Health In Tech, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 was a pivotal year with strategic steps like completing IPO, investing in IT, InfoSec, and cybersecurity, introducing new Spec & agg products, and launching an initiative for large-group underwriting.
• Made critical investments in IT infrastructure, functionality enhancements, and cybersecurity, strengthening internal controls and compliance framework.
• Developed a specific and aggregate product to simplify claims process for TPAs and carriers, enhancing efficiencies.
• Advanced underwriting capabilities in eDIYBS platform to serve mid-sized businesses with over 150 employees, leveraging AI and machine learning for more efficient underwriting.
• Expanded executive leadership team with experienced professionals in sales, operations, and cybersecurity, including promotion of Chris Kurtenbach to COO, hiring of Dustin Plantholt as Chief Growth Officer, promotion of Jenni Guerrica to Chief Information Security Officer, and appointment of Del Lockett as Chief Strategy Officer.

Segment Performance

• Fourth Quarter 2024: Total revenue was $4.9 million, a small decline from $5.2 million in the same period prior year. Underwriting modeling revenue was $1.7 million in Q4 '24 compared to $2 million in Q4 '23 due to increased offering of A-rated insurance policies. Program fees revenue remained relatively flat at $3.2 million. Gross margin was 77.4% in Q4 '24 vs. 81.8% in Q4 '23. Income from continuing operations, net of income tax, was a loss of $0.1 million in Q4, compared with a profit of $1 million in Q4 '23. Adjusted EBITDA for Q4 '24 was $0.5 million, down from $1 million in Q4 '23.
• Full Year 2024: Total revenue was $19.5 million, up 1.8% year over year. Revenue from fees increased by 17.5% to $12.8 million due to high program fees for better medical network access, but was partially offset by declining underwriting model revenue to $6.6 million. Gross margin declined to 79.2% compared to 88% in 2023. Total operating expenses were $14.4 million, a $0.9-million increase from 2023. Income from continuing operations, net of income tax, was $0.7 million, compared to $2.5 million in 2023. Adjusted EBITDA for the full year '24 was $2.3 million, compared to $4.8 million in 2023.

Guidance

• Unaudited total revenue for January and February 2025 was around $5.7 million, exceeding the entire first quarter revenue of 2024.
• Anticipate further investment in automation and expansion into new markets in 2025, with the foundation laid in 2024 driving momentum for long-term success.
• Confident in continued growth and ability to deliver value-driven solutions as they scale their technology-driven platform.

Risks

• Forward-looking statements involve risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed or implied, as discussed in the annual report on Form 10-K for the period ending December 31, 2024, filed with the SEC.
• Market fluctuations can be challenging, and there are factors beyond direct control that could impact actual results.

Question and Answer

Q: Could you help understand the change in the underwriting model?

A: The DIYBS underwriting model needed more features, and the CTO is improving it to make changes faster and more efficiently, with constant improvements based on customer feedback.

Q: Explain collaborations with Vitable DPC?

A: Vitable's Direct Primary Care model is a quick-growing industry where paying a fee covers services, making underwriting more predictable as it provides a guaranteed income for doctors.

Q: Does the January 1 broker business contract affect visibility?

A: A lot of business comes from small groups with effective dates not aligned with 1/1, so they can write more business and have opportunities every month. January and February 2025 revenue was $5.7 million, over 50% year-over-year growth.

Q: How to think about the $5.7 million revenue run rate?

A: Accounting is based on accrual, so the number is for one month. History shows first two months of 2025 exceeded first quarter 2024 total, and guidance will be provided as the company gets a few quarters down the road.

Q: Expand on AI use in underwriting?

A: Use third-party vendors for medical data, apply to risk-scoring methodology, and have proprietary data parsing to reduce time spent on submissions. Beta tests in Q4 2024 had positive feedback.

Q: Moving to middle-sized customers, is opportunity only on January 1?

A: There are midsized companies with effective dates throughout the year, and they need to be prepared by June and July as they start looking for other options then.

Q: Number of lives going down factor?

A: 2024 was a strategic pause to moderate growth and strengthen infrastructures. 2025 has seen dramatic increase in number of lives, with performance to be reported when crossing the first quarter.

Q: Spending on software development in 2025?

A: Deployment of new products/services has a lead time of about six months. Groundwork laid in 2024 starts to harvest results in 2025, with key initiatives for large employers potentially launched in the second half of the year and other initiatives to be shared gradually.

Q: How to expand customer reach?

A: A little bit of everything, including through the Exchange tool which allows brokers, MGUs, underwriters, and large insurance companies to use it for various functions like enrollment and underwriting