54% Increase in Revenue in the Fourth Quarter 2022 Versus Third Quarter 2022

Marpai, Inc. (“Marpai” or the “Company”) (Nasdaq: MRAI), a technology company transforming the company health plan for employers that self-fund their healthcare, today reported financial results for the fourth quarter and year ended December 31, 2022.

The Company’s consolidated results of operations include the results of operations of Marpai and its wholly owned subsidiary, Marpai Health, Inc., for all periods presented, and the results of Marpai Administrators LLC.(“Marpai Administrators”), formerly Continental Benefits, LLC, since its acquisition on April 1, 2021, and of Maestro Health, LLC. (“Maestro Health”) since its acquisition on November 1, 2022.

Financial Highlights

  • Net revenues for the fourth quarter of 2022 were approximately $7.6 million, compared to net revenue of approximately $4.9 million for the third quarter of 2022, representing a sequential increase of approximately $2.7 million, or 54%. This increase is primarily due to the acquisition of Maestro Health.
  • Net revenues for the year ended December 31, 2022, were approximately $24.3 million compared to net revenues of approximately $14.2 million for the year ended December 31, 2021, representing an increase of approximately $10.1 million, or 71%. This increase is primarily due to the acquisition of Maestro Health and because the 2021 results did not include Marpai Administrator’s revenues for the first quarter of 2021.
  • The number of customers’ employees covered under the Company’s administered health plans was 42,107, 16,357 and 21,074 on December 31, 2022, September 30, 2022 and June 30, 2022, respectively. This increase is primarily due to the acquisition of Maestro Health.
  • Operating expenses (including cost of revenues) were approximately $16.6 million for the fourth quarter of 2022, as compared to approximately $10.8 million for the third quarter of2022, reflecting the acquisition of Maestro Health, which increased the overall level of activity of the Company.
  • Operating expenses (including cost of revenues) for the full year 2022 were $51.3 million, compared to approximately $30.1 million for 2021. This increase is primarily due to the acquisition of Maestro Health and because the 2021 results did not include Marpai Administrator’s operating expenses for the first quarter of 2021.
  • Operating loss was approximately $8.9 million for the fourth quarter of 2022 compared to approximately $5.8 million for third quarter of 2022.
  • Operating loss for the full year 2022 was $27 million compared to $15.9 million for the full year 2021.
  • Net loss was approximately $8.5 million for the fourth quarter of 2022, compared to net loss of approximately $5.8 million for the third quarter of 2022.
  • 2022 full year net loss was approximately $26.5 million compared to approximately $16 million in 2021.
  • Adjusted negative EBITDA was approximately $7.0 million for the fourth quarter of 2022 compared to adjusted negative EBITDA of approximately $4.3 million in the third quarter of 2022.
  • Adjusted negative EBITDA for the full year 2022 was $20.0 million compared to adjusted negative EBITDA of $12.7 million for full year 2021.

A reconciliation of U.S. generally accepted accounting principles (“GAAP”) to non-GAAP measures has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Acquisition of Maestro Health

On November 1, 2021, the Company closed the acquisition of Maestro Health in a seller financed deal that more than doubled the size of the Company. While the transaction contributed to the increase of the Company’s consolidated operating loss in the fourth quarter of 2022, we are now in the process of integrating the two companies and expect the transaction to become accretive to our monthly Adjusted EBITDA by the middle of 2023.

"2022 was a transformative year for Marpai, with our acquisition of Maestro Health,” stated Edmundo Gonzalez, Chief Executive Officer of Marpai. “We are focused on a few financial objectives. First, we have reduced, and will continue to reduce, operating costs as we integrate two legacy companies with similar functions into one. This work is on-going. In addition, we must cross sell our products to each legacy company customer base, as this alone represents a significant revenue and profit opportunity,” said Gonzalez.

Financial Guidance

The Company expects 2023 annual revenues to be between $34 million and $35 million and expects first quarter 2023 revenues to be in a range of $9 million to $9.3 million. First quarter revenues are expected to include approximately $0.5 million one- time run out revenues.

The foregoing forward-looking statements reflect our expectations as of today's date. Given the number of risk factors, uncertainties and assumptions discussed below, actual results may differ materially. We do not intend to update our financial outlook until our next quarterly results announcement.

Webcast and Conference Call Information

Marpai will host a conference call and webcast tomorrow, on Thursday, March 30, 2022 at 8:30 a.m. ET to answer questions about the Company's operational and financial highlights for its fourth quarter and year ended December 31, 2022.

Investors interested in listening to the conference call may do so by dialing (866)-652-5200 for domestic callers or +1-412-317-6060 for international callers, or by dialing 1-855-669-9657 for Canadian callers ,or via webcast: https://app.webinar.net/07JEr5B2x8G

About Marpai, Inc.

Marpai, Inc. (Nasdaq: MRAI) is a technology company bringing AI-powered health plan services to employers that directly pay for employee health benefits. Primarily competing in the $22 billion TPA (Third Party Administrator) sector serving self-funded employer health plans representing over $1 trillion in annual claims, Marpai maximizes the value of the health plan as measured in health outcomes. Marpai takes a member-centric approach to connect members to health solutions predicted to have a high probability of positive outcomes, and aims to bring value-based care to the self-insured market. With effective early intervention, disease management, claims processing and proactive member outreach, Marpai works to deliver the healthiest member population for the health plan budget. Operating nationwide, Marpai offers access to provider networks including Aetna and Cigna and all TPA services. For more information, visit www.marpaihealth.com.

Forward-Looking Statement Disclaimer

This press release contains forward-looking statements, as that term is defined in the Private Litigation Reform Act of 1995, that involve significant risks and uncertainties, including statements regarding anticipated 2023 and first quarter 2023 results. Forward-looking statements can be identified through the use of words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," “guidance,” "may," "can," "could", "will", "potential", "should," "goal" and variations of these words or similar expressions. For example, the Company is using forward looking statements when it discusses that it believes that the Maestro Health transaction will become accretive to its monthly Adjusted EBIDTA by the middle of 2023, its future financial goals in 2023,and its first quarter revenue guidance. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Marpai's current expectations and speak only as of the date of this release. Actual results may differ materially from Marpai's current expectations depending upon a number of factors. These factors include, among others, adverse changes in general economic and market conditions, competitive factors including but not limited to pricing pressures and new product introductions, uncertainty of customer acceptance of new product offerings and market changes, risks associated with managing the growth of the business. Except as required by law, Marpai does not undertake any responsibility to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.

More detailed information about Marpai and the risk factors that may affect the realization of forward-looking statements is set forth in Marpai's filings with the Securities and Exchange Commission. Investors and security holders are urged to read these documents free of charge on the SEC's web site at http://www.sec.gov.

Use of Non-GAAP Financial Measures and Their Limitations

In addition to our results and measures of performance determined in accordance with U.S. GAAP presented in this press release, we believe that certain non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans and making strategic decisions.

Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and is also used for internal planning and forecasting purposes.

We believe that Adjusted EBITDA, together with a reconciliation to net loss, helps identify underlying trends in our business and helps investors make comparisons between our company and other companies that may have different capital structures, tax rates, or different forms of employee compensation. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider these measures in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these potential limitations include:

  • other companies, including companies in our industry which have similar business arrangements, may report Adjusted EBITDA, or similarly titled measures but calculate them differently, which reduces their usefulness as comparative measures;
  • although depreciation and amortization expenses are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditures for such replacements or for new capital expenditure requirements;
  • Adjusted EBITDA also does not reflect changes in, or cash requirements for, our working capital needs or the potentially dilutive impact of stock-based compensation; and
  • Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur.

Because of these and other limitations, you should consider our non-GAAP measures only as supplemental to other GAAP-based financial measures.

MARPAI, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

December 31, 2022

 

December 31, 2021

ASSETS:

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,764

 

 

$

19,183

 

Restricted cash

 

 

9,353

 

 

 

6,751

 

Accounts receivable, net of allowance for credit losses of $23 and $0

 

 

1,438

 

 

 

209

 

Unbilled receivable

 

 

350

 

 

 

15

 

Prepaid expenses and other current assets

 

 

1,602

 

 

 

743

 

Other receivables

 

 

31

 

 

 

91

 

Total current assets

 

 

26,538

 

 

 

26,992

 

 

 

 

 

 

Property and equipment, net

 

 

1,506

 

 

 

890

 

Capitalized software, net

 

 

4,589

 

 

 

6,305

 

Operating lease right-of-use assets

 

 

3,842

 

 

 

2,044

 

Goodwill

 

 

5,837

 

 

 

2,383

 

Intangible assets, net

 

 

6,323

 

 

 

5,508

 

Security deposits

 

 

1,293

 

 

 

52

 

Other long-term asset

 

 

22

 

 

 

28

 

Total assets

 

$

49,950

 

 

$

44,202

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,458

 

 

$

1,126

 

Accrued expenses

 

 

5,275

 

 

 

2,525

 

Accrued fiduciary obligations

 

 

9,024

 

 

 

5,541

 

Deferred revenue

 

 

288

 

 

 

1,165

 

Current portion of operating lease liabilities

 

 

1,311

 

 

 

784

 

Due to related party

 

 

3

 

 

 

4

 

Total current liabilities

 

 

17,359

 

 

 

11,145

 

 

 

 

 

 

Other long-term liabilities

 

 

20,204

 

 

 

45

 

Operating lease liabilities, net of current portion

 

 

4,772

 

 

 

1,302

 

Deferred tax liabilities

 

 

1,480

 

 

 

2,001

 

Total liabilities

 

 

43,815

 

 

 

14,493

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Common stock, $0.0001 par value, 227,791,050 shares authorized; 21,279,032 issued and outstanding at December 31, 2022 and 20,299,727 issued and outstanding at December 31, 2021

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

54,126

 

 

 

51,232

 

Accumulated deficit

 

 

(47,994

)

 

 

(21,526

)

Total stockholders’ equity

 

 

6,134

 

 

 

29,708

 

Total liabilities and stockholders’ equity

 

$

49,950

 

 

$

44,202

 

MARPAI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

 

Year ended December 31,

 

2022

 

2021

Revenue

 

$

24,342

 

 

$

14,227

 

Costs and expenses

 

 

 

 

 

Cost of revenue (exclusive of depreciation and amortization shown separately below)

 

 

17,136

 

 

 

10,289

 

General and administrative

 

 

12,319

 

 

 

8,056

 

Sales and marketing

 

 

6,939

 

 

 

4,965

 

Information technology

 

 

6,373

 

 

 

2,492

 

Research and development

 

 

3,708

 

 

 

1,734

 

Depreciation and amortization

 

 

3,538

 

 

 

1,962

 

Facilities

 

 

1,013

 

 

 

590

 

Loss on disposal of assets

 

 

273

 

 

 

 

Total costs and expenses

 

 

51,299

 

 

 

30,088

 

 

 

 

 

 

Operating loss

 

 

(26,957

)

 

 

(15,861

)

 

 

 

 

 

Other income (expenses)

 

 

 

 

Other income, net

 

 

234

 

 

 

173

 

Interest expense

 

 

(268

)

 

 

(427

)

Foreign exchange loss

 

 

(0

)

 

 

(19

)

Loss before provision for income taxes

 

 

(26,990

)

 

 

(16,135

)

 

 

 

 

 

Income tax benefit

 

 

(521

)

 

 

(150

)

Net loss

 

$

(26,468

)

 

$

(15,985

)

 

 

 

 

 

Net loss per share, basic & fully diluted(1)

 

$

(1.31

)

 

$

(1.59

)

 

 

 

 

 

Weighted average number of common shares, basic and fully diluted(1)

 

 

20,239,837

 

 

 

10,076,494

 

(1)

 

Reflects 4.555821-for-1 forward stock split that became effective September 2, 2021. The computation of basic and diluted net loss per share was retroactively adjusted for all periods presented. See Note 16 to the consolidated financial statements.

MARPAI, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

 

Three Months ended December 31,

 

2022

 

2021

Revenue

 

$

7,628

 

 

$

5,896

 

Costs and expenses

 

 

 

 

 

Cost of revenue (exclusive of depreciation and amortization shown separately below)

 

 

4,813

 

 

 

4,226

 

General and administrative

 

 

4,379

 

 

 

2,914

 

Sales and marketing

 

 

2,108

 

 

 

1,932

 

Information technology

 

 

2,511

 

 

 

991

 

Research and development

 

 

1,024

 

 

 

616

 

Depreciation and amortization

 

 

1,034

 

 

 

739

 

Facilities

 

 

426

 

 

 

227

 

Loss on disposal of assets

 

 

213

 

 

 

 

Total costs and expenses

 

 

16,508

 

 

 

11,645

 

 

 

 

 

 

Operating loss

 

 

(8,880

)

 

 

(5,749

)

 

 

 

 

 

Other income (expenses)

 

 

 

 

Other income, net

 

 

107

 

 

 

63

 

Interest expense

 

 

(226

)

 

 

(42

)

Foreign exchange loss

 

 

5

 

 

 

(1

)

Loss before provision for income taxes

 

 

(9,005

)

 

 

(5,729

)

 

 

 

 

 

Income tax benefit

 

 

(521

)

 

 

 

Net loss

 

$

(8,484

)

 

$

(5,729

)

 

 

 

 

 

Net loss per share, basic & fully diluted(1)

 

$

(0.41

)

 

$

(0.34)

 

 

 

 

 

 

Weighted average number of common shares, basic and fully diluted(1)

 

 

20,710,198

 

 

 

16,694,213

 

(2)

 

Reflects 4.555821-for-1 forward stock split that became effective September 2, 2021. The computation of basic and diluted net loss per share was retroactively adjusted for all periods presented. See Note 16 to the consolidated financial statements.

MARPAI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Year ended December 31,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(26,468

)

 

$

(15,985

)

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

 

 

 

 

 

Depreciation and amortization

 

 

3,538

 

 

 

1,962

 

Loss on disposal of assets

 

 

273

 

 

 

 

Share-based compensation

 

 

3,105

 

 

 

1,231

 

Shares issued to vendors in exchange for services

 

 

39

 

 

 

 

Amortization of right-of-use asset

 

 

599

 

 

 

100

 

Amortization of debt discount

 

 

 

 

 

27

 

Non-cash interest

 

 

259

 

 

 

366

 

Convertible note issued for professional services

 

 

 

 

 

75

 

Deferred taxes

 

 

(521

)

 

 

(150)

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable and unbilled receivable

 

 

(597

)

 

 

(132)

 

Prepaid expense and other assets

 

 

893

 

 

 

(350)

 

Other receivables

 

 

61

 

 

 

9

 

Security deposit

 

 

 

 

 

3

 

Accounts payable

 

 

181

 

 

 

41

 

Accounts payable – related party

 

 

 

 

 

(16

)

Accrued expenses

 

 

(2,052

)

 

 

962

 

Accrued fiduciary obligations

 

 

(12,822

)

 

 

1,470

 

Operating lease liabilities

 

 

(661

)

 

 

(100

)

Due to related party

 

 

(3

)

 

 

(240

)

Other liabilities

 

 

(1,068

)

 

 

(40

)

Other asset

 

 

7

 

 

 

(28

)

Net cash used in operating activities

 

 

(35,239

)

 

 

(10,795

)

Cash flows from investing activities:

 

 

 

 

 

Cash and restricted cash acquired as part of acquisitions (see Note 4)

 

 

33,388

 

 

 

11,384

 

Capitalization of software development costs

 

 

(603

)

 

 

(1,463

)

Purchases of intangible asset

 

 

 

 

 

(3

)

Purchase of property and equipment

 

 

(363

)

 

 

(273

)

Net cash provided by investing activities

 

 

32,423

 

 

 

9,644

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from initial public offering, net

 

 

 

 

 

25,379

 

Proceeds from warrant exercises

 

 

 

 

 

900

 

Repayment of convertible note

 

 

 

 

 

(783

)

Proceeds from stock option exercises

 

 

0

 

 

 

0

 

Proceeds from convertible notes

 

 

 

 

 

550

 

Proceeds from short-term loan

 

 

 

 

 

3,000

 

Repayment of short-term loan

 

 

 

 

 

(3,000

)

Payment for initial public offering costs

 

 

 

 

 

(832

)

Proceeds from issuance of warrants

 

 

 

 

 

53

 

Net cash provided by financing activities

 

 

0

 

 

 

25,267

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(2,817

)

 

 

24,115

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

25,934

 

 

 

1,819

 

Cash, cash equivalents and restricted cash at end of period

$

23,117

$

25,934

   

Reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheets

 

Cash and cash equivalents

$

13,765

$

19,183

 

Restricted cash

$

9,352

$

6,751

 

Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows

23,117

25,934

   

Supplemental disclosure of non-cash activity

 

Conversion of convertible notes into common stock at the closing of the CB Acquisition, net

$

$

4,090

 

Conversion of convertible notes into common stock at the IPO

$

$

5,107

 

Office improvements included in accrued expenses

$

$

28

 

Common stock issued as part of the CB Acquisition

$

$

8,500

 

Long term liability incurred in connection with the acquisition of Maestro Health, LLC

$

19,900

$

 

MARPAI, INC. AND SUBSIDIARIES

RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA

 

 

 

Three Months Ended

 

Year Ended

December 31,

December 31,

 

 

2022

2021

 

2022

2021

Net loss

 

$ (8,534)

$ (5,729)

 

$ (26,468)

$ (15,985)

Interest expense and foreign exchange loss, net

 

115

(21)

 

33

274

Income tax benefit

 

(521)

-

 

(521)

(150)

Loss on disposal of asset

 

213

-

 

273

-

Depreciation and amortization expense

 

1,094

739

 

3,538

1,962

Stock based compensation expense

 

680

269

 

3,143

1,231

Adjusted EBITDA

 

$ (6,953)

$ (4,742)

 

$ (20,002)

$ (12,668)

(in thousands)

Investor Relations contact: Simon Li 813-822-3950 Simonli@marpaihealth.com

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