DocGo Inc. (DCGO) Q4 2021 Earnings Report, Transcript and Summary

Greetings and welcome to the DocGo Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Halper of LifeSci Advisors. Thank you, sir. Please go ahead.

Thank you, Danna. 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 the historical facts are indeed forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used to typically to 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 DocGo’s business, financial condition and other operating results. These include but are not limited to the risk factors and other qualifications contained in DocGo’s annual report on Form 10-K, quarterly reports filed on forms, 10-Q and other reports and statements filed by DocGo 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. DocGo expressly disclaims any intent or obligation to update these forward-looking statements. So, at this time it's now my pleasure to turn the call over to Stan Vashovsky, Chief Executive Officer and Co-Founder of DocGo. Stan?

Thank you, Steve. And thank you to everyone for joining our conference call, our first, since closing the acquisition between DocGo and Motion Acquisition Corporation, which we announced back in March 2021 and finalized on November 5. I'll make a few remarks about our business and then turn the call over to Andre to review the financials. We will then take your questions. 2021 was by almost any measure, a very successful year for our company. Andre will cover the financials in detail, but I want to hit on a few of the highlights. We are pleased to report that our full year 2021 total company revenue of $318.7 million, which was well ahead of our expectations. This represents growth of more than 239% over the $94 million in revenue that we reported for the full year 2020. Similarly, we are reporting an adjusted full year 2021 EBITDA of $25.1 million, representing a solid profitability and a substantial improvement over the adjusted EBITDA loss of $8.1 million that we've reported for the full year 2020. And we reported positive net income for the full year and fourth quarter, which also represent significant improvements relative to the net losses that we've reported for Q4 2020 and full year 2020. It is important to note that COVID testing-related revenue is estimated to be approximately $110 million. For 2022 we're taking a conservative approach and are not including in our projections any COVID testing revenue after the end of the second quarter. However, we see strong demand from our customers from both mobile health and transportation services and are comfortable issuing a full year guidance of $400 million to $420 million for 2022. This represents a 26% to a 32% increase over 2021 or a 65% increase if we exclude non-recurring COVID testing revenue from the second half of both years. Taking a step back for those who may not be familiar with our story, DocGo is a leading provider of last-mile healthcare delivery services. What does that mean? We deliver high quality, high affordable healthcare services to patients where they are when they need it most. We operate in two distinct divisions, mobile health and mobile transport. Mobile health, the most significant driver of our growth brings in-person healthcare to patients where visit to a doctor's office or hospital may not be necessary. Many companies provide patient care in non-traditional settings. What differentiates our mobile health business is DocGo's use of highly trained, licensed practical nurses and paramedics who work under physician licenses in our network of medical practices across the United States. This allows our clinicians to work on their much broader scope of practice than how they've been used in the past. This innovative model has enabled DocGo to build a large cost-efficient labor force to facilitate the host of medical treatments that are traditionally provided by more expensive nurses, physician assistants, nurse practitioners, and medical doctors. This approach has enabled DocGo to significantly scale up our medical workforce during a national labor shortage and facilitate a wide range of high-quality medical treatments and interventions to patients at a much lower cost. By leveraging this workforce to provide care to patients in their homes, their offices, and in non-traditional settings, we help avoid costly and unnecessary visits to the emergency room. Our services include bedside procedures, preventative care, medicine administration, monitoring and various vaccinations, EKGs, ultrasounds, fusion therapy, and much, much more. We contract directly with government agencies, corporations, and hospital systems, and then provide services directly to their members. And we get paid by the contracting agency instead of the patient. As mentioned, we employ a large number of licensed practical nurses and paramedics in additional to regular nurses, PAs and MDs, who are used primarily for training and to provide medical supervision. I think it is important worth noting we employ the majority of our practitioners. They are not contractors. We believe the leads to more satisfied customer and loyal employees and ultimately better care for our patients. A key metric that demonstrates our employee satisfaction is DocGo’s stellar ratings on leading internet employment portals. Hundreds of our employees have left ratings of their experience working for our company. And we enjoy a 4.2 rating on Glassdoor and a 4.1 on [indiscernible] scores that are far higher than our competitors. We have provided mobile health solutions in 29 states and are licensed to provide these services in even more markets across the United States. Given the very low penetration rate in our industry currently there remains a significant amount of Greenfield opportunity for us to pursue while in parallel, continuing to grow in our established markets. Between 2019 and 2021, our total revenue, excluding COVID testing grew at a compound annual growth rate of 182% reaching $207 million in 2021 compared to just $48.3 million in 2019. The stellar growth is driven by the inclusion of revenues from several large new and expanded global health contracts and the continued growth and geographic expansion of our Transportation business. One very notable contract that we announced in January that will help drive future growth is with Aetna in New York and New Jersey. This multiyear contract gives us the opportunity to offer unique on-demand medical services to the total population of more than 2.5 million people. This is a significant opportunity for us, even if we convert just a small percentage of these patients to our in-demand at-home services. One of the new services we’re most excited about is our direct-to-consumer offering. As medical copays and deductibles continue to increase, we see an opportunity to provide cost effective treatment alternatives directly to patients who are seeking medical treatment for non-emergency conditions. We are in early stages of piloting this B2C offering and have plans to take the learnings from this pilot and expand these services to a number of markets in 2022. One of the unique aspects of our mobile health service is our purpose-built technology platform that plugs seamlessly into existing healthcare ecosystems and provides better coordination of care designed to be used by patients and their families, care providers and facilities among its many core functions and benefits. It integrates into electronic healthcare records from well-known leaders in the field, such as Epic and Allscripts, ensuring that all patient information is in a single repository. In addition to results in better coordination of care and superior patient experience, these complex EMR integrations provide DocGo with a significant competitive advantage. Our other offerings in medical transportation, which basically refers to providing Uber like on-demand ambulance patient transfer solutions between clinical settings. This is not a 911 emergency work. Our fleet of 300 plus ambulances provide prescheduled high acuity medical transportation. While we have a small number of wheelchair vans and medical sedans, 99% of our transportation revenue comes from high margin ambulance transport. We’ve developed a CapEx light model for our ambulances where we’ll lease vehicles through GE Capital for five-year terms. At the end of the lease period, we’re able to return our vehicles and upgrade to the latest models. We maintain partnerships with some of the largest and highly regarded healthcare providers in the industry, including Fresenius, Jefferson and UCHealth, as well as Northwell and HCA. These long-term multiyear contracts are increasingly moving away from fee for service agreements to a least hour model where we provide vehicles, equipment and staff for a daily fee. This provides our customers with dedicated resources to help expedite patient transfers, a rebate feature to help them lower costs as they increase scheduled deficiency and provides us with better revenue predictability and gross margin performance. Via our strategic partner relationship with Fresenius, Jefferson and others, we are contracted for over $500 million in potential revenue. Between 2019 and 2021 revenue in Medical Transport business grew at a compound annual growth rate of 35% reaching $84 million for the full year 2021 or just about 26% of our total revenue. We currently provide medical transportation services in 11 states with additional licenses pending. At this point, I’d like to hit on a few operational highlights from the quarter. We announce a partnership with Carnival the world’s largest cruise line to deploy medical teams on ships to augment existing medical staff. This is an addition to the embarkation services that we already provide in which we are expanding to additional ports. We now have good partnership with Visiting Physician Services to provide in-home non-emergency services, older adults and home bound patients in New Jersey and the surrounding tri-state area. Visiting Physician Services is the largest geriatric house core practice in New Jersey and this partnership will allow them to serve a larger patient base with faster response times. We introduced additional services, including mobile health to residents in San Diego, California, and a mobile suboxone treatment to treat homelessness in New York. These are just a few examples of the diverse range of services that we offer. Turning to market opportunity. The U.S. addressable market for our services is significant and largely untapped. Virtual healthcare has seen rapid growth in recent years, propelled in large part by COVID. In addition to being a tailwind for our 2021 business performance, the relationships we’ve established have enabled us to prove the value of DocGo’s mobile health services with a range of new customers and expand those relationships in many cases to include additional service offerings. It has been estimated that $250 billion or approximately 20% of all Medicare, Medicaid and commercial outpatient office and home health spend could be virtual. However, some $80 billion of this virtual care requires some form of physical follow-up. And currently there is no broadly available at-home solution for in-person clinical services. In addition, the medical transportation industry is highly fragmented and growing steadily due to the aging of the population, as well as the greater prevalence of chronic disease. Combining the opportunities, we see in both mobile health and transportation, we estimate the TAM for our services in the United States alone to be approximately $102 billion. Similarly, a recent report by McKinsey concluded that up to $265 billion in medical care currently delivered in healthcare facilities will be shifted to home-based care by 2025. This represents a quarter of total expenditures for both the Medicare fee for service and Medicare Advantage programs. This represents a 3x times to 4x increase as compared to today and companies like DocGo who are able to provide care in the home seems to be among the biggest beneficiaries of this shift. Clearly, we have barely scratched the surface, but with the investments that we have made particularly in the area of technology, we believe we have created a significant competitive advantage. At this point, I'd like to turn the call over to our CFO, Andre Oberholzer for the review of our financials.

Thank you, Stan. Good morning. Total company revenue for the fourth quarter of 2021 amounted to just over $121 million, representing growth of 289% as compared to the $31 million reported for the fourth quarter of 2020. The year-over-year revenue growth was driven mainly by the contributions of revenue from several new and expanded Mobile Health contracts. Mobile Health revenue for the fourth quarter of 2021 amounted to $102.6 million, as compared to $15.8 million in Q4 of 2020, up approximately 6.5 times. Medical transport revenue amounted to $18.7 million, up 21% from $15.4 million in Q4 of 2020. It is important to note that excluding COVID testing-related revenue from Q4 of both years, Q4 revenue, stock tripled year-over-year reflecting strong momentum in our core businesses. Adjusted EBITDA grew to $17.3 million in the fourth quarter of 2021, even with significant investments made in regional expansion and infrastructure versus an impressive EBITDA loss of 2.9 million in the prior year quarter. Net income amounted to $20.3 million in the fourth quarter of 2021, which represents a substantial improvement over the net loss of $4.4 million in the fourth quarter of the prior year. This reflects the strong increase in revenue during the fourth quarter, while certain overhead costs remain in line with prior periods allowing a larger proportion of additional revenue to drop to the bottom line. I also want to point out that net income in Q4 2021 includes the gain of $5.2 million relating to the remeasure of water warrant liabilities which has no impact on cash flow or operation. Turning now to our full year results. Total company revenue for fiscal 2021 announced to $318.7 million, representing growth of 239% over $94.1 million reported for fiscal 2020. And it reflects a 4.5% improvement versus our prior guidance. Mobile Health revenue for fiscal 2021 answered to $234.4 million, up 659% from $31 million in the prior year. Medical transportation revenue amounted to $84.3 million; up 33% from $63.1 [ph] million versus is fiscal 2020. Gross margin for fiscal 2021 was 34.4% representing 100 basis point improvement from $33.4 million in 2020. The increase in gross margin was largely due to a shift in revenue mix towards higher margin Mobile Health revenues. Margins were negatively impacted by more expensive subcontracted or agency labor, an increase over time during the loans of several mobile health projects in an expedited fashion, and to a lesser extent increased labor rates. As new market mature, we expect to see improved margins. Generally speaking, we experience global margins during the loans of new projects, as we focus on the timely launch of operations and usually relying on higher priced subcontracted labor. Once we get past that initial launch period, we are able to drive margins higher target margins as we are able to schedule more efficiently with DocGo employees. In 2021 adjusted EBITDA grew to approximately $25.1 million or 7.9% of revenue, even with all of the investments made in regional expansion and corporate infrastructure. This compares to an adjusted EBITDA loss of $8.1 million in 2020. As a reminder, adjusted EBITDA as a non-GAAP measure representing earnings before interest, taxes, depreciation, amortization, and also adding back stock compensation and the impact of the warrant liability re-evaluation as well as adding back non-recurring expenses incurred in connection with our public listing. Please refer to our earnings; lease for a reconciliation of adjusted EBITDA and net income. Net income amounted to $19.2 million during fiscal 2021, which represents a substantial improvement over the net loss of $14.8 million in 2020. Net income for 2021 included a $5.2 million gain from the revaluation of warrant liability. Excluding this non-cash and non-operational item, our operational net income amounted to $14 million or 4.4% of revenue for the year. As of December 30, 2021, our cash and cash equivalents total $175.5 million. Total proceeds to the company from the public listing amounted to approximately $158 million net of transaction expenses. Note that we have insignificant date of approximately only $2 million. Finally, to support our growth we hired over 900 new employees in Q4 of 2021, bringing total hires for calendar year 2021 to over 2,300 and the total number of medical providers to over 3,800 as of yearend. Now turning to 2022 outlook. Stan mentioned earlier we anticipate fiscal 2022 revenues to amount to approximately $400 million to $420 million and we estimated adjusted EBITDA between the range of $35 million to $41 million. At the midpoint adjusted EBITDA is estimated at 9.4% of revenues within 2022 versus 7.9% in 2021. In terms of segments, we expect that the Mobile Health segment to continue to contribute approximately 70% to 75% of revenues with medical transportation as the remainder. That concludes my remarks. At this time, we ask the operator to open the call for questions.

Thank you. [Operator Instructions] Our first question is coming from Mike Latimore of Northland Capital. Please go ahead.

Great. Thanks. And congratulations on the great year there. I guess just two questions on the medical mobility or mobile transport side of things, can you talk a little bit about the growth rate you might see there, the catalyst for maybe a little bit of accelerating growth on the – on that side of the business? And then second question is just on gross margin. What maybe give a little guidance on where you see gross margin going this year?

Yes. Mike, sure. In terms of transportation and the acceleration growth, that's largely dependent on the amount of licenses we can secure throughout the various states. We made announcements a few weeks ago. We acquired two – like two new licenses. We hope to do at least five possibly seven new markets in 2022. We have several LOIs out with small organizations to acquire their current licenses as with our business model we don't just go into a market and start looking for business before we even issue an LOI, before we make any considerations of acquisition first thing we tend to do is look at how many Fresenius locations are in that market. How many of those patients or patients that we can actually serve? We build out a detailed performer and then if it makes sense, we go all in and try to make an offer to buy out that license. This gives us some visibility into the kind of revenue of profits we can generate in that market. And our goal is also to once we sign and we get that license secured, we want to get revenue generating as quickly as possible, usually within a couple of weeks. So, to answer your question hopefully adds another of five to seven markets in 2022. In terms of growth, we tend to grow our transportation business at a rate above 35%, maybe 40% per year. We've been doing that consistently for several years. Don't see any reason why that trend should change anytime soon. If we're lucky and if we can get our hands on more licenses, we can definitely look to accelerate that. We're definitely not capital constrained in any fashion. We have plenty of capital, plenty of cash on the books to do those transactions and anyway they tend to be small. And as we've spoken about in the past, when we acquire these licenses, they have no limitations to the amount of vehicles that we can deploy. We can launch one ambulance or 1,000 ambulance it's an operator's license, there's no limitation on those. In terms of gross margin, we – there is some loss of margin in the first 90 days or so when we do a Mobile Health project. And the reason for that is we very often need to start up very quickly. A lot of times it's in remote locations where we may not have a presence. So, we'll go ahead and work with one of our 30-plus medical staffing agencies that we have contracts with. They will provide the temporary personnel. We provide the more advanced medical trained person to train them, to get them ready for the project that we're launching. And with almost all of our staffing agreements, we have the ability to convert those employees to W2 after day 60 or after day 90 for no fees. So, we'll very often give up some margin in the very beginning by using an agency, but by day-60 by day-90, we ultimately – our goal is to convert those to W2 employees and not have the temp agency provider the staffing any longer. So, after day-90 in Mobile Health our target is about 51% to 52% gross margin and that's our target on a go-forward basis whenever we do a Mobile Health project. Sometimes they're a little bit more profitable depending on the type of services that we're performing in that contract, but our target gross margin in Mobile Health is about 52% – 51%, 52% and then transportation is about 40% to 43%.

Great. Thank you.

Sure, Mike.

Thank you. Our next question is coming from Sarah James of Barclays. Please go ahead.

Hi guys. This is Steve Braun on for – on for Sarah. Just had a question on the COVID revenue assumption in 2022. Just wanted to see – so you said that it was 65% growth excluding the second half of revenue from 2021 and, I guess like 2022? So, I just wanted to see like how much you're assuming, and then like, if you can give us a split between 1Q and 2Q?

So, at this point, we're for 1Q and 2Q we see COVID testing. We're anticipating COVID testing will start to subside. So, it's kind of hard for us to give you any real accurate data, because frankly we have not received that many notifications to reduce them just yet, but we very much expect that we will start receiving those notifications shortly. So, I don't want to share any information that's not accurate. We are assuming come – end of second quarter COVID testing revenue goes to zero. I do believe there will be some continuous COVID testing beyond the second quarter. Keep in mind, Steve we do not do consumer testing and almost all of our business is municipal. We work for county cities and states and it's quite unlikely that municipalities will be removed or municipal testing while COVID still exists. But we are taking a very conservative approach and in our forecasting for going forward in our guidance, we're just simply going to assume worst case scenario COVID testing July 1 goes to zero and that revenue will be replaced and added on by other mobile health services.

Okay. Great. Thank you.

Sure, Steve.

Thank you. The next question is coming from Ryan MacDonald of Needham & Company. Please go ahead.

Hey, Stan and Andre. Thanks for taking my questions and congrats on a great finish to a really strong year. Stan, really want to talk first about the demand environment and perhaps what you're seeing, and maybe you could parse it out between sort of municipalities and health systems. On the health system side are you seeing any sort of tailwind from demand given the severe staffing shortages that these systems are going through right now and how that might be impacting the business as we think about the 2022 outlook?

Hey, Ryan, great to hear from you again. Yes, I mean look demand is going strong. There are staffing shortages throughout the country. I think hospitals throughout the nation, nursing homes, urgent cares are all short staffed. They all need more nurses. They need physician assistants and that it would be almost irresponsible for us to further add to that strain and that is the reason why we want a different model. We firmly believe that nurses and physician assistants, nurse practitioners spend a big portion of their day doing skills and tests that are well below the level of training. So rather than spending top dollar doing basic tests and procedures, our approach is that we'll – we will hire a licensed practitioner like an LPN, and then up train them to do those types of services. It's a lot more cost effective and it doesn't add strain to the existing staffing shortages that we're seeing throughout the country. So, the demand on the municipalities are going strong. We have probably what I would like to say one of the most advanced comprehensive homelessness programs in the nation. We have contracts in Pennsylvania and New York for those programs and now in discussion to do a pilot in California. We've presented to Chicago and several other municipalities on that program, getting a lot of great media from it. And with the municipality demand is strong, but it's not just in the area homelessness, there are other municipal areas where we provide mobile urgent care units to lower income communities that have difficulty getting quality access to medical services other than hospitals. So that mobile urgent care units are again quite popular. Overall demand on municipality and healthcare systems is just doing strong. Hospitals are always looking to add additional services and given their patients opportunities to come into the hospital or be treated for certain things at home is very well received. We do with – we do that with several hospitals throughout the nation. It is being very well received by their customers on a weekly basis where we're constantly presenting the program to new hospital systems that are interested to learn about the offering. And that, and overall, maybe the medical community initially was a little bit skeptical about three years ago when we started this work. Can you really uptrain LPN and I think we've proven with remarkable else that the answer is a strong yes. And you can use lower wage medical professionals to do a lot of these very basic testing procedures that in the past have been done by higher skilled medical professionals. And for medical systems to offer the additional call it higher end level of service by giving patients the option of a clinician going to their home is being extremely well received. So, the overall answer is really strong demand. Our salespeople are very busy, which is always a good thing and besides just local municipalities and local hospitals we're also participating in large state and federal RFPs using that same concept of lower skilled, licensed practitioners up trained to do certain types of services – clinical services. And we have several big RFPs that are out. I should note those – these are RFPs that in the past we probably would not have participated in due to working capital requirements. We just didn't have large amounts of cash needed to support those types of contracts. As Andre mentioned we have plenty of cash on the books. We want to put that money to work and we're now out there and aggressively going for these really large federal state municipal type contracts, and hopefully if we're lucky 2022, we'll get a couple of those big awards.

Excellent. That's really helpful color, Stan. I appreciate that. As a follow up perhaps for Andre, great to see the strong performance here in gross margin in that leased hour model starting to sort of flow through into the model in fourth quarter. As we think about fiscal 2022 and some of these assumptions around what the implied guidance there might be for gross margin. Can you talk about how sort of leased hour start continues to flow through the model, but then also we're in an environment now where we're seeing fuel costs rise quite significantly? Can you just remind us of what the potential impact that has on the gross margin outlook as well? Thanks.

Sure. I'll talk with the last one first on fuel, because that's quite a popular question. So, in our guidance that we talked about earlier, we assume that fuel price will be about $4.30 a gallon for this year. Year-to-date it's running about $3.71, so we save a little bit against the guidance that we've given. If we assume that cash prices go up by another $1 to an average of $5.30, that will cost us about $1.05 million in additional fuel costs, which is about 39, 40 basis points on gross margin. So, it's an impact, but it's not as significant as maybe some other industries like airlines. In terms of gross margin Stan mentioned for transportation in the mature market, we trend towards the 40% [indiscernible] 40% range; and for Mobile Health 50%, 51% growth margin. In 2021 you will note that we are not on that track. And that's part of the reason for that is what Stan also mentioned and I mentioned that when we launch all these new projects and we have a short window to launch the project, because there's a demand, we go out and hire agency staff and some subcontractors, and that basically impacts margins. We expect that to improve by a couple of points during 2022 because we have less expedited projects on the larger base of revenue. So, we see that we're going to train towards, the goal of getting to long-term margins of on the average 50%.

That’s helpful color. Congrats again on the amazing quarters.

Thank you. And again, just to clarify, the long-term goal that we discussed in prior guidance is three to five years out, just to clarify.

Thank you. The next question is coming from David Grossman of Stifel. Please go ahead.

Thank you. Well, good morning. I'm wondering Stan, if you could talk, I know you don't disclose a backlog number or anything like that, but maybe you could discuss just a little bit about the visibility that you have going into the year based on the contracts that you actually have in hand, or perhaps on the recurring revenue that you typically get.

Sure. David good to hear from you again. So, when we look into 2022 and guidance and incremental revenue, we go through quite an exhausting process with all senior management, basically it's a ground-up approach. And we take several things into consideration. There are about five key points that we take into consideration when we come up with our number. And frankly, we don't finalize the process until everyone is in agreement that this is a number that we can get behind. Well, the five points that we take into consideration is one additional revenue from existing Mobile Health contracts. These are contracts that are already in place relationships that we are already servicing that have come forward to us to talk about expansion of existing programs. Two, is Mobile Health contracts that are already contracted and are in the pipeline to be implemented, these are contracts that are signed, contracts that are funded but have a start date of 30, 60, 90 days out to begin capturing revenue. Thirdly, Mobile Health contracts that are in the pipeline with greater than a 75% probability of closing, we use Salesforce, so we go through Salesforce and different stages of contracts are given a probability of closing percentage once they hit 75%, which is usually past the point of us providing a proposal and receiving some indication of acceptance, we take that those types of agreements and attribute those to the pipeline. Then we look at transportation expansion. We look at markets that we've already secured, but have not launched in, but we've already completed performers on because we know what's waiting for us in terms of Fresenius and other customers. And then we also look at our license pipeline with high probability we feel comfortable that we'll be closing some of those licenses and include those locations in our performer. And then finally, number five is some small non-significant or non-material M&A opportunities. When you buy sometimes these little companies there may be some dragging call it revenues that come along with them. So, we take those five factors. We go through an exhaustive process of going through every – a lot of detail on every one of those and then we come up with an annual number that we can all get behind. It's a process that takes time, months. But at the end of the day, the time management team is behind it. And that's how we've come up with the numbers that we shared earlier for 2022.

Got it. So, I guess in that context, plus your thoughts about COVID, the cadence of the quarters in 2022, are probably pretty difficult for all of us to predict. So, is there any guidance you can give us in terms of how to think about the cadence of both revenue and EBITDA as the year progresses, given this kind of unusual year that we're in?

Yes, definitely what I was calling an unusual year because we do expect COVID testing to drop off over Q1 and Q2. Ultimately, taking the most conservative approach and seeing go to zero, come July 1 and a lot of that work being replaced by other mobile health contracts that we've either secured or about to secure. So, it's little bit difficult for us to kind of go quarter-by-quarter because it is, what I would call, some of this revenue transition year for us. But what we could share is that we've gone through this five-step process, and I think, our historical performance in eight quarters, we've never missed guidance, never missed budget don't expect, and don't hope that we never do going forward. So, we feel quite confident about the numbers that we've shared with you. Some people may think it's too conservative. As a company, we tend to be more on the conservative side of things. And if we see that the year shaping up better after each quarter, we'll go ahead and raise that guidance after the quarter. But I do agree with you, it is difficult to kind of project out on a quarter-by-quarter basis and give more detail other than we've already provided.

All right. And maybe I can just ask it a different way, is it logical to think that based on the parameters that you are using relative to COVID that we would see sequential declines in revenue for March and June, and then reestablish that as the base to increase revenue sequentially in the back half of the year, is that – and listen, if you can comment, you can comment, but just curious if that's at least the logical assumption to use as we think about 2022.

I think it's safe to say that as COVID testing revenue starts dropping off, that we have a healthy backlog of agreement that would capitalize on that available labor workforce to start on new projects. That is ultimately our goal. Our challenge is to time it well. So, we secure new agreements. We have a good idea in terms of what COVID testing revenue – when COVID testing revenue will start dropping off, and then we use that workforce to take on and begin new contracts.

All right. Got it. Thanks for that. And then just I want to make sure I understood. So, Andre, I think, you said that there was a $5.2 million, was it a gain? I'm sorry, I didn't get the exact description of what that was in a fourth quarter. Could you mind just repeating that?

Yes, sure, no problem. So basically, net income, as well as adjusted EBITDA for the year and for the quarter, as a matter of fact, it's a $5.2 million gain on the warrant liability. So, when we merged with Motion way back in November, when it went effective, we inherited that warrant liability for outstanding warrant. At the date of the transaction Motion stock was priced at $10 a share. So, you basically value the warrant at $10 a share. At the end of December, when we close the year in the quarter, the stock price was down in the $6 range, $6.16 [ph] whatever. So that delta, that $3.5 is basically an induction of the warrant liability. So that's just mark-to-market. So, we owe – it's a lower liability.

Got you.

So, the bad thing is, or the mix that you're going to get is, we obviously want to see our price trading above $10, then you're going to have it going the other way. So that's why we call it out that it's a non-cash, non-operational, it's just an accounting item, just like stock option treatment, it's a non-cash item.

Correct, correct. Correct. So, when – I think you…

Sorry, go ahead.

So, I think, I guess, going back to January, you, preannounced your quarter, you exceeded that. So, what is the difference between, I think, it was about $108 million and what you actually reported. What is the difference between those two numbers? What came in unexpectedly, I guess, that you were able to outperform what you pre-announced in January?

Yes, so we had several, you know, new projects that started in November, December timeframe, and not to bore you with some accounting lingo, but it's called a 606 calculation to determine based on your revenue that you book, what would you ultimately collect? So, when you have a new project, you don't have any history on collection for that specific project. So, we made some estimates that instead of booking a 100% of revenue, we booked a lower percentage of revenue because we had to project that there will be a lower cash collection from that customer, because we have no experience. And then as we got into January, February, and finalizing the audit, we got paid on some of those projects. So now talking about that reserve that you set aside potential short payment, or non-payment suddenly you take that reserve back into income. And it's just a standard audit process, looking at subsequent receipts on the receivables that you have on the balance sheet. That was the major really factors of the 606 calculation.

Got it.

It's not an unusual transaction. It's a standard process at the end of every quarter and at the end of a fiscal year.

Right. And if I could just one last one, can you just give us some sense of what to use for the share count in 2022, given 2021 is kind of an unusual year, it’s a non-GAAP adjustment also for 2022, to the extent you have visibility on?

In terms of share count we have a 100 million outstanding shares at the end of December, six million warrants out there, about half is public and half is private warrants. So, on a fully diluted basis, it's 106 million. And then we have about five million of a earn out related to the transaction that if we hit certain price points, then the “selling shareholders” will be earning the five million earn out shares. At this point in time, I think, the first earn out reaches at $11.50 a share. So, that’s tough to project when we're going to earn those five million shares. And then there's about six million outstanding shares related to stock options that are not wasted all of them. Full year based on its standard [indiscernible] program. So, those are the buckets. About a 100 million outstanding now, six million warrants for sure, five million potential earn-out in the future. And then about six million stock options. Some is invested and some is not invested. Does that help?

Okay, got it. Yes, it does. And how about the non-GAAP adjustments, any sense for those in 2022?

So going forward non-GAAP adjustments will be still stock compensation because that's always an expense that we book every quarter. It will be a warrant true-up as long as we have the warrants outstanding on the balance sheet. And I just said earlier, if the stock price goes above $10, we'll have a nice loss, let's see. We will be happy if the stock price is up. And then the other adjustment we had in 2021 was related to the listing of the company. We won't have that going forward. So, it'll be standard EBITDA, plus stock option compensation, plus warrants liability true up.

Got it. Great. All right, guys. Thanks very much.

Thank you, David.

You are welcome.

Thank you. Our next question is coming from Richard Close of Canaccord Genuity. Please go ahead.

Yes. thanks for the question. Congratulations on a strong year. I just wanted to clarify what was the COVID revenue in 2021? Did you say it was $110 million?

So, we...

Sorry, go ahead.

Go ahead, Andre.

I was just going to say, yes, we estimate that the COVID testing related revenue was about $110 million. And the reason we say we estimated because some people ask why, don’t you know the specific number. Stan mentioned earlier that we don’t really do consumer testing almost 100% is contracts with municipalities or states. We get paid for a shift or a whole shift for the labor. So, our margin is covered by the shift and whether we do one test or 10 tests on that shift, in some cases, we don’t really get anything extra. In other cases, we get a little bit more. So, our contracts started as testing, and then we started adding vaccines, multiple types of vaccines and then some other services, so on our labor contracts testing, there’s co-mingles with other revenues. So, we had to go through contracts, and we estimate that was about $110 million for 2021.

Richard, a good way to look at it is, we try to structure our agreements for a flat feed by the day. And if we’re doing it, pre-op service in the patient’s home, you’re doing an EKG, blood work, vital signs and a COVID test, but we get paid by the day maybe a nominal upcharges for different things that we can – that we do $5, $10 nominal upcharges, it’s how do you kind of separate out just that COVID test in that scenario? So, it’s a little bit challenging. It’s simpler when you have a – just a contract that only has COVID. But some of the work that we do has COVID as a – one of the many services that we do under a daily rate. So, it’s a little challenging, but I think Andre and the team did a good job of getting to a ballpark figure.

Okay. And then just to be clear on the guidance, because you gave some – you gave the guidance and then you said what the growth is if you exclude it from the second half, because the 2022 you’re expecting no COVID testing revenue in the second half. So, I just want to be clear, what is the assumption for COVID in the first half? Did you call out a specific millions of dollars number that you’re expecting?

We have not. And the reason for that is because, one, we don’t want to communicate a set of numbers, a group of numbers that we’re not basically, absolutely certain about. And although COVID testing in municipalities the volumes have decreased, some of the agreement personnel have been lowered. But frankly, we don’t know when we get a phone call from the municipality, and they asked us to reduce the staffing because the need is no longer there with an ease. The need is substantially reduced. So, we’re basically saying that first half of the year will be on a similar trajectory as the first half of last year. And phasing out during – more towards to Q2 and ultimately going to zero in beginning of Q3. But it wouldn’t be call it, professional of us to just take guesses on how the states and municipalities are going to be doing reductions during Q1 and Q2. So, we just internally kind of budgeted out on a gradual reduction to a zero come July 1.

Okay. Just hitting on Fresenius for a little bit. I know in the filings you previously disclosed the amount of revenue associated with that client or that partner, I should say. What are you expecting in 20 – or what specifically was the revenue associated with Fresenius in 2021 and then your thoughts on expansion of that relationship in 2022?

Again, we don’t disclose the numbers specific to a client, to a customer. But what I would say is, we’ve pretty much doubled the revenue 2021 compared to 2020 with Fresenius. I think as long as we can secure our licenses in new markets, we hope that we’ll continue to closely double the revenue number with them year-after-year. I mean, that’s what I would love to see happen. I don’t think it’s a far stretch to assume that. The relationship with Fresenius is going strong. They are in all 50 states, they have 2,400 clinics, all of which have certain amount of patients that go by private ambulance service, and those are patients that we service and get compensated quite well for. We love that business because it’s recurring, it’s steady and we can forecast it with a very high degree of accuracy. In addition to the transportation services, we are looking at other, call it, mobile health opportunities that we can deliver to Fresenius and some of their patients. Those conversations are ongoing. There’s discussion about pilots. But until things just become a little bit more concrete on there in terms of expansion to other opportunities beyond transport, we’re really not going to go into that detail until there’s a contract that’s signed and we’ll be thrilled to communicate that with everybody.

Okay. And maybe just a clarification. I believe Andre said mobility is expected to be 25% to 30% of revenue in 2022. Is that correct?

That’s correct. Yes.

Okay. And then Stan, you said five to seven new markets expected for transportation in 2022.

I’m sorry. Richard, can you repeat that question?

Did you say five to seven new markets for transportation in 2022?

Yes. We’ve got two new markets licenses that we’ve already secured and kind of started this soft launch on early on in the year. We’ve probably got close to half a dozen LOIs out today. So, I think it’s very realistic to assume we’ll get into five to seven more transportation markets by the end of the year.

Are those two licenses you secured the acquisition you did in Maryland and Pennsylvania and whatnot?

That’s correct. Yes.

Okay. With respect to EMR integration you called that out. Is there thoughts on getting a Cerner or Oracle, I guess now integration or does that matter?

Yes. We have integration with quite a few large EMRs, particularly Epic and Allscripts. We’ve done some work with Cerner in the past. What really drives that is just our customer needs and customer demands, the depth of that integration with Epic, we’ve done really, really deep. I would say the majority of our large customers are on Epic. Northwell, which is an Allscripts client, we’ve got good integration with our product there. We’ve done some basic integration with Cerner. We can definitely go much deeper, but that’s really dictated by the customer and the level of integration that they’d like us to see complete with them. One of the things that I probably should call out, these integrations are not easy to accomplish. If we called on our own to an Epic representative, we probably wouldn’t make it past the reception desk. The only reason why we’ve been successful with these integrations and why we’re probably one of the very few, if not the only company that accomplished them is because our long-term contracts with the hospitals allow the hospitals to actually call the EMR provider and insist on the integration. So, it’s Jefferson, that’s making the call to Epic, it’s UCHealth, it’s Northwell. And when the call comes from them being that they’re a substantial size customer, Epic steps up and helps get that completed, Allscripts steps up and helps get that completed. So, it’s really these long-term quality relationships that we have with our hospital systems that are allowed for these in-depth integrations. And it’s not just Epic or Cerner. I mean there’s about 20 different EMRs, smaller ones that we’ve also have done some level of integration with. And it definitely strengthens our IP that we own.

Okay. And a question with respect to the Aetna, you called that out that’s new who channeled for you guys, I guess, or new customer base in the payer side. And so, I assume there’s some marketing and onboarding costs associated with driving revenue on that business that’s different than your normal mobile health business. Can you talk a little bit about that, how we should think about sort of profitability or go-to-market to ramp the revenue there?

Well, great, great question, Richard. I mean, the reality is, one of the things I’m most excited about in 2022 is us entering the direct-to-consumer market with high copays, high deductibles. We see consumers be willing to pay a nominal amount and get concierge like services in their home. We’ve launched a service with a partnership out of Canada. The pilot is doing super well, and we’re now laying the groundwork to launch that service in the United States. The Aetna agreement is the first, call it, major contract that we signed that is a D2C type of an offering. We don’t have a lot of information that we can share yet about that program. That entire initiative is being headed by Aaron Severs at our company, Aaron is a proven executive with lots of success behind him. And the entire D2C offering is something that he is leading for us. Preliminary testing of, call it, selecting customers that we serviced one-offs have provided really good feedback and very high satisfaction levels. So, what you basically are seeing is the foundation for a future direct to consumer offering. There’s going to be a lot of learning. There’s going to be a lot of development that goes into that program that we are tapping – if successful, we’re going to tap into a huge, huge TAM that the company will benefit for many years going forward. So, we don’t have that much information that we can publicly share yet. Other than, we are all in on the direct-to-consumer offering. And Aetna is one of the first that we signed in preparation for that we have ongoing conversations with several other large national payers to offer that service with. And as we get more results out of our Canada program, we’ll definitely share it with you. And as we get ready to launch that service officially in the United States, beyond the pilot, we’ll definitely share that with everyone.

Thank you. This brings us to the end of our question-and-answer session as we are out of time. I would like to turn the floor back over to Mr. Vashovsky for closing comments.

Yes. Thank you. Well, that concludes our call for this morning. We hope you found the call to be informative. We hope we were successful in conveying our enthusiasm for the year and beyond. We have significant opportunities in front of us, and I look forward to a very successful and exciting year. This is going to conclude our call and really want to thank everyone for joining. Have a great day, everyone.

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