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Weight LOSS Is This Stock’s GAIN
This is one great stock–$1.20 – $5 in 4 months from trough to peak this year–-but one odd company.
The stock soared earlier this year as Q1 financials revealed its SaaS revenue (Software-as-a-Service) from two very different business improved so much–they now have positive cash flow.
I say LifeMD is odd not just because they have two unrelated businesses, but also because the majority of cash flow–and growth–this year comes from their older software suite of online work-fIow programs, called WorkSimpli–which has not much to do with healthcare.
But the stock has STAYED up near $5/share because investors are excited about their growth in their DTC–(Direct-To-Consumer)–online weight loss management program.
What that really means–how they think they can get people access to Ozempic and Wegovy. These are two of the biggest hits in pharmacy in years, as this chart from CNN Health shows:
Where all these seemingly unrelated businesses are coming together is on the income statement. Everything is going up now.
Without weight loss, their overall, broader tele-health product suite is…improving, but has recently had quarters of negative revenue growth. That’s why the stock collapsed from a highly promotional $32/share in 2021 to just over $1/share in 2 years before WorkSimpli improved recently, and then really recently launching the DTC weight loss program (which is still early days!).
I’m not going to touch on the legacy tele-health business here. I will tell you about WorkSimpli a little farther down, but if this stock goes a lot higher from here in the near term, it will be about the hot, hot stock meme of weight loss.
With some improved financials, and management’s positive feelings over their DTC weight loss business, they raised revenue guidance by $7 million to a mid-point in their range of $149 million, but actually lowered adjusted EBITDA guidance to account for the start up costs of DTC weight loss–but adding that they expect this sector to be highly accretive in 2024.
Their new DTC is all about capturing the GLP-1 receptor agonist drug class trend, with common names such as Ozempic and Wegovy (parent company Novo Nordisk NVO: NYSE).
These are actually diabetes drugs, but because they suppress appetites, they are finding a massive off-label market as new weight loss drugs. These are taking the dieting world by storm, with the drug class expecting to reach a $55 B-B-B-BILLION market by the end of the decade.
LifeMD is connecting patients/subscribers with drug access, as well as treatment plans and tracking tools, allowing for a very attractive SaaS model, especially because they can be lifelong (!!) patients. With it launching last quarter, they are expecting to add $7M in revenue this year from this product alone.
This looks like it’s the turning point in what could be a lucrative growth story just for weight loss, but it has the back-up of a fast-growing–and highly lucrative business in its own right–WorkSimpli.
Right now their DTC SaaS business in weight loss is recruiting customers as fast as they are currently (~100/day). For context, 10,000 subscription customers equate to about $15M in high margin SaaS revenue annually.
But they are aiming to rapidly get this way up–to 400-500 per day–at US$129 per MONTH. If they end up with high retention on everyone trying this product, it’s a company maker.
QUICK FACTS
Trading Symbols LFMD: Nasdaq, LFMDP for the preferreds
Share Price Today $4.30
Shares Outstanding 33.5M
Float 27.3M
Market Cap $144.5 M
Revenue (TTM) $128.6M
POSITIVES
- Now has reached overall cash flow positive
- Tight float,
- WorkSimpli provides positive cash flow, likely don’t have to raise money again
- New weight loss program is seeing incredible adoption
NEGATIVES
- Two shrinking revenue quarters within the past year on tele-health
- Cash flow has been dependent on WorkSimpli’s success, not their core business
- Revenue growth may depend on GLP-1 weight loss trend, otherwise could go back to shrinking revenue
● We have no idea what kind of churn rate vs retention rate the new weight loss program will have
WEIGHT LOSS MANAGEMENT SaaS–THE FUTURE!
LifeMD’s new DTC weight management program continues to pick up steam with every update; so much so that they raised revenue guidance again from $146 million to $152 million for 2023.
This is specifically targeted at patients seeking GLP-1 medications, such as Ozempic, Wegovy, Rybelsus and Mounjaro – a superhot trend in the current industry. These four FDA approved GLP-1 medications are expected to do $55 B-B-B-BILLION combined by 2030.
GLP-1 medications are a regular drug in a type 2 diabetic’s med list, but have just started to take off for non-diabetic users for weight loss, averaging a 10-15lbs loss when on this. It’s a weekly dose, and stimulates insulin production to reduce your blood sugar and in turn, reduce appetite.
Normally when these “miracle” weight loss drugs come into the spotlight, negative side effects start to appear when introduced to the masses.
GLP-1 meds keep finding health benefits, like lowering the risk of heart disease, such as heart failure, stroke and kidney disease, decreasing blood pressure and cholesterol levels. It’s even now shown to help shake addictions.
LifeMD is starting to capitalize on this hypergrowth.
They are heavily investing in the marketing of this new offering as well as building out their existing medical team. They are hooking people with headlines like “lose 15% of your body weight in a year”, except that’s not a made-up number. GLP-1 medications are proven to do this regardless of the body weight, diet, exercise regime etc.
All you have to fill out is a quick survey to see if you’re eligible to use GLP-1 medications, and they will connect you with a prescription (with a third party). Then, LifeMD has the software to track and manage your weight loss journey. It’s a good way for them to hold your hand through a weight-loss process if you’ve become curious from the millions of ads you may have seen in the media.
The team seems really excited about the weight management program, and I would be excited too, given the forward-looking numbers they released.
- Since late April, over 5000 active patient subscribers translating to over $7M run rate
- Aiming to increase patient acquisition from now 100 patients per day to 400-500 by year-end (Subscribed quarterly at approx. $129 per month)
- Of note, 10,000 patients ~= $15M annual revenue (these can be lifelong treatments, but we really don’t know retention rates yet)
- Complete vertical integration into the current primary care service offerings, and an already existing customer base to offer the service to
This program provides patient support with various tracking tools and treatment plans, but most notably will provide access to GLP-1 medication (if deemed fit). There is a GLP-1 drug shortage right now, and likely will be until mid-2024.
It also provides guidance to the customer’s weight loss process which is big. There are ads everywhere right now, to the point where names like Ozempic and Wugavy are just as household names as Cialis and Viagara. Patients just want guidance on how to gain access, and lose weight safely, and are they willing to pay.
I’d expect the deliverables from the DTC at the end of the year to bolster the growth numbers from the WorkSimpli AND the broader telehealth business models, with the effect largely being seen in 2024.
WorkSimpli
LifeMD is the 74% owner of WorkSimpli, being its initial seed investor in 2018. It’s a stand-alone business that provides positive cash flow for LifeMD.
WorkSimpli has nothing to do with LifeMD’s healthcare business. It is a collection of software productivity applications:
- PDFSimpli – an Adobe Acrobat competitor where you can convert and edit documents
- SignSimpli – a DocuSign competitor
- Resume Build – a resume template builder
- LegalSimpli – a consumer-friendly resource for legal documents and forms, with more products coming down the pipeline
The pitch here is that they are centralizing these segregated services (although all built in-house), into one single service, as opposed to managing a handful of services and dealing with all of them individually.
Until very recently, this is where the growth and Free Cash Flow has come from:
As you can see, Tele-health revenue is flat, but WorkSimpli is turning into a cash cow for them and is holding up their broader telehealth business. WorkSimpli is expected to do $50M in revenue and $15-20M in EBITDA (~20%) for FY2023 with 173,000 paying customers.
Growth is a healthy 40% YoY, with $36M in revenue FY 2022.
Their most recent financing of a $40M credit facility was strategically raised in order to keep their majority stakeholder in this company, rather they chose to dilute their own shares more than this.
That’s where the LifeMD story is at right now. Can the DTC portion of the business provide enough revenue growth to turn the core of the business into a high-growth story that you would want from this company? And importantly—how sticky will weight loss customer revenue be?
I will continue to watch this stock moving forward, to see how much traction this can get.
