Marpai, Inc. (Ticker: MRAI), a third-party administrator (TPA) for self-funded health plans, has announced its first quarter 2024 financial results, emphasizing strategic growth within the booming TPA market. The company detailed its operational adjustments and financial performance, which are steering it towards profitability despite a year-over-year decline in net revenues and gross profit. Key actions included shedding low-margin clients, enhancing service metrics, and securing a substantial new client. Marpai also highlighted its differentiated position in the market, offering access to two leading national provider networks and value-added services such as wellness programs.
Key Takeaways
- Marpai's strategic focus on the TPA market is driven by rising healthcare premiums and employer shifts to self-funded claims.
- The company offers access to Aetna and Cigna (NYSE:CI) networks, providing members with exceptional care choices.
- Strategic elimination of low-margin clients has led to a revenue and gross profit increase per employee per month.
- Net revenues for Q1 2024 were $7.4 million, down 24% year-over-year, while gross profit was $2.5 million, down 23% year-over-year.
- Operating expenses saw a significant reduction, contributing to an improved operating loss and net loss.
- Marpai's balance sheet has been stabilized with an ending cash balance of $0.9 million and a restricted cash balance of $12.8 million.
- The company completed capital-raising activities ensuring operational funding for the next 12 months.
Company Outlook
- Marpai aims to maintain operational excellence and deliver exceptional customer experiences.
- The company is positioned for success with a strategic focus on the TPA market and value-added services.
- Financial accomplishments in Q1 support Marpai's operational funding for the next 12 months.
Bearish Highlights
- Net revenues and gross profit have decreased compared to the first quarter of 2023.
- The company reported a net loss of $4.3 million, although this is an improvement from the previous year.
Bullish Highlights
- Operating loss improved by 52%, and net loss by 51% year-over-year.
- The strategic shift away from low-margin clients has led to increased average revenue and gross profit per employee per month.
- Marpai has secured a new off-cycle client and improved service metrics for members.
Misses
- Despite strategic shifts, Marpai experienced a decline in net revenues and gross profit for Q1 2024 compared to the same period in the previous year.
Q&A Highlights
- The earnings call concluded without a Q&A session, but contact information was provided for further inquiries.
Marpai's first quarter earnings call outlined a strategic shift focusing on profitability and efficiency, despite facing declines in net revenues and gross profit. The company's commitment to operational excellence and customer satisfaction, along with its unique market position and recent capital-raising successes, suggest a positive trajectory for the future.
InvestingPro Insights
Marpai, Inc. (Ticker: MRAI) continues to navigate the complex TPA market with strategic initiatives aimed at long-term profitability. The latest financial data from InvestingPro provides a clearer picture of the company's current position and challenges.
InvestingPro Data metrics reveal that Marpai's market cap stands at a modest $24.52 million, reflecting the size and scale of the company within the industry. Despite a notable revenue growth of 52.64% over the last twelve months as of Q4 2023, the company is grappling with a negative P/E ratio of -0.84, indicating that investors are concerned about future earnings potential. Additionally, the gross profit margin of 34.76% suggests that while Marpai is generating a reasonable amount of profit from its revenues, there are still efficiency gains to be made.
An InvestingPro Tip points out that Marpai may have trouble making interest payments on its debt, which is a critical consideration for investors given the company's financial restructuring efforts. Moreover, the company is quickly burning through cash, a situation that could impact its ability to sustain operations without additional capital infusions.
For readers looking to delve deeper into Marpai's financial health and stock performance, InvestingPro offers additional tips on its platform. For instance, Marpai's stock price has seen a strong return over the last three months, with an 85.94% price total return, and a significant uptick over the last six months at 247.7%. However, it's worth noting that analysts do not anticipate the company will be profitable this year, and the stock has not been profitable over the last twelve months.
Investors interested in gaining further insights into Marpai's financial outlook can explore more InvestingPro Tips. Currently, there are additional tips available on the InvestingPro platform, which can be accessed at https://www.investing.com/pro/MRAI. To enhance your investing strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Marpai (MRAI) Q1 2024:
Operator: Good morning, and welcome to the Marpai first quarter 2024 earnings conference call. [Operator instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Steve Johnson, Chief Financial Officer. Please go ahead.
Steve Johnson: Thank you, and good morning, and welcome to the Marpai first quarter 2024 earnings release webcast. With me this morning is Damien Lamendola, CEO and Director of Marpai, and John Powers, President of Marpai. Today, we'll dive into the booming TPA market, our strategic moves, and the financial results that are propelling Marpai forward. Please see the required safe harbor and forward-looking statement disclosure on your screen. Next, I'll turn it over to Damien to talk through our agenda for today.
Damien Lamendola: Let's jump right in. First, I'll break down the TPA market trends fueling our future growth. John will then detail our recent game-changing actions. Steve will walk us through our financial performance, and I'll wrap up, outlining our unwavering strategic focus. Healthcare premiums are skyrocketing, driving employers to cost-saving self-funded claims, which third-party administrators like Marpai, manage. That's a win-win for businesses and us. But unlike most third-party administrators, we offer access to two leading national provider networks given our members exceptional choice and better care. As seen in the bottom chart, these increases are driving more and more employers to self-funded health benefit plans. While estimates vary, typically an employer can save 10% by just switching to a self-funded benefit plan. And while maybe third-party administrators struggle with network coverage, Marpai is one of the few independent third-party administrators that has access to two leading national provider networks with Aetna and Cigna. So, our members have a terrific choice of in-network care.
Steve Johnson: Thanks, Damien. Also, the TPA market is a very attractive space for both financial and strategic buyers, with the growing importance of TPAs as the conduit for significant cost savings and recurring cashflows. There has been strong activity in the M&A market and valuations continue to rise. One key differentiator of Marpai is the sheer number of choices that a potential client can choose for their benefit plan and dial up the savings with additional value-added services such as wellness programs and cost containment services. We're not just claim processors. We’re strategic partners offering value-added services like wellness programs that deliver real savings for clients. This translates to a win-win for everyone and an exceptional return on investment for Marpai. We believe that the company is positioned for success. Now, I'll turn it over to John Powers, President of Marpai, to highlight the company's completed actions.
John Powers: Thanks, Steve. Since joining in January, we've hit the ground running. We've conducted a strategic review, eliminating low-margin and high-touch clients. This boosted our average per employee per month revenue by 21.5%, and the gross profit by 22.6% compared to Q1 of 2023. We've also secured a great new off-cycle client, hired top tier sales talent to help accelerate growth, and delivered a highly successful open enrollment season. But that's not all. We've laser-focused on the member experience, improving service metrics like faster response times and smarter cost containment reviews. Finally, we've completed the first phase of our upgraded client and broker reporting packages. I'll turn it back over to Steve to discuss the financial results.
Steve Johnson: Thanks, John. Execution and profitable revenue growth are our top priorities. In the first quarter of 2024, net revenues were approximately $7.4 million for the three months ended, down $2.4 million, or 24% lower year-over-year, compared to the three months ended in March of 2023. As John alluded to, this is primarily due to our strategic shift away from low-margin clients. Gross profit was $2.5 million for the three months ended in March 2024, down $0.7 million or 23% lower year-over-year. Operating expenses were $6.6 million for the three months ended in March of 2024, an improvement of $5.2 million or 44% lower year-over-year compared to last year. This demonstrates our commitment to efficiency. Operating loss was $4.1 million for the three months ended in March of 2024, an improvement of $4.5 million, or 52% lower compared with the three months ended in March 2023. Net loss was $4.3 million, an improvement of $4.5 million, or 51% lower year-over-year compared to March of 2023. Basic and diluted earnings per share were a negative $0.46 in the first quarter, an improvement of $1.22 per share compared to the three months ended in March of 2023. The takeaway, we're making significant strides towards profitability. Moving on to our balance sheet highlights. Ending cash balance at the end of the quarter was $0.9 million. Restricted cash was $12.8 million. And then I always like to remind folks that our restricted cash primarily represents the funds on hand to pay for member claims. And if you look down further on the balance sheet, you will see an offset of - under current liabilities called accrued fiduciary obligations, which were $9.5 million. Marpai collects the funds prior to payment of the members’ benefit claims. Total assets were $0.1 million, down $1.6 million from year-end. Current liabilities, the accounts payable was $3.8 million, down $0.8 million from year-end 2023. So, we started paying down our aged payables. Total liabilities were $44.6 million, down $0.5 million from the year-end in 2023. And stockholders’ equity was a negative $14.5 million, representing an increased deficit of $1.1 million from the year-end in 2023. So, again, all moving and pointing in the right direction. In Q1, our focus was stabilizing the balance sheet, and we've achieved that. Now, moving on to the cashflow. A few key numbers off our cashflow statement. Net cash used in operations was only $3.6 million, an improvement of $2.9 million from the first quarter of 2023. Net cash provided by investing was not material. Net cash provided by financing activities was approximately $3.7 million, which was primarily from the sale of common stock in private offerings to insiders at market prices. Overall, the company was essentially cashflow-neutral in the first quarter, an improvement of $6.5 million from the first quarter of 2023. Next, I want to highlight a few of our financial accomplishments in the first quarter, and highlight also that these recent capital actions provide the required funding for operations for the next 12 months. While we may do other capital-raising activities, the capital that we currently have on the balance sheet is adequate to fund our operations for the next 12 months. Some of those actions that contributed to that was a previously announced payment term extension by AXA, and a $3 million discount on the outstanding payable. If you recall, Marpai purchased Maestro Health from AXA in November of 2022, and we have a roughly $19 million payable that we are paying down for AXA. And we negotiated in February an adjusted payment schedule where we made - and recently completed some minimal payments for 2024, and delayed all further payments until 2025. And in addition, AXA has indicated that they will reduce our outstanding payable by $3 million. And it's - wanted to highlight that it's not included in our - that $3 million discount is not included in our Q1 2024 results. In addition, we completed financing of up to $11.8 million in convertible notes with JGB Management Capital. It has a conversion feature at a premium to the current share price. So, very, very favorable terms there. More details can be found in our 8-K that was filed upon consummating the deal. And then finally, and probably most importantly is, we've gotten continued support by insiders and leadership through an additional $3.7 million equity raise at the market just in Q1 alone. So, we're well positioned for continued growth.
Damien Lamendola: Thanks, Steve. Our strategic priorities remain clear, exceptional customer experience, operational excellence, and delivering on the Marpai saves promise. The actions have taken, and the financial results we've achieved, demonstrate our unwavering commitment to these goals. We're very excited about the future.
End of Q&A: Thank you very much, Damien, and John. I'll leave this slide up for a little bit. If you have any questions or require further information, please feel free to contact me at steve.Johnson@marpaihealth.com, or feel free to go to our Investor Relations website which has tons of information there. I will highlight that this webcast will be available for replay. This concludes our first quarter earnings call. Thank you again for joining us this morning.
Operator: Ladies and gentlemen, thank you for participating. You may now disconnect.
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