DocGo Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2023

There are 11 speakers on the call.

Operator

Greetings, and welcome to the DOCCO First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. On your telephone keypad. As a reminder, this conference is being recorded.

Operator

It is now my pleasure to introduce your host, Mike Cole, Director of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward looking statements. All statements in this conference call other than historical facts are forward looking statements. The words anticipate, aim, believe, estimate, expect, intend, guidance, Confidence, target, project and other similar expressions are used to typically identify such forward looking statements. These forward looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect DOCCO's business, Financial condition and other operating results.

Speaker 1

These include, but are not limited to, the risk factors and other qualifications contained in Dotco's annual report On Form 10 ks, quarterly reports filed on Form 10 Q and other reports and statements filed by DOCO with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements. In addition, today's call contains references to non GAAP financial measures. Reconciliations of these non GAAP financial measures to the most directly comparable GAAP financial measures are provided directly as part of this call or included in our earnings, which is posted on our website, dotgo.com, as well as in our filings with the Securities and Exchange Commission. The information contained in this call is accurate as of only the date discussed.

Speaker 1

Investors should not assume the statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call in the future. At this time, it is now my pleasure to turn the call over to Mr. Anthony Capone, CEO of Docco. Anthony, please go ahead.

Speaker 2

Thank you, Mike. And thank you all very much for joining us today. We had an extremely busy Q1 as we launched multiple new projects late in the quarter that came with challenging logistical timelines. I am pleased to report those launches have gone extremely well and we are ramping on or ahead of schedule. Demand for Docco's services has never been greater due primarily to the rapidly increasing need for population health services across the United States.

Speaker 2

During the Q1, we generated $113,000,000 of revenue, a decline year over year of 4%. However, If you include mass COVID testing to exclude mass COVID testing from that comparison, we grew revenues by 40% year over We have put in place a great foundation for the future and we expect recent project launches to drive significant sequential gains in both revenue and adjusted EBITDA in the coming quarters. With the Q1 in hand, we are reiterating our guidance $500,000,000 to $510,000,000 in revenue $45,000,000 to $50,000,000 in adjusted EBITDA for 2023. At this time, I'm going to

Speaker 3

hand it over to Lee Beanstalk, our President and COO to talk about some of our operational highlights during the quarter. Lee, please go ahead. Thank you, Anthony. We continue to see substantial growth in new contract RFP opportunities both in our Mobile Health and Medical Transportation Since our last report on March 13, 2023, we have doubled the number of open RFPs, which collectively cover a total contract value of approximately $1,500,000,000 The increase in RFPs is due to a larger number of opportunities in both existing and new geographies, as well as our improved internal review and submission capabilities. In particular, we continue to see a substantial amount of new RFP activity for mobile health services.

Speaker 3

Daco has successfully transitioned away from a mass COVID testing centric business to a mobile health business covering a wide range of clinical services. Our current backlog, which includes contracts that have been awarded but not yet fully rolled out, currently totals approximately $205,000,000 compared to $180,000,000 that we announced on March 13th this year. The recent increase in backlog is largely due The largest kidney dialysis company in the U. S. To offer remote patient monitoring, chronic care management and mobile urgent care services.

Speaker 3

Fresenius and its affiliate nephrology practices manage a vast pool of 300,000 patients. We expect the initial enrollment to begin in May with several markets rolling out aggressively in Q3. We are very excited about this significant opportunity given the recurring nature of revenue streams and ubiquitous application of these services to patients with chronic kidney disease. Based on the 8 Current CPT codes, we estimate the revenue potential per patient per month to be approximately $2.50 $100,000,000 of that amount is tied to RPM and the remaining $150,000,000 to CCM. In addition, this will become a self referring mechanism When monitored patients have abnormal vitals or are rapidly decompensating, .gov will respond on-site with a mobile healthcare provider when prudent.

Speaker 3

We anticipate that gross margins for this RPM CCM offering, when fully implemented, will be above 50% with relatively low levels of associated SG and A and extremely low customer acquisition cost and a high customer lifetime value. In the coming months, we will be working closely with Fresenius and its affiliate nephrology practices to identify and enroll qualified cohorts of patients into DATCO's RPM CCM Revenues associated with RPM and CCM are expected to become a significant contributing factor towards 2024 revenue growth with the early impacts felt late in 2023. During the quarter, we also acquired CRMS, Which stands for cardiac remote monitoring solution. The cardiac segment is one of the fastest growing subspecialties in RPMs And this gives us access to a pool of approximately 400,000 patients, which we can now enroll for RPM and CCM services. Previously, CRMS was focused on just the CIED market, which is the cardiac implanted electronic device market.

Speaker 3

Now under the Dotco umbrella, we can offer CCM services to this population as well. This is a great example of how we can leverage Dotco's licensure, Technology and mobile health workforce to improve patient outcomes and lower cost to payers while expanding our revenue capture potential in the remote patient monitoring space. Dawko's RPM CCM strategy is intentionally focused on cardiology with CRMS and nephrology with Fresenius, And we anticipate announcing strategic partners in endocrinology and pulmonology in the near future. Through both organic and inorganic means, we expect to be providing RPM and CCM services to over 50,000 patients by the end of 2023. While we are on the topic of chronic care management, It's critical to understand the strategic value between our municipal population health programs and our CCM programs.

Speaker 3

In the last 12 months, 75% of the patients we have seen across just 2 programs, approximately 600,000 patients Either did not have a primary care provider or did not know who their primary care provider was. A large portion of these patients need someone to manage their care. And this is where DOCO comes in, managing care for the underserved populations of America. At this time, I'll pass it back to Anthony.

Speaker 2

Thanks, Lee. Before we hand it over to Norm, I wanted to cover margins and our rapid normalization initiative. In January February, a major customer asked us to accelerate the rollout of a large project due to the incumbent winding down faster than contractually specified. We were able to successfully launch on this accelerated timeline, which caused us to beat our revenue expectations, but it came at the expense of significantly depressed margins. However, as of March and subsequent to quarter end, we experienced a significant rebound as the costs abated.

Speaker 2

We are in a great position currently and our margin expectations for the year remain unchanged. We simply had a greater decline than we originally expected January February as a result of this accelerated rollout. On a positive note, the rebound was stronger than expected as well and margins are trending in the Direction. With regard to our rapid normalization initiative, this is currently one of our most critical areas of focus. While we are early on in this process, as I mentioned above, in March and subsequent to quarter end, we experienced considerable company wide cost reduction improvements, which we expect to support improved margins in Q2 and carry through the balance of the year.

Speaker 2

Minimizing the impact of 52% to 41% with continued improvement expected over the coming months. We have also seen a 40% decline in the number of rental vehicles utilized as we replace them with owned or leased units, which are about half the cost. Lastly, the extremely high mobile health overtime rates, which we experienced in the 4th and early 1st quarter Are abating as we institute controls, which are expected to drive that number toward a long term expectation of 5% over time usage From the recent peak of 17%. Currently, that overtime number resides at approximately 7%. Aside from our rapid normalization initiative, we are also seeing a loosening macro labor market, which is conducive to our growth and margin objectives as well.

Speaker 2

Collectively, we expect these measures to support our projected 37% gross margin exit rate for 2023. I will now hand it over to Norm Rosenberg, our CFO to review the financials.

Speaker 4

Thank you, Anthony, and good afternoon. Total revenue for the Q1 of 2023 was $113,000,000 compared to $117,900,000 in the Q1 of 2022. Removing mass COVID testing revenues from both periods, recurring revenue increased by 40% year over year. Last year's Q1 included an estimated $38,000,000 In mass COVID testing revenues, while testing revenues amounted to about $1,000,000 in this year's Q1, less than 1% of total revenues for the period. Mobile Health revenue for the Q1 of 2023 was $72,900,000 as compared to $90,100,000 in the Q1 of 2022.

Speaker 4

Once again, excluding the estimated mass COVID testing revenue in both periods, mobile health revenues increased by 38%. Medical transportation revenue increased significantly to $40,100,000 in the Q1 of 2023, representing an increase of 44% from 27 $8,000,000 in the Q1 of 2022. Nearly every core transportation market witnessed year over year and sequential revenue growth Continuing the strong momentum for the second half of last year. We recorded a net loss of $3,900,000 in Q1 2023 compared with net income in the prior year period and more than the total for all of 2022 as well as an increase of more than $1,000,000 in our insurance loss reserves and approximately $400,000 And non recurring legal costs relating to exiting the California transportation market, as we discussed in our previous earnings release. Adjusted EBITDA for the Q1 of 2023 was a positive $5,600,000 as compared to adjusted EBITDA of $13,600,000 in Q1 of 'twenty two.

Speaker 4

As usual, a reconciliation of net income to adjusted EBITDA has been included as a table in the earnings release. Total gross margin percentage Q1 of 2023 amounted to 28.1% as compared to 33.9% for the same period of 2022 With stronger transportation segment gross margins outweighed by temporary weakness in mobile health gross margins. During Q1 of 2023, gross margins from the Mobile Health segment were 27.7% compared to 37.3% for the Q1 of 2022. Margins were restrained by ongoing start up costs for projects that were launched late in 2022 early in 2023, as we discussed on our last earnings call, With the margin dampening effects continuing to provide an impact in January February, while last year's Q1 Mobile Health gross margins were aided by the spike in COVID testing we witnessed in the 1st few Mobile Health gross margins in March improved nicely due in part to the rapid normalization project. As Anthony just discussed, the key performance indicators that we track on a daily basis are all pointing in a positive direction over the past 60 days, serving as a leading indicator for the gross margin improvement We are expecting in the Q2.

Speaker 4

In the Transportation segment, gross margins increased to 28.9% in Q1 2023, Up from 22.7 percent in Q1 of 2022. This segment's margins continue to improve aided by higher price realizations on trips, The ongoing shift towards higher margin leased hour business and some easing of fuel prices. Looking ahead to our gross margin trend, we have continued to build on our progress in March With improved metrics through April and into May, this trend certainly bolsters our confidence that we are on track to achieve sequential gross margin improvement through the year. In addition, we continue to make progress on integrating the 6 acquisitions we have made since mid-twenty 22. As we do so, we expect to realize the margin improvements that we have targeted for each of these entities.

Speaker 4

Looking at operating costs, operating expenses as a percentage of total revenues amounted to 34% in the Q1 of 2023 compared with 25% in the Q1 of 2022. The key drivers we add back for the purposes of calculating adjusted EBITDA was approximately $8,500,000 in the Q1 of this year compared to $1,400,000 in the Q1 of 2022. Going forward, we expect that the quarterly stock compensation expense will track much more closely to the levels recorded in prior quarters, And we would expect that overall operating expenses as a percentage of revenue will be below 30% going forward. Backing out depreciation of $3,600,000 the aforementioned stock compensation expense and SG and A amounted to 24% of total revenues in the Q1 of 2023, up a bit from 22% of total revenues on the same basis in last year's Q1. Over the remainder of 2023, we would expect SG and A expenses to decline As a percentage of revenues, as we witnessed sequential revenue growth while holding the line on or in some cases decreasing our SG and A expenses in absolute dollar terms.

Speaker 4

Turning now to the balance sheet. As of March 31, 2023, our total cash and cash equivalents, including restricted cash, Was $127,500,000 as compared to $164,100,000 as of the end of 2022. The reduction in cash during the Q1 was due almost entirely to working capital factors as accounts receivable increased by $24,700,000 due to several factors, including the timing of payments from high credit quality customers. There were also approximately $11,500,000 in acquisition related payments and about $2,000,000 in capital expenditures. Looking at cash flow from operations, our negative operating cash flow for the quarter of $23,000,000 Was entirely due to changes in operating assets and liabilities, also known as the working capital categories, primarily driven by a We would gladly trade longer payment terms for greater assurance of being paid in full as we have up until now from these customers.

Speaker 4

Secondly, We feel that this becomes an actual competitive advantage for us when bidding on these large municipal deals. Unlike many of the providers with whom we are competing for these contracts, We have the balance sheet and the capital to undertake large scale projects that require significant start up costs before we receive our first payments for services rendered. We have experienced significant collections and cash inflows as our largest aged invoices are being paid. Most encouragingly, These recent collections have included primarily our most aged receivables, which will result in a better day sales outstanding or DSO for our AR portfolio as we come to the end of the Q2. While this cycle leads to some large fluctuations in our cash balances from quarter to quarter, the balance sheet remains strong throughout the cash cycle.

Speaker 4

Given the collections we have seen over the past 20 days or so, we expect that we will return to generating positive operating cash flow in the second quarter as we have in each quarter since we went public up until this Q1 of 2023. Combined with our $90,000,000 line of credit, without the need to raise any new capital. Turning to guidance. We are reiterating our revenue guidance for the year in the range of $500,000,000 to $510,000,000 We are encouraged by the Q1's revenue performance, which was slightly higher than our internal forecast and by the increase in our backlog to $205,000,000 from $180,000,000 just the last 7 weeks, the guidance revenue range would represent year over year top line growth of about 14% to 16% on a gross reported basis, But excluding the impact of mass COVID testing, the revenue growth rate is really in the 36% to 40% annual range. We continue to expect that adjusted EBITDA will be in the range of $45,000,000 to $50,000,000 with EBITDA margin acceleration expected as we go through the year.

Speaker 4

This concludes my remarks. At this time, I'd like to hand it back to Andy.

Speaker 2

Thanks, Norm. Before we jump into Q and A, I just wanted to briefly remind everybody that we will be having our Investor Day on June 20 at the NASDAQ Market Site in New York. For interested parties, please reference our recent press release on this event and follow the registration link. Now, operator, please go ahead and open it up for Q and A.

Operator

Thank you. We will now be conducting a question and answer session. Your first question comes from Mike Latimore with Northland Capital Markets. Please go ahead.

Speaker 5

Great. Thanks, Jan. Good afternoon. Hi, guys. Interesting that the RFP value Double since March 13 fairly significantly.

Speaker 5

Can you talk a little bit more about that? Are there a Couple of federal deals in there or is that mostly municipalities? Maybe a little more color on that would be great.

Speaker 3

Sure. Hi, Mike. It's Lee. So the number of RFP submissions outstanding has actually doubled since we last reported that number. The total contract value has from $1,100,000,000 to $1,500,000,000 So just to clarify that, we're seeing really an increase across the board from federal deals To local municipal deals, we continue to evaluate RFP opportunities across the spectrum on the government side.

Speaker 3

So really it has Included representation from the federal opportunities as well as the local and state municipal opportunities.

Speaker 2

And I can add on with What Lee just said, there is certainly a macro trend across the country in more and more mobile health contracts, Existing RFPs being posted, RFIs, RFQs are more or less the same thing. But there is a much larger growing need for Population health, especially for the underserved communities, not just underserved communities in more of the classical sense of like a local homeless population, but also PA, Indian Health Service, maybe even these communities that once aren't as apparent, there's a growing need for those.

Speaker 5

Got it. And then the mobile transport did very well again this quarter. Is that The current revenue level in mobile transport, a good baseline you can build off of or was there some sort of added usage in there or something?

Speaker 2

Yes. So a couple of things, something that we noted at the beginning of the quarter is that we still had a percentage I think at the beginning of the year was closer to 40% of our ambulance contracts that were on a Fee for service basis where we took risk on demand and we've been very successful in converting an increasing percentage of our revenue on the transport side to that leased our model by which we have downside margin protection. So that's a significant part of it as well as trying to keep the SG and A on the transport segment Mostly flat. So it's amortized over a greater revenue base. Norm, do you have anything to add on that?

Speaker 4

I I would say the same thing. It's always been, as we've said, it's a little bit of a mix of organic and inorganic growth, but really it's a continuation of a trend that we've seen really since early 2022. A lot of it is a matter of a little bit more focus, some other customers coming online. I think it is a pretty good base to build off of. Not much non recurring in this call.

Speaker 4

And

Speaker 5

just last, the Comment about a

Speaker 1

goal of

Speaker 5

getting the 50,000 patients in RPM. I mean just sort of the back of the envelope calculation I would suggest that's probably well over $100,000,000 business then if you hit that number. I guess one is that right? And second, If you get to that 50,000, how are you thinking about organic versus inorganic pressure?

Speaker 2

Yes. I mean, It's really all of the remote patient and remote device monitoring, which then leads to chronic care management, comes from We're planning on it from 2 main areas. The bulk of it is going to come from patients that are part of the cardiology practices That are already customers of CRMS, a company that we mentioned that we acquired very late at the end of Q1. And so they basically already provide what's called CIED, which is implantable devices. And we are going to be able to offer to those cardiology practices, RPM, which is kind of a non implantable device.

Speaker 2

And then for the existing ones, both on CID and RPM, being able to give them Chronic Care Management Solutions, which is actually a larger reimbursement than both of those. So that's it. And then A smaller but still significant portion is going to come from the deal with Fresenius that we announced. So those kind of our main focus is on cardiology and secondary focus is on nephrology.

Operator

Next question, Ryan MacDonald with Needham. Please go ahead.

Speaker 6

Hey, this is Matt Hsieh on for Ryan. Thanks for taking the question. Wanted to follow-up on the RPM commentary. So when we think about the 50,000 patient goal and the two partners that you guys have announced or I suppose the one you acquired in the the one you've announced with Fresenius, what kind of percentage of the population does 50,000 patients represent? And Assuming this is a small part of the population today, how do you kind of see that opportunity today versus how can you scale to reach a bigger part of that population?

Speaker 6

Like What is that total population with those partners look like in your mind?

Speaker 2

We look at it very much as a When you look at the provider, like the cardiologist and the nephrologist, what percentage of their patients that they see Meet medical need for these services. So for a cardiology practice on average, it's between 30% 50% of the patients that are at cardiology practice We'll receive value and meet the medical necessity for an RPM solution. And then of those, you have Chronic Care Management or PCM, both of those you're going to have about half of that are meet medical necessity for the management services. It It goes up in levels of complexity. On the nephrology side, nearly all of the patients, it's very close to 100% of the patients have medical need to meet medical necessity or RPM and the vast majority for CCM because The patient that's in a nephrology practice or patients being dialyzed usually doesn't just have kidney disease.

Speaker 2

They also have diabetes, often that's hypertension and so they're polychronic and thus management is really critical. So that's why the nephrology practices have such a high percentage of the patients there. So when we look at it and you want to look at what's the addressable market, you could look at the stats Patients with cardiovascular issues as well as patients with kidney issues and kind of the conversion percentages I gave you is what we see For each one of the kind of clinics and providers.

Speaker 6

Got it. That's helpful. And then when we think about scaling that RPM solution into other specialty areas that you're not in, you mentioned endocrinology and pulmonology. Do you look at that as an organic expansion or would that be something that you would need to partner with or acquire in that space or how do you look at adding other Specialties to your RPM offering? Yes.

Speaker 2

I think those 2 are going to come on the partnership side. We have some exciting partnerships that will be announced. But in general, Daco's strategy of growth is one that we don't We try to find synergies with other companies so that we can eliminate the customer acquisition cost. So we'll find a partner. In this case, we already have the 2 partners.

Speaker 2

And those partners already have access to patients that have these diseases or multiple diseases And they don't currently offer RPM, PCM or CCM or mobile urgent care services to this population. They say, okay, you're already with the patient, usually a very close intimate relationship with the patient, can we now offer these increased value add services to them. So both of those will be launched in partnership with 2 existing large players.

Operator

Next question, Richard Close with Canaccord Genuity. Please go ahead.

Speaker 7

Hi. This is John Penney on for Richard. Thanks for the question. So you're adding the backlog added 25,000,000 Since last quarter and is any of that like factored into guidance as of now or is that more of a 2024 start story?

Speaker 2

Yes. It's a good question. Lee, why don't you take that one?

Speaker 3

Yes, absolutely. Hi, John. So the vast majority of those projects will launch towards the back Half of this year and we'll ramp those significantly heading into 2024. So some of that revenue will come online, but the vast majority of it will be Starting and ramping in 2023 as we head into 2024. Worth noting that also those revenue streams also have kind of a similar Time line on them, so most of

Speaker 2

the revenue we have is kind of it's at 3 you're looking at that $200 plus 1,000,000 over a 3 year period.

Speaker 4

So the short answer is, it's not baked into guidance. Right.

Speaker 7

Okay, great. Thanks. Also, like do you have any insights in as far as that backlog or anything you can provide us as far as what the breakdown would be for like mobile health versus transportation revenue?

Speaker 3

Yes. So the vast majority of the increase in the backlog are mobile health, new mobile health contracts. Almost all of the increase that you noted is our mobile health contracts.

Speaker 7

Okay, great. Thanks. And then just one more question. For the rapid normalization, you say here that Phase 1 is coming to complete like completion at the end of July. That's what you're saying in the press release.

Speaker 7

That sort of implies like a Phase 2. Is there any like detail you can Yes. Provide there, is there something that's going to be like additional in that initiative coming in after July?

Speaker 2

They will. The Phase 2 will get the additional 300 basis points. I'll give more detail as to the very details of how that's achieved. We already have it quite planned out. But yes, there will be a Phase 2 to get the entirety of that 600 basis points Margin that we with some degree we give up.

Speaker 2

And we're actually ahead of track on Phase 1 right now.

Speaker 7

Okay, great. Thanks so much.

Operator

Next question, Craig Jones with Stifel. Please go ahead.

Speaker 8

Hey, thank you. I wanted to ask you on the margin side. So one, as As you think about sort of the ramp through the year for the margin expansion, will that be fairly linear?

Speaker 4

So, Craig, how are you doing? I think that when we first planned it out, we first started talking about it. Obviously, we modeled it out in a pretty linear fashion. But that's sort of not the way it's playing out, right? I think that you're going to get the steeper piece of the curve, on the in the earlier phases from here on out.

Speaker 4

We had talked about how we saw some good rebound in March. We saw some pretty dramatic change in some of those KPIs that are leading indicators for us on the margin As we head into Q2. So I would say that as far as the margin expansion that relates to the rapid normalization, I think that that's become a little bit more, I guess, now at this point front end loaded in the next couple of quarters than back end loaded. The curve is a little bit steeper, Which is a good thing when you're talking about improving margin.

Speaker 8

Yes, absolutely. That's good to hear.

Speaker 4

Yes. It's also not purely linear in the sense that if we were to look at daily margin from here On to the end of the year, it's not only going to be up in one direction, right? It's going to fluctuate a little bit based on different things that are going on, Based on many, many different factors. That's why even though we look at this stuff on a daily basis, we do sometimes need to take a wider angle look at it and go out to a week, a month or a But the direction on a quarterly basis should be linearly increasing.

Speaker 8

Okay. Got it. And then so it looks like as the mass COVID testing revenue has fallen off that the margins have Come down at the same time. Is there any way to size what the headwinds and margins as that revenue showed off?

Speaker 4

So we've talked about this a little bit in the past. It's a little bit tricky because when we look at the projects on a project by project or project category by project category basis. In the mobile health projects that we're undertaking now have really the same margin profile, albeit Broken into different pieces, but they have the same kind of margin profile as with those projects that we were doing a year ago or more. I think where you get the impact is When we had those spikes in the mass COVID testing. So we saw that in Q4 of 2021, we saw in the beginning of Q1 of 2022, Mental piece comes at a very, very high margin.

Speaker 4

So it was sort of a difficult comp for us both in Q4 and again here in Q1. But overall, that's not necessarily the case, meaning we have not as we've replaced margin, I'm sorry, as we've replaced that COVID revenue, Over the long run, that revenue really should be coming in at about the same kind of margin that we had seen in the past.

Speaker 2

Correct. When we bid on those new RFPs, which is that same backlog, we really have not Change the margin profile that we put into those new contracts.

Speaker 8

Okay, got it. Thanks. That's all for me.

Operator

Your next question comes from Sarah James with Cantor Fitzgerald. Please go ahead.

Speaker 9

Hi, thank you. I wanted to unpack a little bit the comments about the start up costs, which impacted gross margins. So can you tell us Was that the large New York contract or should we think about that as being like a second wave of startup costs that we should model in for later on this year.

Speaker 2

Yes. Due to kind of the nature of the contentious relationship with the incumbent, we can't disclose the actual Contracting question, but to your general question, yes, It was to some degree unexpected because it was an accelerated launch timeline. So more than just the normal startup costs, which we tend to plan for and we've talked about that 600 basis points. In this case, we had to accelerate many months faster than we had anticipated purely because The incumbent of that contract decided to basically pull out and kind of void Some of their contractual obligations, and of course as being customer first company, we stepped in and we over delivered for the customer, Which is why you see that our revenue actually kind of beat some of our expectations, but it did come at a with margin contraction.

Speaker 9

Okay. And then as you guys dive into the RPM, can you talk to us about How that might affect efficiency or, patients per day that You might be able to handle given that there's going to be some more interaction or maybe longer visits at the home?

Speaker 2

I don't think we haven't seen that the visits will necessarily be longer, but We plan to in our Investor Day in June to give some really specifics around The average amount of at home visits per patient per kind of period of time. So in that we'll Try and help to build the model to say, if I have a patient who is a cardiology patient, what is the frequency by which they're going to need a primary care intervention Per year or a urgent care intervention per year or maybe an ambulance transport per year. What percentage of them are Going to get managed versus just monitored. So we're well into the thick of it. We have a Fair number of patients on right now.

Speaker 2

So in that June meeting, we plan to kind of package it together and disclose as much data as we have to help you build a model.

Speaker 4

We're also going to look at it, Sarah, from a unit economic standpoint. So not only as Anthony talked about what our estimated lifetime value or annual value of a patient would be, but also on an interaction by interaction basis. Like what are the unit economics of that kind of thing and also comparing it to the unit economics that we've seen out there That are not comparable to ours.

Speaker 9

Great. And last question, if I could. On the Dollar General JV, is there any updates you can give us on how those locations are ramping up to the volume that you expected or that Dollar General was hoping to see.

Speaker 3

Sure. Hi, Sarah. It's Lee. So the volume continues to increase, The volume continues to increase, which we're excited about. I definitely think we are working on getting our marketing mix Correct.

Speaker 3

And our promotional mix is correct. And in addition, as Anthony mentioned, I believe on the last call, we're looking at other public private partnership opportunities as well. So you'll notice in our release, we talked a bit about how some of the Dollar General locations will be serving as public health Population health locations where underserved populations can receive services as well. So we believe that those opportunities together will bring more access The people Dollar General location serve as a great location for that access and we'll continue to look for opportunities to expand there as well.

Speaker 2

And it's worth noting the current the pilot that we have with Dollar General is a pilot With Dollar General, but it's also supported, with funding from the state of Tennessee. And so We've already proving out what I said on the last earnings call, which was trying to bring together the municipal With the private, so the public and the private partnership to solve this rural healthcare need, which allows for .go to have more downside margin protection. That was the barrier that I mentioned where I said, obviously, everybody wants us to scale rapidly with this. It's been, I think, quite a success. But .go doesn't do fee for service.

Speaker 2

We don't take risk on fee for service medicine. So we needed a model by which it allowed us to protect our downside margin. So now that we have that with the Dollar General pilot, the main purpose right now or the current base of Dollar General is Prove out the relationship, determine can we scale this model by which we have a public private partnership that has high demand and gives Dot go downside margin protection. That's where we're at right now.

Speaker 9

Very helpful. Thank you.

Operator

Next question, Jeb Terry with Aberdeen Investment Management. Please go ahead.

Speaker 10

Good afternoon, Ben.

Speaker 8

Hello, Jeff.

Speaker 10

Very exciting growth. So and I was very excited to see the activation with the state of Tennessee. Can you give us a little clarity on the your bullet regarding the 9 11 telemedicine program with the FDNY?

Speaker 2

Yes. The 911 program they have with FDNY, telemedicine program to basically, It goes into the realm we call pre hospital work. So pre hospital work to try and lessen the amount of unnecessary visits The need to get transported to a hospital. So it was an RFP that was put out through all of New York City with a lot of people bidding on it. It's been it's something that will really help the community.

Speaker 2

So imagine that .go has the ability to respond in partnership with FDNY with our mobile health providers Under some of the supervision of a hospitals based telehealth system. And that kind of pairs together the municipality, The health system and then Dotto is the private provider in order to try and reduce the amount of ER admissions.

Speaker 10

And what kind of

Speaker 8

And just

Speaker 2

to give you an idea, sorry, It is. Yes, it's across the entire city. Give me an idea of size and don't quote me because I'm not an expert on these stats, but FDNY does millions of transports a year. Okay.

Speaker 3

Well that's The goal is really Yes. The goal is really can we help triage and address these calls that are coming in to make sure that it is indeed an emergency and someone does indeed need to go to the ED. And if they don't, then helping provide services for them outside of the ED.

Speaker 10

Got it. So this could be a material bump to the transportation business at least in addition to telemedicine services that you have actual People on the calls.

Speaker 2

I don't know on the transportation side, because if they do need to get transported, FDNY will be the one who will like They transport them. This is really a mobile health opportunity, but a considerable one.

Speaker 10

Okay. Understand. And so perhaps a question for Lee, given all the RFPs and the growth in those RFPs and you had a considerable number going into that, I guess there would be quite a few that are reaching some degree of culmination. Can is it Should it be expected that there may be kind of a bulge, if you will, in awards or at least some outcome Here in the next number of weeks, I guess, as we go through the end of this quarter?

Speaker 3

Yes. The team is certainly looking forward to hearing back, I can tell you that, on a lot of these opportunities. Absolutely. And we have heard back on a number of them. The way the process works is usually we will get provided with what's called an to award.

Speaker 3

This is when the process culminates in them reaching out to us and notifying us whether or not we are Every single contract we win for competitive reasons, we don't announce every contract we win. That being said, we have been notified on some of them, And we look forward to hearing back on others. And once they culminate in that contract being finalized, not just an intent to award, but a contract in place, You'll probably be hearing more and more about those.

Speaker 2

And just so that you have some background, Jeb, we did win a large population health contract, the telehealth contract you mentioned, large employee health on the West Coast as well as numerous significant federal government contracts among many others. Yes, we have heard that. We just there's cases when we feel we can announce it without hurting either the contract itself or the our kind of And so but there have been a fair number we've heard back on and our win rate has remained fairly consistent. So

Speaker 10

and therefore, in addition to the 50,000 RPM, CCM patients that you feel like you'd be Serving by the end of this year relative to Fresenius and the cardiac side, you can these awards would be additive to all that. So sounds like 2024 could be significant step function kind of growth from where we are today.

Speaker 2

Yes. The ones that I just mentioned, the ones that we've been awarded are not in any guidance.

Speaker 10

Understand. Perfect. Thank you very much, Minh.

Speaker 3

Thanks, Jeb. Thanks, Jeb.

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Earnings Conference Call
DocGo Q1 2023
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