Earnings call transcript: Marpai posts improved Q1 2025 results amid cost cuts

Marpai Inc., a micro-cap healthcare technology company with a market capitalization of $20.11 million, reported a net revenue of $5.4 million for Q1 2025, marking a 27% decline from the previous year. The company showed significant improvement in its cost structure, with operating expenses reduced by 33% and a net loss of $3.1 million, a 29% improvement year-over-year. The stock saw a premarket drop of 6.67% following the earnings release, consistent with its historically high price volatility.

According to InvestingPro anticipate sales growth in the current year, though profitability remains a concern. For deeper insights, investors can access the comprehensive Pro Research Report, available for Marpai and 1,400+ other US stocks, offering detailed analysis and actionable intelligence.

Executive Commentary

CEO Damian Lamondola emphasized the company's focus on profitability, stating, "Hitting profitability this year is my absolute top priority." He also highlighted the growing demand for third-party administrators (TPAs) and the company's strategic positioning to capitalize on this trend.

Risks and Challenges

• Continued revenue decline could impact financial stability.
• Market competition in the TPA space may pressure margins.
• Dependence on successful client acquisitions for future growth.
• Potential challenges in scaling AI-powered solutions effectively.

Q&A

During the earnings call, analysts inquired about Marpai's sales strategy and cost reduction initiatives. The management reiterated its focus on off-cycle client acquisition and the efficiency improvements expected from the AI-powered Empower portal.

Full transcript - Marpai Inc (MRAI) Q1 2025:

Conference Operator: Good morning, and welcome to the Marpai First Quarter twenty twenty five Earnings Webcast. Participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Johnson, Chief Financial Officer.

Steve, please go ahead.

Steve Johnson, Chief Financial Officer, Marpai: Thank you, and good morning, and welcome to the Marpay First Quarter twenty twenty five Earnings Release Webcast. With me this morning is Damian Lamondola, CEO and Director of Marpay. Before we begin, I'd like to draw your attention to the forward looking statements included in this presentation. And let's get right into it. Moving to our q one twenty twenty five highlights, we're seeing continued momentum and an acceleration of our turnaround efforts.

Net revenues were 5,400,000.0 for the three months ended 03/31/2025. '2 million or approximately 27% lower than q one in 2024. Some additional color with that is that industry turnover is typically 20 to 30% annually. So we're on the higher end of that. And the company continues to focus on our margin generating clients.

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So as we move forward, we continue to manage and either raise prices and do the renewals or lower margin clients will continue to drop off. Operating expenses were 7,700,000.0 for the three months ended March 31, '3 point '8 million or 33% improvement over Q1 of twenty twenty four. Our operating loss was 2,300,000.0 for the first quarter, '1 point '8 million or 45% improvement over Q1 of twenty twenty four. Our net loss was 3,100,000.0 for the three months ended in March, which was 1,300,000.0 or a 29% improvement over Q1 of twenty twenty four. Basic and diluted earnings per share were a loss of $0.21 for the three months ended 03/31/2025, which was an improvement of $0.25 per share over the first quarter in twenty twenty four.

Next, I'll turn it over to Damien to highlight the role of third party administrators. Sorry, I'm gonna turn over to myself to talk about the role of third party administrators. So third party administrators, what are they? As healthcare inflation continues to rise, a growing number of employers are adopting self funded health insurance. Third party administrators or TPAs play a vital role in this landscape by managing claims processing and reporting.

While TPAs manage the administrative aspects of the insurance program, they typically offer several value added solutions that drive both revenue for the TPA and savings for the employer. Marpay is positioned to effectively partner with these employers to navigate the complexities of self funded plans. The value proposition of a TPA is significant. Employers typically see savings up to 10% by simply moving to a self funded model managed by a tPA. This is driven by several key benefits.

First, cost efficiency through reduced administrative expenses. Second, flexibility in designing customized benefit plans to meet the specific needs of their employees. And third, compliance support. Helping employers navigate complex regulatory landscapes and mitigate risks. And finally, and somewhat more importantly, is transparency.

Through detailed reporting and data insights, we empower employers to make informed decisions about their health care spending. Whereas in typical fully funded arrangements, the employer does not receive detailed claim data or analytics of their member population. The tPA market in The United States is is a hundred and 50 billion with forecasted annual growth of 12.1% through 02/1931. Marpay has a national footprint allowing us to service employers with multi state locations, which many of our regional competitors can't do. Marpay also offers significant cost savings programs and our relaunch of the Marpay RX program will be game changing.

More details regarding Marpay RX will be shared later in the quarter. As a leading national independent TPA, our clients come first and we can aggressively negotiate with providers, optimize pharmacy benefit management, enhance utilization management, offer an emphasis on wellness and prevention, and implement alternative payment models like reference based pricing and bundled payments.

Damian Lamondola, CEO and Director, Marpai: Thanks, Steve. At Marpay, our core mission is to deliver affordable and intelligent healthcare solutions. And our deliverables remain consistent. Revenue growth, we have a strong pipeline of business for the second half of twenty twenty five, and we'll communicate further updates when we hold our third quarter earnings call in November. On the customer experience, we are executing our rollout of the Empower member portal, which is on track to be completed by the end of the second quarter.

And on profitability, we are relentless in driving efficiencies and cost reductions. In a short span, Marpace team engineered an exceptional turnaround, dramatically reducing losses. As Marpay's largest shareholder, hitting profitability this year is my absolute top priority, and I won't be satisfied until we reach that milestone. To further our goal of profitability and drive growth, we strengthened our leadership team. I'm particularly pleased to highlight the recent appointment of Dallas Scripp as our Chief Operating Officer and President of MarpayRx.

Dallas brings a wealth of experience in the TPA industry with a strong track record from his previous roles, and is a recognized leader in the field. Dallas's appointment is a crucial part of our strategy to build a stronger bench across the organization. We have assembled a high performing team that will propel our growth initiatives and drive us towards sustainable profitability. A few final thoughts. In conclusion, Marpay is making significant strides in our turnaround.

We're leveraging the growing demand for TPAs. At Marpay, we cut costs, we expect profits, we are growing, and we will be cash flow positive this year. Thank you for your time. We'll now open the floor for any questions you may have.

Conference Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press the star button, the number one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press the star button, the number two.

At this time, we will pause momentarily to assemble our roster. The first question comes from Neel Khataldi I

Neel Khataldi, Analyst: got a few, if you don't mind. First, it looks like you didn't sign up as much new business in the first quarter compared to maybe what we, we would have expected, you know, in 2024. I was wondering if you could give us some color into, the sales strategy today and what you're changing so you can grow quicker.

Steve Johnson, Chief Financial Officer, Marpai: Yeah. Good. Great question. We really focused on the turnaround in 2024, improving our operations, our efficiencies. We didn't hire our two key sales people until May of last year.

So kind of joined early enough to get some new business, but not early enough to get the larger clients out there. Now we've got the full team on for the full year. The nice thing is the team's been doing a great job of picking up lives, what I would call off cycle with about 80% typically either renew or change TPAs on January 1. That's when you usually get your big bump there and obviously we didn't get it this year. Part of that was also managing, as I mentioned in my comments, managing some of the lower margin clients to other TPAs to let them handle those less profitable clients.

Neel Khataldi, Analyst: Okay, great. So we should expect you guys to kinda win lives off cycle this year, and then in the Jan cycle next year could be could be much different.

Steve Johnson, Chief Financial Officer, Marpai: Exactly. Exactly. I mean, we've got the second half of twenty twenty five. We've got a very strong pipeline. Our predecessor company, Connell Benefits, had a strong relationship with the teachers retirement system of Texas.

And we've recently signed a couple of school districts with them and they start September 1 from there. So those would be some good wins that we've got coming on. Then as I mentioned, we'll also give a full update for the January 1 sales pipeline after our third quarter call in mid November. It's typically a ninety day cycle and we'll have very good clarity on the numbers for 2026 by mid November.

Neel Khataldi, Analyst: Okay, great. Switching gears, you burned I think $3,000,000 in the first quarter. That's a pretty big hole to fill given the commentary around getting to cash flow positive. Can you talk about potential for further cost reduction initiatives? And what gives you confidence you can really get to break even by year end?

Steve Johnson, Chief Financial Officer, Marpai: Yeah. Great question. Great question. We still have a few more duplicative vendors to rationalize, and we have a few legacy contracts that are coming to an end, will provide additional savings. And the real bang for the buck is we're working on driving our operational efficiencies and some of the redundancies that we have.

One, to reduce costs and two, provide better customer service and member service from there, which again, it's a virtuous cycle. You offer great service, The ability to reference existing clients and to gain additional clients runs very positive. Addition, we've really reduced our cash burn rate. You'll see a significant reduction in the second quarter from there. And so we look solid for the second half of the year.

Neel Khataldi, Analyst: Okay. Great. And then my last question, though, is just you mentioned the Impara portal. I was wondering if you could provide a little more color on that and the benefits that the solution offers to MarPi.

Steve Johnson, Chief Financial Officer, Marpai: Yeah. This one is really a fantastic solution for us. Right now between the acquisition of Maestro and Marpay, we had a few different portals and apps out there for our clients to utilize. And what we're doing is rationalizing those multiple portals into the Empara solution, which is really a world class application utilizing AI. And what's really neat about there is we've loaded each of our clients summary plan documents, which is the core of our clients benefit plans.

And it allows our members to go on the app, get their ID cards and ask questions like, hey, is knee surgery approved for my benefit plan? And it goes in searches and answers automatically, which also reduces the number of calls that we require in our call center. In addition, if there's further clarification needed, there's a button right on the app that says make a call and that gets transferred to our call center And it feeds all the prior information and the discussion and answers that were done in the app to the customer service agent. So they're right up to speed and can get to the solution that the member is looking for. So we see a big opportunity to again improve our efficiencies, reduce the number of heads that are required in our call center and also provide information right at their fingertips.

Neel Khataldi, Analyst: Yeah. That's great, Steve. Thank you. Looking forward to to watching the progress, and I'll talk to you guys soon.

Steve Johnson, Chief Financial Officer, Marpai: Alright. Thank you.

Conference Operator: Thank you so much for the question, Neil. And, again, if you have a question, please press the star button, then the number one. Since there are no further question at this time, this concludes our question and answer session. I would like to turn the conference back over to Steve Johnson for our closing remarks.

Steve Johnson, Chief Financial Officer, Marpai: Thank you very much, and I appreciate you joining us this morning. I just wanna reiterate, a replay of the webcast will be available later today for the next week if you wanted to delve into more details or catch something on the slides. Thank you again.

Conference Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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