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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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.
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?
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.
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.
Hi. Congratulations on the good quarter. Jeff, you mentioned that I think you added something like 275,000 lives in the first quarter. Can you talk a little bit more about that, where those from a handful of customers, were they from Carelon? When should we expect those lives to roll onto Enterprise? Can you talk and can you talk a little bit about the sort of expected cadence in enterprise revenue and lives as we progress through 2023? Thank you.
Sure. Hi, David. Thank you. Yeah, we had a really good first quarter. Our sales force is really starting to kick in. To kind of put it in perspective, last year in Q1, we signed up 14,000 new eligible lives.
This quarter it was over 275,000. The majority of those lives are in 2024. And I think I mentioned in the opening comments, we've been investing in our public sector sales force as well. So we were able to land a large state wellness account. However, that does also include lives that Carelon brought over and Q1, as well as some new customers that will roll on throughout the year.
Okay. Can you talk about your progress and the receptivity that clients have to Sharecare Plus. How many clients do you have on that platform and what is the delta in the PMPM rate? And then why are clients willing to pay more for Sharecare Plus. Does that result in higher claims and savings for them?
Maybe I'll start. Hey, David, it's Justin. I'll start with the lives. The lives is, as we've discussed, close to a million lives on the platform for Sharecare Plus. And it is at a higher PMPM. You know, we're averaged close to, you know, between $3 and $4 PMPM on our Sharecare Plus lives, which is an increase, as we've talked about historically to our purely digital lives that, you know, are roughly $2 PMPM. So it's a significant uptick.
And maybe, Jaffry, you can add on the clinical piece, but what I'll add is, you know, why it's a strong offering is having a digital first approach, I think is really compelling. So, you know, we've always been good at the front door. How do we get people to engage? How do we make a B2B experience feel? B2C, you know, how do we produce personalized award winning content?
And when we added the digital first advocacy, it, you know, it was enabled right through that same digital front door. And we have one large advocacy client in which I was looking at the data this morning. Over 50% of the interactions between the -- for advocacy is happening digitally, which is what we had hoped for. And Jeffrey, do you want to touch on the clinical?
Yeah, sure. I mean, our clinical value is driven by a very strong analytics up front where we have a systems in place to identify cost saving opportunities in terms of redirection and utilization, in terms of identifying the emerging clinical onset and the impact of the quality measures. What we have seen is that in controlling the waste through optimizing the ED visits, in patient visits, optimizing the RX cost, delivers the value to our customers. For the customers who are on Sharecare Plus, we are doing those activities that have translated into very quantifiable savings to our customers.
Okay. Jeffrey, can you please put a number on that? Like what percent savings do we see? What percent reduction in inpatient admissions do we see. Is 5% reasonable? Is 10% reasonable? I just think that's an important metric, you know, given that, you know, even though your clients might spend a little more, they're ultimately saving more money by using the Sharecare Plus platform.
Yeah. I mean, I think, as you know, David, it's very difficult to give a specific number. It varies from customer to customer. The profile of the customers. But we are going to publish a report very soon where we are showing that how much we have vended the hospital readmission for one of our customers. And it might be slightly early for me to speak on that, but it is in the range of from 20% to 30% range where we have avoided the hospital in readmission around that. And that report would be published in very leading journal.
Okay. And then can you talk about the cadence of life additions that are expected in 2023? Should we expect to see continued increases in lives being added to enterprise because of deals that were signed last year or just any color there would be very helpful.
Yes, we've talked about this, Dave, is that one, one is typically the largest growth, but we have line of sight to adding additional lives on July 1st and October 1st. So you can expect to see additional lives added through the year.
Okay. And then just one more and I'll hop back in the queue. Can you talk a little bit about CareLinx? It just seems to me like that's a very high value solution. There's a lot of growth in MA. It's basically Uber for homecare. Just how is that trending relative to expectations? And I think United is a client. Any incremental discussions you've been having with them?
Yeah, we continue to grow our membership base for CareLinx. I think we've talked in the past. It's gone from less than 300,000 to over 1.8 million last year to over 2 million this year. We brought on our first Blues plan this year for CareLinx and we have really good traction. And we've also using CareLinx not only as the tip of the spear for our MA business, but we're using it to differentiate within our advocacy solution as well. Do you want to talk to that real quick?
Yeah, sure. I mean, this also goes back to your previous question, David. I think CareLinx says, as Jeff said, tip of the sphere as it for us, which is being used to contain the cost of care. We have created many programs under our clinical leadership in CareLinx to take care of the chronic and acute illnesses and to optimize some of the cost savings which I talked about earlier.
Okay. Fantastic. I have a whole list of questions here, but I'll hop back in the queue. Thank you.
Okay.
The next question comes from Richard Close of Canaccord Genuity. Please go ahead.
Yes. Thanks for the questions. Congratulations on the results. First, on the provider segment, you mentioned. It sounds like payment integrity wins. Can you just dive into those relationships? I think you said some national payers.
Yeah, that was all medical retrieval business. So we had a record quarter in revenues and records processed. You know and what's been great in that business is we've been able to really effectively cross-pollinate what historically was a provider sale. Now half of the revenue is made up from payers.
Okay.
Yeah, it wasn't payment integrity, Richard. It was audits from our payer customers. And again just underscoring what Jeff has said that we've talked a lot about as our cross-selling capabilities. And that is, you know, close to half of that business is now from payers.
Okay, That's helpful. Thanks. Justin with respect to the 30 million cost savings opportunity. 22 million hitting here in 2023. Can you go over just like where we see that in terms of the P&L in terms of the various buckets?
Yeah. So, you know, this has been underway for over a year now and it's performing very well. We broke that 30 million into two areas. 14 million of it is on the workforce globalization around our provider division.
We are well on track and we expect to realize 10 million of that 14 million. It will be 14 million by the end of the year, 10 million this year. And that will primarily be primarily in the COGS line, some on the OpEx side.
And then we're also well underway on the 16 million and rationalization across the enterprise and corporate business. And we talked about 12 million of that 16 being realized in 2023 and that will be a mix of OpEx and CapEx. So you should see our CapEx come down throughout the year as well as efficiency on our OpEx line, which is part of, you know, which gives us confidence in nearly doubling our EBITDA target for this year.
Okay. With respect to Life Sciences encouraging the growth year-over-year and the pipeline increase, the 20% pipeline increase. Jeff, are you thinking, you know, you closed some deals that hits this year or is that more purchasing for the calendar 2024 year?
That's for this year.
Okay. All right. Thanks for the questions. I'll hop back in the queue.
Okay. Thank you.
The next question comes from Eric Percher of Nephron Research. Please go ahead.
Thank you. Maybe I'll just start where you just ended on Life-Sci. Can you give us a little bit of perspective on market spend now versus a year ago and what you're seeing in macro trend versus the micro in the 20% you called out?
Yeah. I mean our reports that we go off of is that, you know, Nielsen showed pharma digital spend was down 19% in the first quarter. And so we are, you know, enthusiastic about the performance of that channel in the first quarter, just being up, you know, a little over 5%.
So but we watch that closely. But we're seeing macro trends move against us and the digital pharma, you know, we've read other areas, maybe HCP an area might be stronger, but our specific area, which is digital pharma spend, is down year-over-year. So we're pleased to not only hold serve, but to show nice growth and expanding pipeline.
And maybe I'd add to that is, you know, we continue to see strong performance. 80% of our campaigns have been exceeding benchmarks. Just a couple other stats. Our top 20 brands grew 43% year-over-year.
Our top 20 clients grew 15% year-over-year. We had big year-over-year growth from three of our larger longest standing clients. So if you took it, you know, three big clients that we've had for the longest amount of time, they respectively grew over 100%, 350% over the year. So, you know, what we're really pleased with is we're starting to see that modest growth.
We're starting to see that pipeline. Yes, the sector is down, you know, overall, as Justin referenced, but our top brands are renewing and they're growing.
That's helpful. And then my other question was on the potential use of capital from a bail in provider and just the general M&A market. Any update you can provide us in terms of where valuations sit and whether we're seeing more transactions today as we see peace made with current valuations.
Well, what I would say to that is that, you know, we've been very active, you know, in the market trying to prove out the underlying value of our owned assets independently and collectively to the market. And, you know, like others as I think you're suggesting, we feel like we're undervalued.
Market obviously plays into this. But we see we see lots of opportunity and that's, you know, been taken into consideration as we've gone through the year within our strategic review. But yes, we see, we see the valuations are now not only affecting our public peers but also private companies.
Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Arnold for any closing remarks.
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.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.