LogicMark, Inc. (NASDAQ:LGMK) Q4 2022 Earnings Call Transcript

LogicMark, Inc. (NASDAQ:LGMK) Q4 2022 Earnings Call Transcript March 28, 2023

Operator: Good day and thank you for standing by. Welcome to the LogicMark’s Fourth Quarter and 2022 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to turn the call over to Louie Toma from CORE IR, the company’s Investor Relations firm.

Louie Toma: Good afternoon and thank you for participating in today’s conference call. Joining me from LogicMark’s leadership team are Chia-Lin Simmons, Chief Executive Officer; and Mark Archer, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address LogicMark’s expectations for future performance or operational results and anticipated product launches. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in LogicMark’s most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC and LogicMark’s press release that accompanies this call, particularly the cautionary statements in it.

The content of this call contains time-sensitive information that is accurate only as of today, March 28, 2023, except as required by law, LogicMark disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to the company’s CEO, Chia-Lin Simmons.

Chia-Lin Simmons: Thank you, Louie. Welcome, everyone, and thanks for joining us. Our fourth quarter represents rebuilding period for the company as we focus on developing new innovative products and investing in our sales and marketing efforts to drive sustained growth and shareholder value. During the year, we added key expertise in sales and marketing roles that will help drive these initiatives. In September, we added John Federico as Senior Product Director. In this role, John has been focusing on managing our product development efforts as we work towards launching new leading-edge products. The extensive experience in product management with various technology companies, including Audible, Dell and Cisco, will be a significant asset as we bring new products to market.

In October, Garett Hunter joined us as Senior VP of Marketing. Garett also has extensive experience with consumer product marketing companies with 20 years of relevant marketing experience as Senior Vice President of LifeMD, VP of Growth at Yumi and Co-Founder of Gravity Brands and Vegamour. In December, we added Brady Farrell as VP of Sales. His extensive sales experience at various MedTech companies that will be key in helping LogicMark achieve its sales objectives. He come to us with a background in both large companies like VM, where he was a Regional Sales Director to start-up medical device companies like Argon and Monarch. These strong additions to our team highlights our commitment to building new innovative products, as well as having the strong sales team that will take these new offerings in addition to our current best-selling products to market.

The care economy represents a significant opportunity and we are the only public pure play company dedicated to addressing those needs. We believe that our new products and our key hires position us to capitalize on that competitive advantage. Our Q4 revenue decreased from the high levels we experienced earlier in the year as we benefited from a boost in sales as U.S. Veterans Health Administration business and customers upgraded to 4G devices. With this upgrade cycle now complete, we expect future sales to be driven by the launch of new products, as well as new sales channels. We are confident that these new products will provide a competitive offering that will be well received in the market. We look forward to providing updates as we complete our product development and approach their launch.

As a reminder, we launched a direct-to-consumer sales channel in July to enable customers to purchase directly from us. Revenue and AOV from this channel continues to rise, while media spend remains relatively flat, helping to increase margin. With implementation of new upsell cross-sell sale flows in December, we look to continue this trend moving into the rest of 2023. Additionally, we will be further extending our direct-to-consumer sales channel with the launch of the LogicMark Amazon store, which we expect to go live by the end of next month. As we continue to invest in our sales and marketing and new product initiatives, we did so in a prudent and cost effective way with our additional focus on minimizing our corporate expenses. One way we fortify our product development efforts to do the application for and receiving patents that will protect our position and investments made.

These provisional applications include various techniques at; one, ensure the quality of wellness care systems and delivery; two, incorporates various machine learning and AI techniques; and three, focus on systems in support of wellness in multiparty interactions. Two provisional patent applications were filed in the third quarter and fourth quarter that focus on machine learning and AI, making about a total of five provisional patents filed in 2022 for the company. In Q4, we also focused on starting to move some of those provisional patents into final filings in 2023. We expect to move two of those provisional patents into final patent filings in early 2023. We have experienced some delays in the launch of our new products that we are working through.

We expect those will resolve within the next few quarters and we are planning to bring our first software product to the market in Q2. With $7 million in cash as of December 31, 2022 and $5.2 million of gross proceeds that we raised in registered offering in January 2023, we are now well positioned to further execute our strategy as we launch new products and establish additional sales channels. Our business plan is solid and we believe that the coming silver tsunami driven by the growth in the elderly population and the presence to age out home will create a perfect storm for our offerings. We are confident that as we execute we will become a leading provider of core solutions and services and expanding care economy. I will now pause and ask Mark Archer to discuss our 2022 financial results and then I will return to provide some closing remarks.

Mark Archer: Thank you, Chia-Lin. Here are the financial results for the year ended December 31, 2022. Revenue for the year ended December 31, 2022, was $11.9 million, up 19% from prior year. The increase in revenues resulted from improved sales to VA hospitals and clinics. Gross profit was $7.2 million for the year ended December 2022 versus $5.8 million in 2021, an increase of 25%. Gross margin increased 300 bps from — to 60.7% from 57.7% in the prior year. Gross profit increased as a result of higher revenues and lower inbound freight costs. Total operating expenses increased 6% in fiscal year 2022, totaling $14.1 million, compared to $13.3 million in fiscal 2021. Last year’s our fiscal 2021 results included a $4.5 million charge for goodwill impairment.

Net loss attributable to common shareholders for the year was $7.3 million versus a net loss of $14 million in fiscal 2021, an improvement of $6.8 million. The results for the year ended December 31, 2021, included $2.9 million in warrant modification expense. Net loss per share improved from a loss of 2.25% — $2.25 per share in the fiscal year ended 2021 to a net loss of $0.76 per share in the year ended 2022, an improvement of $1.49 per share. Of that improvement, 40% — $0.40 per share was attributable to the 53% increase in common shares outstanding between the two years. Cash balance as of December 31st was $7 million before the addition of $5.2 million of gross proceeds raised in our January registered offering. I will now turn the call back to Chia-Lin.

Chia-Lin Simmons: Thanks, Mark. 2022 has been a busy year as we focus on innovating solutions that enable safely in their own homes for ensuring that they are being properly monitored and appropriately cared for. We at LogicMark are beyond excited about these opportunities and continue to work tirelessly to provide leading edge solutions to address this evolving care economy. At this time, I will open the call to questions. Operator?

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Q&A Session

Operator: Thank you. Our first question comes from Allen Klee with Maxim. You may proceed.

Allen Klee: Good afternoon. Hi. Can you talk a little about your new product strategy and how you plan to — what do you think the competitive advantages of the products are and the go-to-market strategy? Thank you.

Chia-Lin Simmons: Sure. Hi, Allen. Great to chat with you. So one of the things that we are looking at is trying to bring some of those IoT capabilities and machine learning and AI into a particular sort of products offerings. And so today, if you look at the majority of the technologies, what we are seeing lacking primarily is a couple of different things. First, I want to talk about fall detection. So fall detection today typically utilizes things such as accelerometer and gyroscope, speed and tilt. So we are — we actually have the patent on adding additional multifactor sort of sensor capabilities into a PERS device, including the capability to have an altitude rear, allowing us to lead the distance between sort of where you were to where you sort of ended up as a device and so think about this as tilts, speed and distance.

And so that provides a much better accuracy around what is fall tech — what really is a fall versus potentially you just setting down too quickly. And so adding those sort of features around machine learning and AI is one of the ways for us to actually fine-tune that fall detection to really be personalized to the individual, as well as giving us the capability to also take the aggregate data and be able to sort of learn more on how your sort of pattern of movement and so forth compared to those where we have similar age and perhaps the health background. And so, for example, we are able to — as we sort of learn more of your capability and we start adding some of these features into the new products, be able to say, look, on Tuesdays and Thursdays, looks like you are falling, we check in with you and looks like it’s got to fall, but it happens at 10 o’clock at this geographic location, it looks like it’s a yoga studio.

So on Tuesdays and Thursdays, what seems to be a fall is not a fall. So eliminating some of those issues related to both positives when it comes to reasons why people don’t actually want to wear a device because these devices go off all the time, thinking that you have fallen and it causes a bit of a nuisance for a lot of people who wear them. And so what we are really trying to do is to learn your patterns and understand basically how best to sort of manage your experience, as well as also, again, aggregate and sort of learn around that. So machine learning and AI is very crucial to that, and we think that, that’s really something that we are not seeing in the market today. Secondarily, you will see that all of our new products moving forward will include new sort of hardware features that make it much more modern in terms of sharing data for you to share data with us and for your caretakers to check and look to you and get the much more interactive experience and then we can add that to a better learning and understanding of who you are from a health communications perspective.