SOC Telemed Reports Third Quarter 2021 Financial and Operating Results

SOC Telemed, Inc. and Subsidiaries and Affiliates
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and per share amounts)
(Unaudited)

September 30,
2021

December 31,
2020

ASSETS

Current assets

     Cash and cash equivalents (from variable interest entities $12,357 and $1,942,
     respectively)

$

37,727

$

38,754

     Accounts receivable, net of allowance for doubtful accounts of $488 and $447
     (from variable interest entities, net of allowance $12,650 and $8,192, respectively)

14,361

8,721

     Inventory

1,303

–

     Prepaid expenses and other current assets (from variable interest entities $15 and $0,
     respectively)

4,434

1,609

          Total current assets

57,825

49,084

    Property and equipment, net

3,855

4,092

    Capitalized software costs, net

9,957

8,935

    Intangible assets, net

45,081

5,988

    Goodwill

155,099

16,281

    Deposits and other assets

1,801

559

    Total assets

$

273,618

$

84,939

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

    Accounts payable (from variable interest entities $3,100 and $692, respectively)

$

5,387

$

2,809

    Accrued expenses (from variable interest entities $3,303 and $1,349, respectively)

11,163

8,293

    Deferred revenues

520

610

    Capital lease obligations

22

–

    Other Current Liabilities

282

–

    Stock-based compensation liabilities

–

4,228

             Total current liabilities

17,374

15,940

    Deferred revenues

960

923

    Capital lease obligations

52

–

    Long-term debt, net of unamortized discount and debt issuance costs

73,897

–

    Contingent shares issuance liabilities

2,725

12,450

    Other long-term liabilities (from variable interest entities $0 and $157, respectively)

403

560

     Total liabilities

$

95,411

$

29,873

COMMITMENTS AND CONTINGENCIES (Note 16)

STOCKHOLDERS’ EQUITY

     Class A common stock, $0.0001 par value; 500,000,000 shares authorized as of
     September 30, 2021, and December 31, 2020; 98,853,186 and 74,898,380 shares
     issued and outstanding at September 30, 2021, and December 31, 2020,
     respectively.

10

8

     Preferred stock, $0.0001 par value, 5,000,000 shares authorized; none issued and
     outstanding as of September 30, 2021, and December 31, 2020, respectively.

–

–

     Additional paid-in capital

452,115

291,277

     Accumulated deficit

(273,918)

(236,219)

     Total stockholders’ equity

178,207

55,066

Total liabilities and stockholders’ equity

$

273,618

$

84,939

SOC Telemed, Inc. and Subsidiaries and Affiliates
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except shares and per share amounts)
(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenues

$

26,684

$

15,132

$

66,465

$

43,493

Cost of revenues

18,561

9,534

45,265

29,277

Operating expenses

  Selling, general and administrative

21,247

11,993

64,987

30,267

  Changes in fair value of contingent consideration

(318)

–

(3,265)

      Total operating expenses

20,929

11,993

61,722

30,267

      Loss from operations

(12,806)

(6,395)

(40,522)

(16,051)

Other income (expense)

Gain on contingent shares issuance liabilities

4,081

–

9,725

–

Loss on puttable option liabilities

–

(412)

–

(517)

Interest expense

(1,775)

(2,853)

(5,047)

(8,469)

Interest expense – Related party

–

(21)

(2,026)

(21)

    Total other income (expense)

2,306

(3,286)

2,652

(9,007)

    Loss before income taxes

(10,500)

(9,681)

(37,870)

(25,058)

Income tax benefit (expense)

(146)

(7)

171

(10)

Net loss and comprehensive loss

$

(10,646)

$

(9,688)

$

(37,699)

$

(25,068)

Accretion of contingently redeemable preferred stock

–

(2,152)

–

(5,670)

Net loss attributable to common stockholders

$

(10,646)

$

(11,840)

$

(37,699)

$

(30,738)

Net loss per share attributable to common stockholders

Basic

$

(0.11)

$

(0.34)

$

(0.43)

$

(0.89)

Diluted

$

(0.11)

$

(0.34)

$

(0.43)

$

(0.89)

Weighted-average shares used to compute net loss per share attributable to common stockholders:

   Basic

98,377,279

34,345,197

88,675,997

34,345,197

   Diluted

98,377,279

34,345,197

88,675,997

34,345,197

SOC Telemed, Inc. and Subsidiaries and Affiliates
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Nine Months Ended
September 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(37,699)

$

(25,068)

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization

6,723

4,008

Stock-based compensation

13,331

1,280

Change in fair value of contingent consideration

(3,265)

–

Loss on puttable option liabilities

–

517

(Gain) on contingent shares issuance liabilities

(9,725)

–

Bad debt expense

66

64

Accrued interest on convertible bridge debt (related party)

–

21

Paid-in kind interest on long-term debt

203

2,310

Amortization of debt issuance costs and issuance discount

3,737

1,073

Income tax benefit

(241)

–

Change in assets and liabilities, net of acquisitions

        Accounts receivable, net of allowance

(104)

1,661

        Prepaid expense and other current assets

(2,189)

(599)

        Inventory

79

–

        Deposits and other non-current assets

(957)

32

        Accounts payable

115

891

        Accrued expenses and other liabilities

1,809

1,657

        Deferred revenues

(53)

213

           Net cash used in operating activities

(28,170)

(11,940)

Cash flows from investing activities:

        Capitalization of software development costs

(3,099)

(3,252)

        Purchase of property and equipment

(989)

(1,724)

        Acquisition of business, net of cash

(90,306)

–

       Net cash used in investing activities

(94,394)

(4,976)

Cash flows from financing activities:

        Principal payments under capital lease obligations

(6)

(66)

        Proceeds from long-term debt, net of discount

82,980

3,961

        Proceeds from Related-party – Unsecured subordinated promissory note, net of
        unamortized discount

11,474

–

        Repayment of long-term debt

(10,795)

–

        Repayment of Related-party – Unsecured subordinated promissory note

(13,703)

–

        Proceeds from exercise of stock options

42

–

        Payment of deferred transaction related costs

–

(63)

        Issuance of contingently redeemable preferred stock

–

10,938

        Proceeds from issuance of Class A Common Stock, net of issuance costs

51,545

–

    Net cash provided by financing activities

121,537

14,770

NET DECREASE IN CASH AND CASH EQUIVALENTS

(1,027)

(2,146)

Cash and cash equivalents at beginning of the period

38,754

4,541

Cash and cash equivalents at end of the period

$

37,727

$

2,395

SOC Telemed, Inc. and Subsidiaries and Affiliates
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data) (Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

2021

2020

2021

2020

Change

% Change

Change

% Change

(dollars in thousands)

Revenues

$

26,684

$

15,132

$

66,465

$

43,493

$

11,552

76

%

$

22,972

53

%

Cost of revenues

18,561

9,534

45,265

29,277

9,027

95

%

15,988

55

%

Gross profit

8,123

5,598

21,200

14,216

2,525

45

%

6,984

49

%

Add:

Depreciation and amortization (a)

1,322

1,004

3,766

2,807

318

32

%

959

34

%

Equipment leasing costs (b)

–

15

8

57

(15)

(100)

%

(49)

(86)

%

Stock-based compensation (e)

31

–

37

–

31

*

37

*

Adjusted gross profit

$

9,476

$

6,617

$

25,011

$

17,080

2,859

43

%

7,931

46

%

Adjusted gross margin (as a percentage of revenues)

36

%

44

%

38

%

39

%

Three Months Ended
September 30

Nine Months Ended
September 30,

Three Months Ended
September 30

Nine Months Ended
September 30,

2021

2020

2021

2020

Change $

Change %

Change $

Change %

(dollars in thousands)

Net loss

$

(10,646)

$

(9,688)

$

(37,699)

$

(25,068)

$

(958)

10

%

$

(12,631)

50

%

Add:

    Interest expense (c)

1,775

2,874

7,073

8,490

(1,099)

(38)

%

(1,417)

(17)

%

    Income tax (benefit)
expense (d)

146

7

(171)

10

139

*

(181)

*

    Depreciation and
amortization (a)

2,618

1,401

6,759

4,008

1,217

87

%

2,751

69

%

    Stock-based
compensation (e)

2,686

1,033

13,330

1,280

1,653

160

%

12,050

941

%

    Loss on puttable
option
liabilities (g)

–

412

–

517

(412)

(100)

%

(517)

(100)

%

    Gain on contingent
shares issuance
liabilities (f)

(4,081)

–

(9,725)

–

(4,081)

*

(9,725)

*

    Gain on change in fair value of contingent
consideration (h)

(318)

–

(3,265)

–

(318)

*

(3,265)

*

    Integration,
acquisition,
transaction, and
executive
severance costs (i)

2,228

1,018

8,137

3,521

1,210

119

%

4,616

131

%

Adjusted EBITDA

$

(5,592)

$

(2,943)

$

(15,561)

$

(7,242)

(2,649)

90

%

(8,319)

115

%

Three Months Ended
 September 30,

2021

2020

Change

% Change

(dollars in thousands)

Selling, general and administrative expenses (1):

Sales and marketing

$

2,371

$

1,936

$

435

23

%

Research and development

637

398

239

60

%

Operations

2,656

2,357

299

13

%

General and administrative

15,583

7,302

8,281

113

%

 Total

$

21,247

$

11,993

$

9,254

77

%

(1)           Selling, general, and administrative expenses include the following expenses for the periods presented:

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

Stock-Based
Compensation

Depreciation
and
Amortization

Integration
Costs

Stock-Based
Compensation

Depreciation
and
Amortization

Integration
Costs

(dollars in thousands)

Sales and marketing

$

151

$

–

$

–

$

3

$

–

$

–

Research and development

185

–

–

8

–

–

Operations

169

–

–

10

–

–

General and administrative

2,151

1,296

2,228

1,012

397

1,018

Total

$

2,656

$

1,296

$

2,228

$

1,033

$

397

$

1,018

Three Months Ended
 September 30,

2021

2020

Change

% Change

(dollars in thousands)

Selling, general and administrative expenses excluding
stock-based compensation, depreciation and amortization
and integration costs:

Sales and marketing

$

2,220

$

1,931

$

289

15

%

Research and development

452

392

60

15

%

Operations

2,487

2,346

141

6

%

General and administrative

9,908

4,887

5,021

103

%

 Total

$

15,067

$

9,556

$

5,511

58

%

Nine Months Ended
September 30,

2021

2020

Change

% Change

(dollars in thousands)

Selling, general and administrative expenses (1):

Sales and marketing

$

7,358

$

4,920

$

2,438

50

%

Research and development

1,695

940

755

80

%

Operations

7,718

6,539

1,179

18

%

General and administrative

48,216

17,868

30,348

170

%

 Total

$

64,987

$

30,267

$

34,720

115

%

(1)           Selling, general, and administrative expenses include the following expenses for the periods presented:

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

Stock-Based
Compensation

Depreciation
and
Amortization

Integration
Costs

Stock-Based
Compensation

Depreciation
and
Amortization

Integration
Costs

(dollars in thousands)

Sales and marketing

$

494

$

–

$

–

$

18

$

–

$

–

Research and development

459

–

–

48

–

–

Operations

484

–

–

45

–

–

General and administrative

11,856

2,993

8,137

1,169

1,201

3,521

Total

$

13,293

$

2,993

$

8,137

$

1,280

$

1,201

$

3,521

Nine Months Ended
 September 30,

2021

2020

Change

% Change

(dollars in thousands)

Selling, general and administrative expenses excluding
stock-based compensation, depreciation and amortization
and integration costs:

Sales and marketing

$

6,864

$

4,902

$

1,962

40

%

Research and development

1,236

892

344

39

%

Operations

7,234

6,494

740

11

%

General and administrative

25,230

11,977

13,253

111

%

 Total

$

40,564

$

24,265

$

16,299

67

%

Explanation of Non-GAAP Adjustments

(a)

Depreciation and amortization consists primarily of depreciation of fixed assets, amortization of capitalized software development costs and amortization of acquisition-related intangible assets, such as customer relationships, non-compete agreements, and trade names acquired in connection with business combinations. While depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced or updated in the future, and these measures do not reflect any cash requirements for these replacements or updates. Additionally, we incur amortization of acquisition-related intangible assets based on the portion of the purchase price allocated to intangible assets and the estimated useful lives of such assets. However, the purchase price allocated to these assets is not necessarily reflective of the cost we would incur to internally develop the intangible asset and we do not believe these charges are reflective of our operating results in the period incurred. We eliminate these non-cash charges from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period.

(b)

Equipment leasing costs consist of the cost of procuring telemedicine equipment through lease financing. We ceased this practice in the second quarter of 2017. We eliminate these charges from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period.

(c)

Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and issuance costs associated with our term loan agreement. We eliminate these cash and non-cash expenses from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period within our presentation of adjusted EBITDA. Adjusted EBITDA is widely used by investors to measure a company’s operating performance without regard to items, such as interest benefit and expense, income tax benefit and expense, depreciation and amortization, stock-based compensation, and other charges and income. We believe adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry as this metric generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

(d)

We incur income tax expenses or benefits that are related to prior periods. We eliminate these expenses from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period within our presentation of adjusted EBITDA.

(e)

Stock-based compensation expense consists of expenses for stock options and other stock-based awards. Although stock-based compensation is a key incentive offered to our employees, we continue to evaluate our operating and financial performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods. We evaluate our performance both with and without these measures because stock-based compensation is a non-cash expense and can vary significantly over time based on the timing, size, nature and design of the awards granted, and is influenced in part by certain factors that are generally beyond our control, such as the volatility of the market value of our common stock. In addition, we eliminate stock-based compensation expense from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period.

(f)

Gain on contingent share issuance liabilities consists of the change in fair value of 1,875,000 shares of our common stock held by HCMC’s sponsor and subsequently distributed to permitted transferees and were modified and became subject to forfeiture in connection with the closing of our Merger Transaction, and 350,000 private placement warrants granted to HCMC’s sponsor subsequently distributed to its permitted transferees as part of the Merger Transaction.  The contingent shares issuance liabilities are revalued at their fair value every reporting period.

(g)

Loss on puttable option liabilities consists of changes in the fair value of puttable option liabilities. We eliminate these non-cash expenses from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period.

(h)

Gain on change in fair value of contingent consideration is the change in fair value of the earnout contingent consideration and the deferred payment in connection with our acquisition of Access Physicians in Q1 2021. The contingent consideration is revalued every reporting period based on the estimation of the likelihood that such contingent consideration will be earned. We eliminate these non-cash activities from our non-GAAP operating results to facilitate an understanding of our operating and financial performance from period-to-period.

(i)

Integration, acquisition, transaction and executive severance costs represent the transaction and business integration costs related to our business combination with Healthcare Merger Corp. in Q4 2020 and our acquisition of Access Physicians in Q1 2021.  These costs include incremental expenses incurred to affect business combinations such as advisory, legal, accounting, valuation, and other professional or consulting fees, as well as other related incremental executive severance costs. We exclude these costs from our non-GAAP results as they have no direct correlation to the operation of our business, and because we believe that the non-GAAP financial measures excluding these costs provide useful information about our spending trends to facilitate an understanding of our operating and financial performance from period-to-period.