over 205 million in available liquidity and no debt. Looking forward to Q2, our guidance for revenue is set between $109.5 million and $110.5 million, an increase from $103.8 million in the second quarter of 2022.

Our Q2 adjusted EBITDA guidance is $2.5 million to $3.5 million, an increase of approximately 40% over Q2 fiscal ’22 using the midpoint of the range. We are hard at work to realize our 30 million annualized savings opportunity, with 22 million in savings projected to be realized this fiscal year. We expect these savings to accelerate as we move into the latter half of the year. We believe the combination of our strategic automation, re-engineering of business processes and workforce globalization will contribute to the expansion of our adjusted EBITDA margins nearly double our year-over-year adjusted EBITDA target and enable us to turn cash flow positive within 2023. Based upon our Q1 top line outperformance and current business visibility, we are raising the low end of our full year 2023 revenue guidance to $452.5 million.

We are also reaffirming the top end 2023 revenue guidance of $460 million and adjusted EBITDA range of $25 million to $30 million. We appreciate your continued support. We’re now ready to take your questions. Thank you.

Q&A Session

Operator: We’ll now begin the question-and-answer session. [Operator Instructions] And our first question will come from David Larsen of BTIG. Please go ahead.

Operator: The next question comes from Richard Close of Canaccord Genuity. Please go ahead.

Operator: The next question comes from Eric Percher of Nephron Research. Please go ahead.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Arnold for any closing remarks.

Jeff Arnold: Great. Well, thank you. In closing, I want to reiterate that we’re very pleased with our financial performance this quarter. In addition to exceeding the top end of our Q1 2023 revenue and adjusted EBITDA guidance, our Enterprise channel, as we discussed, booked 275,000 new eligible lives during the quarter, including a significant public sector win for a large state employee wellness plan. This progress demonstrates the value we already are realizing on the operational alignment and the investments in our sales force, which we are confident will continue to drive meaningful growth throughout this year and beyond. The provider channel also performed very well in Q1, achieving record breaking quarterly revenue. While our Life Science channel grew during the quarter and its current pipeline, as we discussed, is up 20% year-over-year.

As we stated, we believe that all three of our channels complement one another with a depth and breadth of capabilities that together have enabled Sharecare to create a unique platform driven ecosystem that’s built for scale. As I noted in my opening remarks, we continue to consider strategic options that could unlock additional value for shareholders. But above and beyond these considerations, we have embarked on globalization strategies and cost savings initiatives across our channels, which we believe will contribute to the expansion of our adjusted EBITDA margins and enable us to turn cash flow positive within 2023. As always, thank you for your interest. Have a great day.

Operator: The conference has now concluded. Thank you for attending today’s presentation and you may now disconnect.