Good morning. Thank you for joining us today to discuss the results for LifeMD's first quarter ended March 31, 2022. Joining the call today are Justin Schreiber, Chairman and Chief Executive Officer, and Marc Benathen, Chief Financial Officer of LifeMD. Following management prepared remarks, we will open the call for questions and answer session. I would like to remind everyone that today's call is being hosted via webcast, and the recording will be available via the link in today's press release, which is available in the investor relations section of the company's website. Before we begin, I'd like to remind everyone that during this call, the company will make a number of forward-looking statements, which are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from those projected.
These risks and uncertainties are described in the company's 10-K and 10-Q filings and other filings that LifeMD may make with the SEC from time to time. Forward-looking statements made during this call are based on current information available to the company as of today, May 13, 2022. The company assumes no obligation to update or revise any forward-looking statements after today's call, except as required by law. Also, please note that management will be discussing certain non-GAAP financial measures that the company believes are important in evaluating LifeMD's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release issued earlier today.
Finally, I would like to remind everyone that today's call is being recorded and will be available for replay in the investor relations section of the company's website. Now, I'd like to turn the call over to LifeMD's CEO, Justin Schreiber. Sir, please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining us today to discuss our first quarter 2022 results. In the first quarter of 2022, LifeMD posted its 13th consecutive quarter of sequential revenue growth and a 14% sequential improvement in bottom line profitability. The first quarter was impacted due to a one-time deferral of approximately $1 million in rebilling revenue to the second quarter following a pharmacy-related technology upgrade and short-term headwinds in the advertising market we've since adapted to. That being said, we still remain on track to deliver on our full-year adjusted EBITDA guidance and our previously guided adjusted EBITDA profitability by the fourth quarter. In the first quarter, we successfully closed two acquisitions, executed the launch of our virtual primary care platform, and continued to improve our telehealth marketing and technology infrastructure.
Our improvement is reflected in the 13% sequential improvement in average order value versus the fourth quarter of 2021. LifeMD announced our first ever acquisition, Cleared Technologies, in January of this year. Cleared is a nationwide allergy, asthma, and immunology telehealth platform with both direct-to-consumer and business-to-business capabilities. We're now in the process of integrating Cleared into LifeMD's telehealth platform, which we expect to complete by Q3 of this year. We're extremely excited about this acquisition for two reasons. One, the tremendous white space opportunity we see in the allergy and asthma telehealth market. Two, we see Cleared as a vehicle for pharma and other healthcare product company partnerships that leverage LifeMD's present and growing telehealth marketing and patient adherence capabilities.
In a short period of time since closing the acquisition, we have amassed two B2B partnerships and developed a sizable pipeline of additional companies that we believe we will contract with in the coming quarters. We followed up the Cleared deal with the acquisition of ResumeBuild by our subsidiary WorkSimpli in February 2022. ResumeBuild is a worldwide leader in the digital resume space and like WorkSimpli, the unit economics of the business are very strong. The WorkSimpli team is already off to a great start with this new platform and expects to amass over 10,000 subscribers in this segment alone before the end of the second quarter. This acquisition further empowers WorkSimpli's transformation into a multi-faceted work and document services platform for consumers and small businesses.
As stated before, LifeMD is in the early stages of seeking to divest WorkSimpli, and we believe that WorkSimpli's acquisition of ResumeBuild will be highly accretive to its valuation. Having launched our virtual primary care platform this quarter, moving forward, we believe that it will be an important cross-sell to our growing patient population and a big driver of overall lifetime value. Due to some technology-related delays, our cross-sell capability went live this month, so it's still a bit too early to share patient count data. However, we are very excited to have just launched this critical capability. Also in the first quarter, LifeMD successfully drove improvements in our customer AOV and LTV. Among our many initiatives, we introduced new subscription and cross-sell opportunities across our brands, contributing to LifeMD's 13% sequential increase versus the prior quarter in AOV for prescription products.
I believe that the combination of growing strength in our core business, coupled with strategic enhancements and new lines of business this quarter, positions LifeMD to achieve record results this year, including adjusted EBITDA profitability by year-end. With that, I will now turn the call over to our CFO, Marc Benathen, who will provide a summary of our financial results. Marc Benathen?
Thank you, Justin, and good morning, everyone. As Justin mentioned, the first quarter of 2022 was another record revenue quarter, marking our 13th consecutive quarter of revenue growth. In addition to this growth, we remain on track to achieve our previously provided full-year 2022 adjusted EBITDA guidance, including attaining adjusted EBITDA profitability by the fourth quarter 2022. In conjunction with this, we are revising our full-year revenue guidance to be between $132 million and $138 million, but without any impact to our bottom-line guidance in order to reflect short-term revenue impacts from the first quarter while we remained laser focused on margin expansion, unit economics, and growing profitability. We have begun the process to divest WorkSimpli, including hiring an M&A advisor and remain very optimistic about this process.
Furthermore, WorkSimpli remains a profitable, self-funded business which recently returned back to growth and is accretive to our company. This is particularly important as it will enable LifeMD to ensure we are only doing the transaction that is in the best interest of our shareholders. Now turning to the results for the first quarter of 2022. Revenue in the first quarter totaled a record $29 million, up 60% as compared to the same quarter a year ago. 91% of the total revenues in the first quarter were generated by recurring subscriptions, compared to 88% in the same year ago period. Telehealth net revenues grew by 70% to $22.6 million, while WorkSimpli net revenues grew by 31% to $6.4 million.
WorkSimpli revenues did experience a one-time decline in sequential revenues following some initial challenges related to the integration of their ResumeBuild acquisition and some new product enhancements, but rebounded strongly in March 2022, with WorkSimpli adding a monthly record 13,000+ net new subscribers in the month alone. WorkSimpli is expected to return back to sequential growth in the second quarter and on a go-forward basis. Gross profit totaled $23.8 million, an increase of 59% from the same year ago period. Gross profit as a percentage of revenue was 82% for both the quarter ended March 31, 2022 and 2021. Operating expenses for the first quarter totaled $36.9 million, an increase of $10 million versus the year ago period.
This increase was predominantly driven by a $5.3 million increase in general and administrative expenses, a $3.3 million increase in selling and marketing expenses versus the year ago period. Operating expenses as a percentage of revenue improved by 2,400 basis points, driven by a 2,700 basis point improvement in selling and marketing expenses as a percentage of revenue versus the year ago period. Our GAAP net loss attributable to common stockholders for the first quarter totaled $14.1 million or $0.46 per share. This compares to a net loss attributable to common stockholders of $11.6 million or $0.47 per share in the first quarter of 2021.
Adjusted EPS is a non-GAAP measure that excludes $4.5 million in non-cash stock-based compensation expense, $52,000 in financing transactions expense, $531,000 in depreciation and amortization expense, $168,000 in interest expense, $393,000 in non-recurring charges, and $776,000 in preferred stock dividends. This figure totaled a loss of $0.25 per share for the first quarter as compared to a loss of $0.37 per share in the same year ago period. Adjusted EPS also improved 14% sequentially versus the prior quarter. Adjusted EBITDA non-GAAP measure, which excludes non-cash stock-based compensation, depreciation and amortization expenses, financing transaction expenses, inventory adjustments, preferred stock dividends, non-recurring charges, and interest expenses totaled a loss of $7.6 million in the first quarter of 2022.
This compares to an adjusted EBITDA loss of $9 million in the same year-ago quarter. Now turning to the balance sheet. Cash total of $25.1 million as of March 31, 2022, and included the impact of $7 million of one-time cash outflows related to the two acquisitions we completed in the first quarter, plus related working capital. We continue to believe our balance sheet is sufficient to support LifeMD, Inc., as we scale without the need for additional capital. This wraps up our financial results. I'd now like to turn the call back over to Justin.
Thanks, Marc. In summary, while we faced a challenging macro environment that weighed somewhat on our top-line results, we were able to produce our thirteenth consecutive quarter of sequential growth and a 14% sequential improvement in adjusted EPS. We continue to remain on track to meet or exceed our profitability goals this year, leveraging our consistent growth, industry-leading gross margins, and optimizing our operating expenses. We believe that this formula will drive sustained and growing cash flow profitability in the coming quarters. We remain excited for the year ahead, including our relentless pursuit of our mission to revolutionize the U.S. healthcare system with digital healthcare. In closing, I would like to thank our entire team for delivering record performance at LifeMD, our affiliated medical providers for the excellent care provided to their patients, and our shareholders for their continued support as LifeMD changes the face of healthcare.
With that, I would like to open the call for Q&A.
Thank you very much. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. We have a first question from the line of David Larsen with BTIG. Please go ahead.
Hi. Can you please talk a little bit about the $1 million I think that you said pushed from 1Q to 2Q? What exactly was that? With the reduced revenue guide for the year, can you give a little more color around that? What is driving it? Is that intentional or not because you're trying to get more profitable revenue in the door? How is Nava and also the virtual primary care business ramping relative to expectations? Thanks.
Hey, David. This is Marc . First to address the $1 million. During the quarter, we actually did a pretty significant upgrade to the company's pharmacy infrastructure and related technology to handle sort of the next leg of growth over the next several years for the company. In doing so, towards the end of the quarter, it pushed out approximately $1 million of rebill shipments from the first quarter to the second quarter. We only recognize revenue once the product is shipped. That revenue is not lost, it was just moving into the second quarter from the first quarter. That's what that related to. Regarding the revenue guidance, the revenue guidance takedown was intentional for a couple reasons.
One, we are very focused on maximizing LTV of our patients and bringing in the most profitable revenue with a high return on ad spend and a high return on that investment. We continue to get smarter and smarter by the day as we go through that. This, you know, takedown largely reflected that. We also continue to believe that there could be, you know, some bumpiness in the advertising market that we've been very adept at navigating, but we're not gonna go after just chasing, you know, bad revenue in some cases when we can go refine the revenue guidance a bit, but maintain our profitability and possibly even surprise to the upside on the bottom line. On Nava is actually continuing to scale very well.
We've actually seen since the fourth quarter of last year that business has really continued to pick up. I mean, heading into the fourth quarter of last year, they were onboarding approximately, you know, 20, 30 new patients a day. Today, that number is in excess of 100, and we'll probably get to 150 plus new patients a day pretty soon. We're excited about where that business is going and where it should be in another 12 months.
Okay. With Nava, how much revenue do you expect that to add in 2022? What could that grow to in 2023? Any thoughts on Cleared? Has any revenue been generated there yet or not? It was sort of my understanding that if you were gonna have a positive revenue surprise for the year, it would come from these new product launches.
This is Marc. On the Nava MD question, for this year, Nava is gonna probably generate a little bit south of $5 million for the year in revenue. A lot of that is because it's a business where there's an initial purchase and then the rebillings take place over a 60-day period. People are typically on a 2-month subscription length. It takes a little bit of time for that to build up. Next year, I would envision that that business is definitely going to be north of $10 million in annual revenue. Exactly what it is, we haven't set next year's plan, but it will be north of $10 million.
On the Cleared piece, yes, we did generate a couple hundred thousand of initial revenue in the first quarter. We're still going through the direct-to-consumer integration with their technology, but began to generate initial B2B revenue through a couple of agreements that we have in place with pharma partners and expect that revenue to continue to grow nicely throughout the year. As we've stated early on when we did the acquisition, for the year, we expect Cleared to be in the range of about $3 million-$4 million of revenue for the year, EBITDA neutral to slightly accretive, and then begin to see that jump up pretty significantly next year with the business getting to $10 million+.
Okay.
David, this is Justin.
Yep.
I'll just add on the Cleared side that you know the B2B pipeline continues to grow both you know direct partnerships with healthcare product and pharmaceutical companies. You know also we have some other really promising partnerships in the works with you know larger healthcare service companies that really could you know enable us to go to a lot of you know their entire portfolio of customers at once. You know I think it's important like we're very optimistic on everything Alex is doing. You know we still kinda maintain our forecast that you know we're gonna build and really start to show a lot of traction this year on the B2B side of things. Hopefully, we'll have a lot more to talk about on that, on our next earnings call.
When you talk about partnerships with large healthcare service organizations, have those discussions already occurred? When you say a large organization, I'm thinking like a national health plan with well over 10 million lives as membership in the U.S. or large hospital systems in certain cities. Are those the kinds of partnerships you're talking about?
Neither. I would say they're companies that, you know, have service offerings. I don't wanna be super specific, but they're just companies that have, you know, very respected companies in the healthcare world that have a large client base, you know, that could benefit from, you know, LifeMD's D2C telehealth platform. You know, with two of these groups in particular, you know, there's mutual interest in moving forward and kind of, you know, co-marketing our services to their client base. We're very excited about it in addition to the large pipeline that Alex and the team have built, you know, themselves.
Okay, that's helpful. Thank you very much. With regards to your customer acquisition costs and you know, costs of you know, online advertising and your G&A costs, I mean, how is CAC trending in the quarter relative to 4Q and your expectations? How is it trending in April and May for 2Q and 3Q? Just any color there would be helpful.
Yeah. In the first quarter, CACs were pretty much flat with the prior period, both sequentially as well as year-over-year. The main delta, obviously, as we've probably all heard across, you know, the market, obviously there was some tightness in the media market, particularly in the beginning of the quarter and at the end of the quarter. The main delta being that on some of those periods, we made the conscious decision to acquire patients, new patients that is, at a slightly lower daily rate than you know, we would have during some other periods where the market was a little bit less tight. The CAC itself was very much consistent with what it's been before and is also very much controllable by us.
As far as Q2, we are seeing some slight, and by slight I mean, you know, low to mid single-digit percentage improvement in CACs in the second quarter versus the first quarter. The market hasn't changed that much, but we had some learnings in the first quarter with some new test strategies that we undertook that actually have proven to be really successful. I don't wanna get into the specifics of those for competitive reasons, but they've proven to be very successful. Third quarter, I mean, it's a little bit hard to obviously predict that far out, but we're confident we're gonna continue to be able to, you know, navigate the environment as we've done in the past.
Okay, I think what I heard was advertising costs were actually up in the quarter, but you were able to keep your CAC relatively flat. Is that right?
It's not that the ad costs were up. The ad costs were pretty much flat. It was the number of new patients that we brought on was slightly down versus the prior quarter. We were able to do that with about a flat amount of spend, so slightly less efficient.
Okay. Just the last one for me, the G&A costs looked a little bit high relative to our model. Any thoughts there? It might be stock comp. Stock comp came in-
Yeah. It was stock comp. Stock comp came in for the quarter at about $4 .5 million, a little bit under that, which was higher than the models that we had. The reason for that was we actually elected to proactively begin to recognize portions of stock-based compensation associated with certain performance awards that were granted in the past that were geared towards the company obtaining $100 million of telehealth revenue this year, as well as obtaining adjusted EBITDA profitability this year.
Because there is some probability, and we think a very high probability of, those awards, being achieved this year, rather than take a lump sum hit in one quarter, we pulled forward and amortized, that expense over the expected, period between now and when they will be earned. That was the main delta. Otherwise, you know, our core cash G&A expenses were in line, but slightly better than, you know, what was expected.
Okay. I'll hop back in the queue. Thank you.
Thank you. We have next question from the line of Marc Wiesenberger with B. Riley Securities. Please go ahead.
Yep. Thanks. Good morning. Appreciate taking the questions. Wondering if you could talk about any changes in the patient cohort behavior, maybe shifting subscription plans or any kinda levers that are being pulled within different cohorts across the brands.
Yeah, this is Marc Benathen. You know, as we reported, we actually saw a 13% sequential increase in AOV in this quarter versus the prior quarter. Some of that was due to some additional cross-sells that we introduced, particularly within the Rex brand. Some of it was due to we've seen success introducing some longer subscription periods, so we introduced a six-month sub, and then very recently, 12-month subscription. We actually saw from 3-6 months, approximately an 18% take rate in those people that were offered the opportunity to upgrade and trade up, which we were very pleased with the economics on the six month versus three months or you know a pretty decent amount better. Obviously the payback is pretty much instantaneous on those types of subscriptions.
Same thing with the 12-month payback will be, you know, even greater. We don't expect the majority of our subscribers to do that, but we are beginning to see traction with some of those longer subscriptions, which gives us a little more flexibility on the advertising side, but also means we can recruit that investment that much quicker.
Yeah. Marc, this is Justin [crosstalk]
I'll just add in one other thing. We've implemented a lot of new technology over the last couple months as well, which has been just totally transformational, like, for the cross-sell rate, for offering people, you know, other treatment options, both, you know, RX and OTC. Something, it's a very high point right now in the business and something that we think is gonna continue to drive the unit economics throughout this year and beyond.
Got it. Could you talk about the level of promotional activity in the quarter, and maybe your thoughts on that as you into the second and third quarter?
There was no promotional activity outside of the norm. As a matter of fact, some of the very low price promotions that we tested last year, we've actually discontinued because we didn't feel that the retention and long-term value of those patients was high enough for our standards and what we wanted. You know, no real additional promotional activity. In fact, you know, we're actually going the other direction. You know, we're not raising our prices. Our prices have been consistent with where they have been in the past, but we've been able to find ways to get people to either buy more trade-off from the subscription standpoint.
Got it. Kinda logically moving from there, wondering if you could talk about the dynamics around input costs in the quarter, maybe what trends you're seeing, kinda into the second quarter, and then kinda how can you mitigate that and maybe pass some of that on to the patients, if at all.
Yeah. We haven't seen any impacts. You know, the biggest impacts are that we're having, particularly on the over-the-counter stuff where we do take in that inventory, we're having to place purchase orders well in advance of when we normally would and then procure. We're taking the approach of procuring a one-year supply, locking in low rates. It's a little bit more of a cash outflow initially, but it's not a material change. On the prescription side, there's been no impact whatsoever. We think that's evidenced in the fact that when we show, you know, record level gross margins this quarter, we're not seeing any, you know, impacts related to our COGS though at the current moment. It's more around just planning our supply chain more carefully than we have in the past.
Understood. Then just two more for me. The first one, you did talk about some marketing and advertising headwinds. Could you talk about those kinda across the respective channels? Yeah, I'll have one more after that.
Yeah. It was a bigger impact in digital than offline. You know, we use a pretty good mix of different strategies. We actually discovered some new strategies here that, you know, had CPAs that were some of the lowest that we've seen in our entire business, and we're gonna continue to be parlaying that forward. Quite frankly, had it not been for some of the challenges in the market, we might not have as aggressively tested some of those with the successful results that we had. You know, it's really been just some rate increases in certain areas. Obviously, you know, ever since the country has reopened more, obviously the market's been a little bit challenging, but it's nothing that we haven't been able to navigate.
We as a company have a philosophy that we want to achieve the 1.6-2x return on that ad spend when backing out the COGS in the first year. We're not gonna go out and do some marketing investment just for the sake of saying we have the highest revenue growth rate. That's just not our philosophy.
Understood. Appreciate that. Then just the last one. Wondering if you could talk about the level of profitability at WorkSimpli in the quarter, how that's trended over the last couple quarters, and then expectations moving forward. Thank you.
Yeah. I wanna be careful on that because we're in the middle of a process where we're gonna be going to market very shortly. We have an advisor. We're in a prep period. What I'll say is that the level of profitability has been trending up and you know we think by the end of the year you know the business could have you know double-digit EBITDA margins by the fourth quarter of this year. Giving out actual figures I wanna be careful about 'cause we are in the middle of a private process.
Understood. Appreciate it. Thank you.
Thank you. We have next question from the line of David Larsen with BTIG. Please go ahead.
Hey, just one more quick follow-up. With the LegalSimpli Software business, it looks like the revenue has been pretty flat for the past four quarters. Maybe what's going on there? I mean, it had been growing, you know, in 1Q of 2021, I think it was up over 260% year-over-year. Just any color there would be helpful. Thank you.
There's a couple of things went on. Initially, the first quarter. It started in the third quarter of last year where the flatness started. We initially tested some trial offers there that went back to the original mechanism. Then, you know, in the last couple of quarters, we've been making some enhancements, some refinements in the marketing strategy, as well as we integrated an acquisition this quarter. You know, what's happened with that is when the companies really realized that its roots and how they've always approached marketing is the right way to go, and they've continued to, you know, refine that a little bit. What I will say is it's returning to growth this quarter, hands down. April was a phenomenal month for it.
You know, they actually achieved record revenue in the month of April. You know, as we mentioned, most of that revenue in March is deferred to the following quarter because we do it down to the day on these subscriptions. They signed up over 13,000 net new subscribers, which is new signups less attrition, which was a record month for them. A lot of it was just dialing back into what's made the business really successful so far and getting away from deviating from that.
Now they're in a position where they have the beginnings of a platform offering, which with an offering in the digital HR resume space, the signature space, the PDF space, and there's gonna be additional offerings which they'll be adding in the future, which should drive that business, you know, even more, whether we own it or somebody else owns it in the future. But the growth stuff we're very cognizant of, and that's behind us. They're returning back to growth, and profitability is gonna be growing each quarter also there.
Okay. Thanks very much. Just lastly, any sense for how much revenue the software business generated in April or what your revenue expectations are for the software business for 2Q?
Yeah. For the second quarter, you know, I would expect to see revenue in the range of about $7.5 million-$8 million is probably a reasonable range to expect for it in the second quarter.
That's helpful. That would be up around 20% year-over-year in 2Q?
Yeah, but, you know, at this point because there was a little bit of flatness, we're looking at it more sequentially. Yeah, it would be up about 25% sequentially.
Okay. Thanks very much.
Thank you. There are no other questions, and I would like to turn the call back to Justin Schreiber, CEO, for closing remarks. Over to you, sir.
Thanks to everybody for participating in our earnings call today. Have a great weekend. Look forward to updating everybody on more positive progress on our call next quarter. Thanks.
Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.