SOC Telemed Reports Third Quarter 2021 Financial and Operating Results

RESTON, Va., Nov. 12, 2021 /PRNewswire/ -- SOC Telemed, Inc., (NASDAQ: TLMD), the largest national provider of acute care telemedicine, today announced its financial and operating results for the third quarter ending September 30, 2021.

 "We are proud of our third quarter results as the new organization came together with renewed focus resulting in the highest quarterly revenue and bookings in our company's history," said Dr. Chris Gallagher, Chief Executive Officer. "Upon joining the Company, my first task has been to launch an enterprise-wide transformation of the legacy businesses, align our business objectives, and drive greater efficiencies throughout the organization. Our recently announced restructuring helps position the Company to continue to lead the industry, effectively service our clients and grow in line with our sales momentum. The cost reductions recognized as part of the restructuring will allow us to invest in areas known to be important to our market position and growth. We are grateful for the contributions of all of our employees, including those affected by the restructuring."

Third Quarter and Recent Highlights

• SOC Telemed took steps to shore up its balance sheet, reaching an agreement with SLR Investment Corp. to allow the Company to accelerate the drawdown of an additional $12.5 million in term debt to bolster its cash position
• In October, the company completed an organizational review and announced an enterprise-wide restructuring plan, which is expected to result in $7 million to $9 million in annualized cost savings beginning in 2022. The resulting headcount reduction of roughly 12% of the Company's non-clinical staff and other actions are expected to result in up to $3 million in restructuring costs consisting of roughly $2 million in severance and termination benefits and $1 million for site closures and other exit and disposal costs
• In September, SOC Telemed and OB Hospitalist Group (OBHG) announced a collaboration combining OBHG's leading OB hospitalist programs with SOC Telemed's maternal-fetal medicine (MFM) experts. The first hospital partner, Hendrick Medical Center in Abilene, Texas, went live with the new service in August 2021. The combined hospitalist/teleMFM offering will expand to additional OBHG hospital sites nationwide
• In September, SOC Telemed announced the appointment of a new leadership team naming Dr. Chris Gallagher as CEO, David Mikula as COO, and Joe Greskoviak as Vice-Chairman. Additionally, the Company named David Fletcher as Interim CFO

Operating Metrics Summary

Operational performance metrics for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.  We present consults on a pro forma basis (i.e., giving retroactive effect to the Access Physicians acquisition to January 1, 2020) to provide investors with insight into how management views the performance of the combined business period over period.

• Total system-wide consults were 140,743 compared to 79,926, up 76% year over year, and up 32% year over year on a pro forma basis
• Stand-alone SOC core consults totaled 37,845 compared to 32,126, up 18% on a year over year basis. TelePsychiatry volumes recovered to pre-COVID levels faster than expected, and the teleNeurology service line experienced significant volume increases
• Access Physicians contributed 38,020 core consults, up 44% on a year over year basis
• System-wide revenue per core consult totaled $328 compared to $345, down 5%, primarily driven by the addition of Access Physicians, as revenue per core consult at Access Physicians is historically lower than revenue per core consult at legacy SOC. The average revenue per core consult is also impacted by duration of each consult, which varies widely between service lines
• Stand-alone SOC revenue per core consult was $428 versus $449, as the volume recovery in telePsychiatry and teleNeurology narrowed the gap associated with minimum consult thresholds in client contracts
• Access Physicians revenue per core consult was $229 versus $219, up 4% year over year, driven by service line volume mix
• Implementations totaled 66 compared to 55, with Access Physicians contributing 32 implementations
• Stand-alone SOC services per facility totaled 1.9, demonstrating the continued opportunity to expand across both service lines and sites with existing customers
• Total facilities serviced were 1,087 compared to 843 a year ago, up 29% on a year over year basis. The 1,087 facilities serviced includes 193 facilities serviced by Access Physicians

Financial Results Summary

Financial performance for the three months ended September 30, 2021, compared to the three months ended September 30, 2020.

• Revenue totaled $26.7 million compared to $15.1 million, up 76%
• Bookings totaled $9.0 million, up 247%
• Access Physicians contributed $9.7 million of revenue
• GAAP gross profit totaled $8.1 million compared to $5.6 million
• Adjusted gross profit (non-GAAP) totaled $9.5 million compared to $6.6 million
• GAAP gross margin was 30% compared to 37%
• Adjusted gross margin (non-GAAP) was 36% compared to 44%. Results were negatively impacted primarily by an increase in physician incentive payments related to the rapid increase and volatility of consult demand and the lack of availability of fully licensed and privileged physicians needed to conduct consults
• Net loss totaled $(10.6) million compared to a net loss of $(9.7) million
• Adjusted EBITDA loss (non-GAAP) totaled $(5.6) million compared to $(2.9) million

Balance Sheet

As of September 30, 2021, the Company had cash and cash equivalents of $37.7 million.

Subsequent to quarter end, the Company drew down an additional $12.5 million from its existing SLR term loan facility to further improve balance sheet liquidity.

Updated 2021 Financial Outlook

For the full year 2021, SOC Telemed is providing the following revised financial guidance:

• GAAP Revenue is expected to be in the range of $91.5 million to $93.5 million, with approximately 30% expected to be attributed to Access Physicians, an increase from the prior guidance range of $90 million to $92 million
• The upward guidance revision is the result of improved consultation volume and new implementations
• Adjusted EBITDA is expected to be in the range of $(21.5) million to $(22.5) million, and improvement from the prior guidance range of $(22.0) million to $(25.0) million

These statements are forward-looking and actual results may differ materially. Please refer to the Forward-Looking Statements safe harbor below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

SOC Telemed has not reconciled its expectations as to Adjusted EBITDA to the most comparable GAAP measure because certain items are out of its control or cannot be reasonably calculated or predicted at this time without unreasonable efforts. Accordingly, a reconciliation for forward-looking Adjusted EBITDA is not available without unreasonable effort.

Conference Call Details

The third quarter 2021 earnings conference call and webcast will be held on November 12, 2021, at 8:00 a.m. ET. The conference call can be accessed by dialing, either:

Domestic: (877) 292-0959

International: (412) 542-4143

Passcode: reference "SOC Telemed call"

A live audio webcast will be available on the Investor Relations section of the Company website at investors.soctelemed.com. A webcast replay will be available for on-demand listening shortly after the completion of the call at the same web link.

About SOC Telemed

SOC Telemed (NASDAQ: TLMD, "SOC") is the leading national provider of acute telemedicine technology and solutions to hospitals, health systems, post-acute providers, physician networks, and value-based care organizations since 2004. Built on proven and scalable infrastructure as an enterprise-wide solution, SOC's technology platform, Telemed IQ, rapidly deploys and seamlessly optimizes telemedicine programs across the continuum of care. SOC provides a supportive and dedicated partner presence, virtually delivering patient care through teleNeurology, telePsychiatry, teleCritical Care, telePulmonology, teleCardiology, teleInfectious Disease, teleNephrology, teleMaternal-Fetal Medicine and other service lines, enabling healthcare organizations to build sustainable telemedicine programs across clinical specialties. SOC enables organizations to enrich their care models and touch more lives by supplying healthcare teams with industry-leading solutions that drive improved clinical care, patient outcomes, and organizational health. The company was the first provider of acute clinical telemedicine services to earn The Joint Commission's Gold Seal of Approval and has maintained that accreditation every year since inception. For more information, visit www.soctelemed.com.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify these forward-looking statements by the use of terms such as "expect," "will," "continue," or similar expressions, and variations or negatives of these words, but the absence of these words does not mean that a statement is not forward-looking. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to: the statements under "Updated 2021 Financial Outlook," including expectations relating to bookings and revenue; statements regarding the costs and anticipated benefits of the restructuring plan; statements regarding the statements regarding borrowings under the SLR term loan facility; statements regarding relationships with customers and business momentum; statements regarding the expected benefits of the acquisition of Access Physicians (including anticipated synergies, projected financial information and future opportunities); and any other statements of expectation or belief. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from results expressed or implied in this press release.  Such risk factors include, but are not limited to, those related to: the current and future impact of the COVID-19 pandemic on SOC Telemed's business and industry; continued difficulties in the integration of Access Physicians; the effects of competition on the future business of SOC Telemed; uncertainty regarding the demand for and market utilization of its solution; returns on investments in its business; the ability to maintain customer relationships; difficulties maintaining and expanding its network of qualified physicians and other provider specialists; disruptions in SOC Telemed's relationships with affiliated professional entities or third party suppliers or service providers; general business and economic conditions; the ability of SOC Telemed to successfully execute strategic plans; the timing and market acceptance of new solutions or success of new enhancements, features modifications to existing solutions and the degree to which they gain acceptance. Additional information concerning these and other risk factors is contained in the Risk Factors section of SOC Telemed's most recent annual report on Form 10-K. Additional information will be made available in SOC Telemed's quarterly report on Form 10-Q for the three months ended September 30, 2021, and other filings and reports that SOC Telemed may file from time to time with the SEC. SOC Telemed assumes no obligation, and does not intend, to update these forward-looking statements as a result of future events or developments.

Use of Non-GAAP Financial Information

We believe that, in addition to our financial results determined in accordance with GAAP, adjusted gross profit (non-GAAP), adjusted gross margin (non-GAAP), and adjusted EBITDA, all of which are non-GAAP financial measures, are useful in evaluating our business, results of operations, and financial condition.  However, our use of the terms adjusted gross profit, adjusted gross margin and adjusted EBITDA may vary from that of others in our industry. Adjusted gross profit, adjusted gross margin and adjusted EBITDA should not be considered as an alternative to gross profit, net loss, net loss per share or any other performance measures derived in accordance with GAAP as measures of performance. Adjusted gross profit, adjusted gross margin and adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• adjusted EBITDA does not reflect the significant interest expense on our debt;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted gross profit, adjusted gross margin and adjusted EBITDA do not reflect any expenditures for such replacements; and
• other companies in our industry may calculate these financial measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by using these non-GAAP financial measures along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include gross profit, net loss, net loss per share and other performance measures. In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. When evaluating our performance, you should consider these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable GAAP measures set forth in the reconciliation tables below and our other GAAP results.

Our non-GAAP financial measures are described as follows:

Adjusted gross profit and adjusted gross margin. Adjusted gross profit is defined as revenues less cost of revenues plus depreciation and amortization plus equipment leasing costs plus stock-based compensation. Adjusted gross margin is adjusted gross profit divided by revenues.

Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) before interest, taxes, depreciation and amortization, stock-based compensation, gain on contingent shares issuance liabilities, loss on puttable option liabilities, gain on change in fair value of contingent consideration, and integration, acquisition, transaction and executive severance costs.

Readers are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results, which is attached to this earnings release and which can be found on SOC Telemed's investor relations page of its website at: investors.soctelemed.com.  

Operating Metrics

Because our consultation fee revenue generally increases as the number of visits increase, we believe the number of consultations provides investors with useful information on period-to-period performance as evaluated by management and as a comparison to our past financial performance. We define core consultations as consultations utilizing our 11 core services. Telemed IQ / other consultations are defined as consultations performed by other physician networks utilizing our technology platform, Telemed IQ. Pro forma consultations represent the number of total consultations as if Access Physicians had been acquired as of January 1, 2020.