Castlight Health Deep Dive: November 2021 - 7investing 7investing
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Castlight Health Deep Dive: November 2021

Castlight Health has received an acquisition offer and we're closing out our official 7investing position. We believe this provides a great opportunity for us to showcase our actual recommendation to the public.

December 28, 2021

The following is a transcript of the 7investing advisor team’s conversation about Castlight Health. This conversation originally took place on October 22, 2021. Castlight Health was later published as an official 7investing recommendation on November 1, 2021.

Introduction to Our 7investing “Deep Dive” Team Calls

January 6, 2022: Our 7investing team has a policy that we don’t publicly reveal our official recommendations. Our members subscribe to our service for our research, and we always consider our recommendation reports as proprietary IP. We reserve these reports, as well as our team’s discussion about the stocks during the month when we recommend them, for our paying subscribers.

However, a unique opportunity recently presented itself, which allows us to once again publicly share our research in a way that doesn’t compromise our policy.

Castlight Health (NYSE: CSLT) was the official recommendation of 7investing lead advisor Dana Abramovitz in November 2021. On January 5, 2022, Vera Whole Health announced it had made an official all-cash offer to acquire Castlight Health for $2.05 per share.

We believe this is a win-win for Castlight as a business and also for its shareholders. We also expect the deal will close and do not expect there to be another offer. As such, we are officially selling our shares and closing the Castlight position from our 7investing scorecard.

We also have decided to make our initial November 2021 recommendation report publicly available. This is a great opportunity for us to showcase one of our actual recommendation reports and also give a sneak-peek into our investing process.

As this now-public research demonstrates, each team member wields a deep understanding of their respective domains — we’re not just handing members a list of tickers. We thoroughly and objectively evaluate opportunities and challenges to encourage members to adopt a long-term mindset. The team at 7investing comprises experts in biotechnology, health care, synthetic biology, artificial intelligence, fintech, disruptive innovation, space technologies, and more. If you’re interested in gaining access to seven of these recommendations each month, please subscribe today!

We hope you enjoy our actual November 2021 Deep Dive team discussion. The transcript follows, and the video pitch is displayed above.


Dana Abramovitz  00:00

All right. So this month, I am recommending Castlight Health (NYSE: CSLT), it’s been on my radar for years, and just kind of looking at it, kind of watching it progressively, I’ll tell you my whole story, why I’m interested in it, as part of the presentation. It is a health care technology company, one of the first digital health companies really, that’s kind of survived through the decade. For the risk level, I kind of go back and forth between high and very high. And that’s just my level of comfort. Today, I was feeling really good about it so I just stuck with high, but I’ll hopefully present enough information so you can make your own choice. It is an investment type growth and a small cap, even smaller, company. And again, we’ll go over that.

Dana Abramovitz  00:59

So what does Castlight Health do? Their mission is to make it as easy as humanly possible for individuals to navigate the health care system. Primarily through their health benefits, right? So a lot of times, people have different choices about which doctor to see, where to go, what test to have, and with all the different types of digital health companies available, there are even more options now. And just how do you know the right thing for you, at the right time, for the right cost and the right value. And so that’s what Castlight Health does. They were founded in 2008. Again, very, very visionary for what they were doing, initially focusing on price transparency, which has come up in conversations more recently, and again one of the reasons why I’ve always been pulled back to Castlight, Health. They went public in 2014. It hasn’t been an easy road for them. They recently brought in a new CEO and she’s doing, I think, a great job at turning things around. For fiscal year 2020, they had $140 million in revenue.

Dana Abramovitz  02:21

So let’s go in a little bit more about what Castlight Health does. It helps people navigate their health care system. So for large employers, and we’ve talked about this when we were talking about Progyny, employers are offering more and more health benefits to their employees because employees are looking for benefits when they’re choosing what job to take. And we’ve seen with the current economy, that there’s a lot of competition for good employees, so employers are adding on all these new benefits. But if you have too many things to choose from, sometimes you don’t know what to do, and you don’t take any of those options. So Castlight Health, helps employees use all of their health benefits, from fitness and wellness, to finding the right doctor, to understanding the cost of the care, again, going back to their original focus of price transparency and quality. More recently, they’ve been expanding into health plans. So organizations like Cigna and Anthem that provide insurance programs to individuals to help them get the benefits from all the different options that they have. So just again, navigating, helping individuals choose what is right for their health, to promote health and wellness. We are talking about healthy snacks, healthy activities, all those things.

Dana Abramovitz  04:03

So, again, it hasn’t been easy. They started out in 2008. The idea was to transform the health care industry by focusing on transparency of price and quality. So helping if you had to get a certain lab test, do you go to this lab, or do you go to this lab? They may be conveniently located to you, but one is going to be cheaper than the other. We hear all the time in the news that sometimes it’s crazy that the cost of a test, or a medication, or a doctor’s visit, or a procedure is significantly different from one place to the other, and there’s really no reason for it since it is the same thing. Why is it different? So Castlight Health went out to expose that and make people aware of that and give people options when choosing their health care. And that was 2008. We’re just talking about it now. So maybe they’re a little bit too visionary to be successful.

Dana Abramovitz  05:20

So you know, being a good Silicon Valley startup, they pivot. So then they start focusing on employees and helping them with their benefits journey, and figuring out what to do. And then as we had more digital health tools, there was an emphasis on fitness and wellness. And so, Jiff is a company that had a holistic well being program for employers, and in 2017, Castlight Health acquired Jiff and incorporated that into their platform. Again, it was a little bit rocky, the integration wasn’t necessarily great at that time, the, the founding CEO left, so they brought in a new CEO, and then they were just kind of figuring out what’s going on. So then they kind of progress. Oh, I forgot, I missed the timeline. So in 2014, I had mentioned, they went public. Now we’re in 2018 and they’re expanding into health plans, so kind of growing that market. And then finally, in 2018 2019, they’ve been adding on a more comprehensive program, which they call Castlight Complete. And incorporating what they call Care Guides, who are people that help their customers understand the digital aspects of what they get access to, in terms of their health care.

Dana Abramovitz  07:03

But at its base, is a SaaS platform, right. So they have this giant platform of data that they’ve been developing since 2008. And they’ve been integrating all sorts of different types of data. So payer data, pharmacy data, behavioral data. They include user data, like location data, so they have all this information. And then they’re able to use AI to kind of learn from this. You know, patients are putting in the information if they have a fitness tracker, so you have all this information. And it conveniently provides it at the base of your hands in your your smartphone, in the Castlight Health app. But again, it’s this platform that is the core of their technology. The ability to use that platform, develop API’s for it, allows them to expand. So again, creating these personalized solutions, based on all of the data to really make things convenient that is their mission: helping people get access to the best care that they need at that time, and make it as convenient as possible, as easy to use as possible.

Dana Abramovitz  08:31

So it’s enjoyed by users, they have over 15 million covered lives. so that would be the the employee or members of the employee’s family. Their net promoter score is 66. And their app store rating is 4.7 stars. So people are using it, they’re enjoying it. And you know, they’re getting value from it.

Dana Abramovitz  08:57

So they introduce the Care Guides, who utilize their platform, so if somebody makes a call or is chatting to try to find something or understand something, the Care Guides are also using all of the data that the user has put in as well. And then this large platform of 3 billion pieces of information to help guide the user. And so it’s kind of like we see with telehealth, and just having access to a clinical individual who can kind of help answer your questions, even if it’s just reiterating something that you already know. But you know, hearing it from somebody who has that clinical background, that level of expertise, sometimes that helps us, you know, give peace of mind to actually do something or figure out a solution for ourselves.

Dana Abramovitz  10:10

The platform integrates with various partners. So, if you’re going to be a solution for understanding benefits, you should have all the different benefits that are available to all the different employers. And so they have API’s to enable that integration. They’re able to add new companies and new solutions as they become available. Recently Castlight announced the addition of four new companies into their ecosystem. So Progyny, I’ve covered that before, they provide fertility benefits. Spring Health, which helps with mental health, which has certainly been helpful during the COVID pandemic. WW helps with weight management, and then SWORD Health assists with musculoskeletal pain. So just constantly integrating in these new solutions to make it a convenient, easy to use platform for users to get their health care benefits. And the cool thing is, is the solution works, it’s delivering value and cost savings. And we know that employers and health plans want healthy and happy employees, if people are healthy and happy, then they’re more productive at work. And they’re not spending time looking for doctors or going to different clinics and whatnot, you know, missing time from work. And they’re also healthy and productive.

Dana Abramovitz  11:59

So the cost savings. So, users using Castlight Complete had 6%, fewer emergency room visits, reduction in labs and imaging costs. So again, that price transparency to see if I have a choice between this lab and this lab for a blood test, or a COVID test, where should I go? This might be more convenient, but this one’s cheaper. And if that’s something that’s important to me, then I can make that choice. And that’s what Castlight Health is doing, it’s giving people that ability to make choices for themselves. It has delivered about a 2% savings on medical claims, and their people are getting appropriate care. I talked before about One Medical, about the importance of primary care and primary care in cost savings. So with Castlight Health, people are accessing primary care, they’re having those preventative office visits, so that it is less expensive for them, as well as their employers and the insurance programs. And they’re seeing user engagement, which is great.

Dana Abramovitz  13:27

Okay, so their business model. So they sell to employers, and now they’re selling to health plans. They have their branded navigation platform, which they make available to employers, they also make that available to health plans. But for health plans, they also white label their navigation platform, and then they can kind of work with each individual health plan to customize to meet the needs of that plan. They generate revenue from subscription fees. So however many users or employees that a large employer may have, they get money per employee per month as a subscription fee. They also get professional service fees, as well as add on products sold through their marketplace. They’ve they’ve identified health plans as a way to accelerate their growth, starting with Anthem.

Dana Abramovitz  14:31

And then they now have Blue Cross Blue Shield of Alabama on their program as well as Cigna Health. And then interestingly, during the COVID pandemic, they worked with Boston Children’s Hospital to find a vaccine tracker, which is just kind of interesting because I know one of the guys from Boston Children’s who was working on that and then also working with Google and Amazon on helping people find testing sites. So you have the app already on your phone, because your employer has it, you have this, and you want to know is there a testing location near me, and that’s available.

Dana Abramovitz  14:42

And again, I had mentioned, they had $147 million in revenue this past year. So, you know, things haven’t been great. They started in 2008, I think, perhaps a little bit too visionary for what the health care industry was expecting. I was at the same place, you know, I thought we’d have more personalized medicine by this time, and everybody would have their genome sequence. You know, healthcare moves slowly. And things have been rocky for them. The integration with Jiff wasn’t great. I think that they need to and are reevaluating their sales process, and that’s one of the things that I’m really excited to talk about their new CEO, or relatively new CEO.

Dana Abramovitz  16:13

They use their annual recurring revenue (ARR), to measure their sales performance. So this is their annualized value of a subscription revenue at the end of each quarter. And they do this because they’re realizing revenue at different times based on a contract, so you may sign a contract, but not get revenue for a quarter or two as that is being delivered to the customer. So this way, it kind of averages it out, in a way. The ARR does not include customers that terminated or did not renew, and at the end of Q2, their ARR increased for a second quarter in a row to $128.2 million. So, things haven’t been great, but quarter over quarter, they’re starting to see improvement. So that’s why I’m, again, I go between using high risk or very high risk. And, you know, I think that there is a good opportunity for a good reward with this if they can make it but, it’s still kind of touch and go. So that makes it a little bit higher risk to me, and in terms of the companies that I normally look at, you know, I like to see more levels of profitability, and better margins. But this one, I do, I do believe in. I actually interviewed with them in, I think 2012. So, you know, it’s a company that I’ve liked for a very long time.

Dana Abramovitz  17:59

Okay. So, you know, there is competition, clearly, there always is, and the market is evolving, and highly competitive. And they were one of the first to do what they do, which is good, you know, because they have their platform with lots of data. But also they are disadvantaged by being the first mover. And so that is certainly a problem. And, like I said, the market is evolving, there are so many new digital health companies, I mean, it’s really easy to create an app, and, you know, health care, fitness, it’s something that a lot of people do, or care about or think is easy to do. So it’s really easy to create apps that work in this space. And so that does make things difficult for Castlight. But then I also think that there’s room consolidation in the market.

Dana Abramovitz  19:03

And this is, this is one of the things that gets me really excited about Castlight Health and why it has been on my radar pretty much for a year now. I mentioned that in 2008, their founders were thinking, “Hey, we really need people to have access to the cost of care and find the best value.” And there are too many stories of that discrepancy with the same test costing significantly different prices at two different locations. In 2020, so, last year at this time, the Center for Medicare and Medicaid Services issued a rule to increase price transparency among group health plans and health insurers. So now the government is saying, “Okay, we need to understand what something costs.” And they started with hospitals. So in January of this year, hospitals were required to list the cost of their prices and services. And then this is going to spread to all sorts of covered services by January 1, 2024. So there’s definitely room to grow. And the rule requires that the prices be available in a consumer friendly format. Right? So if you get a bill from the hospital, you’re just like, “What is this? I don’t know what this is, because they have all these codes and all these really high prices.” This needs to be consumer friendly. And this is what Castlight Health was founded on. And so I think that they are in the position to really come out ahead, you know, with these new rulings. I was hearing about price transparency in the news and hearing about this new rule, and I’m just like, hey, what’s going on with Castlight. And I’ve been monitoring them for the last few quarters, and now feel comfortable recommending them. So that’s what I did.

Dana Abramovitz  21:32

And then let me talk about Maeve O’Meara, so she is their CEO. She is their CEO. She was appointed CEO in 2019. But she joined the company in 2010, after graduating from Stanford Graduate School of Business. So we are fellow alumnae. And when she went to Castlight Health, she led teams and product management. So she started in product management, but then moved to all parts of the business. When she joined the company, she was one of 20. And now the company’s scaled to over 400. So she’s worked at different aspects of it. I had mentioned when they were moving into health plans, and their relationship with Anthem. Maeve was the person who originated and, and really mastered that relationship. She is an expert in health benefits and serves on the National Business Group on Health cost Institute. And then prior to Castlight Health and prior to business school, she was a venture capital investor at Highland Capital Partners, where she was focused on health IT, health care services, and the consumer internet market. She was also a consultant at Bain, and she has a BA from the University of Virginia.

Dana Abramovitz  23:01

Alright, and then it was just the company culture, right. So they really focus on diversity, being a place where people feel good about making the world a little bit better and working hard to make the world a little bit better. So, like one of types of companies, you know, people that are trying to make people healthier and happier. 77% of the people that work there said that they would refer a friend, 84% approved the CEO. 52% of employees are women, 40% of those are director level, or above, and 14% identify as being an underrepresented minority. So Castlight Health realizes that that’s a little bit low, they’re shooting for higher, around 20%. But you know, diversity and inclusivity is something that is important to them. I actually have a friend who works there, she loves it. She’s trying to recruit me. I told her that I love my job, so Simon, you’re safe.

Dana Abramovitz  24:12

Alright, key risks. So a big risk is that a small number of their customers provide the majority of the revenue,. So they have over 260 customers, but they have a few key customers that are providing most of the revenue and so if something happens with that customer that’s going to significantly impact their revenue. The success of their customers and their ability to retain employees is definitely important. And as we’re looking at the industry and inflation and we talk about all sorts of things in the economy. If business isn’t successful, and they have to lay off a third or more of their employees, that’s going to significantly impact the revenue that Castlight Health brings in. They’re in the health care industry, there are all sorts of different regulations, many of them are not necessarily specific to Castlight Health like so for the HIPAA regulation, for example, they’re just a business associate, they don’t necessarily contain customer personal medical information. But still they interface with companies and people that do. And so health care data security is always an issue, as well, as you know, all sorts of regulations that everyone in the health care industry is subject to, at the whim of our administrations. They have relationships with all those third party vendors. So if something happens with that, that could be a problem. It’s a volatile market, they have been operating at a loss for many years. And, you know, that is a problem. And they are making that comeback, and we’re starting to see, increasing revenue and profitability. But that’s still something that they need to overcome. And then the question is, were they too visionary too soon, such that they kind of petered out, and now somebody else can take their place? I don’t know, that’s just a risk. And again, I vary between whether this is high or very high, and just how comfortable and confident I feel and their abilities.

Dana Abramovitz  26:44

So anyways, key takeaways. They help employees and customers navigate health benefits and make choices for their needs. They have a propriety platform with a decade of data and know how. I do think that their core platform is positioned, such that they can incorporate all solutions. They originated with price transparency, which the health care industry has finally caught up with. And they’re turning themselves around with successive positive quarters, and hopefully, we’ll see that with Q3. So bad timing on my part, they are having their earnings call November 2. So we’ll see how we do with that.

Dana Abramovitz  27:37

I think that’s it. So if you have any questions, let me know. I’ll stop sharing the screen so I can see you.

Maxx Chatsko  27:47

Yeah, I’ll ask first. I really liked this company. As I told you, Dana, I’m basically about as helpful as a toddler in this space. This is 110% your area, but it seems like the company’s in the right place at the right time. It’s making a lot of improvements with integrating those other health companies into the platform. It is actually generating operating cash flow. So even though it’s not profitable, that does help to keep things going. It seems like one of the only remaining bottleneck is like scaling and growing. It seems like the most important part of that is working with health plans. So can you just walk through that one more time? Explain it to me, because I’m a toddler? What, what actions is the company taking to work with those health plans? And how will that accelerate growth?

Dana Abramovitz  28:35

Yeah, so the best example I can give is what they’ve already done with Anthem, because they’ve been doing that I think they started that relationship in 2018. And so Anthem is a health plan. So they have different people that buy into their program, their insurance. But, you know, as an insurer, you want people to be healthy, right? Because otherwise you’re paying out a lot of money for more expensive medical procedures. And so Anthem has created this Engaged platform, right, to help people make appointments with their primary care doctor, they may use a fitness tracker tracker, so that they’re exercising more, just, again, getting people to be healthier, so that it’s more preventative. So that you don’t have these expensive costs that the insurer will have to pay for later. So Castlight has worked with Anthem, so they did that whole white label thing. So they’ve essentially used their platform integrated with some of Anthem’s data and then created that platform for all the Anthem users. And they recently, I think, just last year, have a relationship with Blue Cross Blue Shield of Alabama, Alabama, did I say Alabama? I think Alabama and then with Cigna to do that as well. But, you know, they’re looking into working with other groups. Now, of course, they’re going to run into groups like United Health, which is a big health plan, and they’ve developed their own system. And so you’re not, they’re not necessarily going to be able to get a United Health possibly on on board, but for a health plan that doesn’t have or doesn’t want to invest in building out the technology, that relationship with Castlight, I think, is a good one. And they’ve been developing this platform for a long time. And have just so much data and, just kind of makes it, I think that’s valuable to people.

Maxx Chatsko  31:15

It’s really interesting. I mean, if they can execute, this seems like a no brainer, maybe even a good, like, acquisition target for someone else to plug in and bolt onto their own platform. Yeah.

Dana Abramovitz  31:25

I think that’s possible as well, especially if you look at their financials and where they’ve been trading. I mean it could be a good acquisition target. I don’t know, we’ll see.

Steve Symington  31:42

I was surprised when I was like, Okay, let’s look at this company I’ve never heard of Wait a second. I have heard of them. But it was in this interesting context. Like, I look, I’m like, Wait, how are they, they’re a $220 million company, like market cap? They’re selling at like less than two times annual sales, like trailing 12 months sales. But then I kind of look back and like, okay, that’s where I’ve heard of them. Like, I think they called their IPO sort of overhyped, right, because it was super, super hot out of the gate. And then they lost like, I think Walmart as a customer in like, 2018. Now forgive me if you mentioned that, and I missed that. And I think that was part of it, and then kind of downgrades. But now it’s like this turnaround story, maybe? And promising signs? Yeah, that that should be really interesting. If we, if we go back to like, growth in ARR. And, yeah, that’s if they can execute I think Maxx is right. That’s, it’s really interesting. But yeah, they’re like not really well viewed from, you know, a lot of people just sort of like, it’s like a house that’s been on the market for too long, right? And people just sort of stop looking at it. And so it could be really interesting. For sure.

Dana Abramovitz  32:59

Yeah, and again, that’s what makes me a little bit nervous, right, just from my level of comfort, right, because, like, again, I normally whenI’m looking at a company it’s a little bit more stable and structured. But I do think that this could be a really interesting opportunity. And if they are able to, you know, turn things around, and, I’ve been watching it for a while, and, it’s looking, you know, I mean, we’ll see next month, but you know, it’s been looking like they’ve been moving in the right direction. And then it could be a really interesting opportunity. So I don’t know. I’m pushing myself out of out of my comfort zone.

Simon Erickson  33:46

So can you compare them a little more to One Medical, Dana? I know, you mentioned it earlier in the presentation. But Google, it seems like Google was a customer of Castlight and of One Medical. Does it seem like a company would work with One Medical to take on all the primary care because they also have the relationships with their primary care doctors, but then they also would work with Castlight because that’s a little bit of a, maybe a layer above that about the price transparency and just kind of keeping options open for people to go wherever they would want to?

Dana Abramovitz  34:22

So Castlight it’s kind of like, it’s kind of like a net, right? Of all the services. Whereas One Medical is your primary care. Right? So you know, that’s going to be your doctor, that’s going to be your go to and, you know, One Medical does have a lot of digital solutions, so they may help you with things. But, Castlight is going to give you access to all sorts of other things,, like so Progyny, we talked about them, right? That’s not necessarily something that One Medical’s doing, you know, they’re primary care, Progyny helps you with your fertility benefit. But you know, if your employer’s offering you both, you want to understand both and so Castlight kind of is that layer on top of all those different opportunities that you have to kind of help you find what it is that you’re you’re looking for. So if your employer provides you with One Medical, then you’ll know, okay, well, One Medical is where my primary care physician is, and maybe they’re offering some of weight management service, and I can use that. Or my employer is also offering this weight management service and I want to use that because I’d like that option better. And Castlight because of the data and the way it’s integrated, and being able to use user preferences to kind of search and find what it is. What you like and what I like might be totally different. And so, this way of all the different things, I can find what works for me, and you can find what works for you. And the idea is, if you find something in the health care industry that works for you, and you use it, and you change your lifestyle, so now you have a healthier lifestyle, now, you’re healthier, right? And so if you can get that level of utilization.

Simon Erickson  36:31

Yeah, just to add my two cents on this to Maxx’s comment earlier. If I was to bet on this, I would bet on a lot of consolidation in this space. And it’s going to be based on who’s got the highest NPS scores, and who’s already got the relationship with Google. Because Google probably didn’t want to work with seven digital health companies, they want one rep that has all of this covered for him. And I wouldn’t be surprised at all to see like, Castlight plus One Medical plus, whoever else can under the same umbrella.

Dana Abramovitz  37:01

Yeah, well, we’ll see. I mean, you know, again, pushing outside of my comfort zone. But, I do think it could be a really interesting opportunity. So it’ll be interesting to see what happens, in the next year or two, especially with the the price transparency ruling, and all the people that need to move into that space and provide that level of pricing information.

Maxx Chatsko  37:36

This could be the most exciting pick from November 2021. In the long run, way more exciting than an ice cream shop from Steve.

Matt Cochrane  37:45

Dana aren’t like health care companies kind of doing this in house? I know, it’s like United Healthcare, like, I log on to my digital portal. And I manage all my appointments and it gives me options and things like that. I mean, what’s, I guess what makes it better than an insurance company doing it in house with their own app, or like even a large employer just doing it in house?

Dana Abramovitz  38:13

They don’t have the time or knowledge to do it. Right. So I mean, like, so that’s what they’re doing with Anthem. Right. So, you know, that insurer wanted to create an app, they were working on app, and they utilize the data and the platform that Castlight has, and so they branded it, it’s the Engage app at Anthem, but it’s reallythe Castlight Health back end and data. So, you know, that that’s kind of there, so you don’t necessarily know as a user. And, like, with large employer, something we saw with Amazon and Berkshire Hathaway and Jamie Dimon can’t

Maxx Chatsko  39:03

Haven, something like that?

Dana Abramovitz  39:05

Yeah. Right. We talked about it. And, and you you wanted it to be successful, right? And so, you hear you have all these smart people, and they’re like, we’re gonna make, you know, we’re gonna fix health care, because we’re smart, and it’s broken, and we know we should be able to it, and then they’re, like, it’s really hard. So a lot of the tech companies want to and they just don’t. So here’s a company that’s been dedicated to it. It was founded by two physicians, so I didn’t mention this, but Dr. Giovanni Colella. So he was a psychiatrist. And so he was their first CEO. And then Bryan Roberts is also a physician. He is still he’s still on their board, he’s the chairman of their board. And he’s doing more in venture capital now. And the third co founder is Todd Park. I don’t know if you’ve heard of Todd Park. So he was the first chief technology officer of the United States. So that was, that was his role. And he and his brother just started Devoted Health to focus on think aging in place. So, smart people, technology people, but also physicians, people in the healthcare space, that were trying to change health care. So I think that employers need this, but they don’t necessarily want to spend the time or resources to do it. And, you know, maybe Google will, right? Amazon tried. Walmart’s trying. Or, you know, they can partner with somebody. But, there are, like I said it’s kind of easy to make an app, health and fitness is, something that a lot of people think about, at least a couple times a year, and so you make an app, you sell it on the App Store, whatever, but like there are 10,000, different health and wellness apps, right. So, you know, there will be some consolidation, and you need to navigate which are the best ones and actually get people to use them.

Dan Kline  41:34

That’s good. It can be both right, like, you know, it’s sort of like Shopify, like Walmart and Amazon can do their own thing, but most other people can’t. So like, maybe some of the health insurers will do this on their own or do do this, but there’s still a lot of potential clients, right?

Dana Abramovitz  41:49

Sure. Absolutely. Absolutely.

Simon Erickson  41:59

Okay, great job, Dana, by the way, off camera here, but just for our knowledge, that IPO that Steve was mentioning, they came public at a $1.4 billion valuation in 2014. With $13 million in revenue. Yeah.

Steve Symington  42:14

They’re just crazy.

Simon Erickson  42:19

Yeah, like a spicy 100 times sales when they came out. I mean, it doubled and doubled right out to

Dana Abramovitz  42:25

I was I was gonna mention that, but then I was just like, Oh,

Simon Erickson  42:30

don’t worry, a lot of money off.

Steve Symington  42:34

Yeah, yeah. It’s I mean, something that someone made a lot of money. But yeah, that’s, that’s what’s interesting about it, though, is if they continue, if they turn it back around, and they scaled to even a fraction of what, you know, it’s possible trading at less than two times sales right now. Now, there’s, there’s some room for multiple, multiple expansion in their valuation. And that’s, you know, that could be one, you know, decent catalysts with people saying why there’s only two? How is this still a 200 and change million dollar company, when they’ve got 150 million in sales or whatever? What is it 135 or something? Is there guidance? But yeah, if they continue to scale, the stock would almost have no choice. Unless they’re significantly diluting people to I met it I mean, it gets acquired, or is it surprising? Yeah, yeah. Or it’s

Simon Erickson  43:24

acquired or they sign a really big deal. Imagine if they sign a really big deal how much I would pop the stuff

Steve Symington  43:28

like like a Walmart comes back or something or like they signed some other big company like it kind of reminds me a q2 a little bit. Like the webmap was asking like ours, like still talking about this. But q2 is like a regional they focus on regional banks providing like a banking platform for these small banks that don’t really have decent it or development teams to actually put this together themselves. Whereas like, Wells Fargo, or, you know, Capital One, or JP Morgan, or they’ll make their own, like online banking platform, but all these little regional banks don’t want to have to go through that rigmarole and so yeah, there there is room for like smaller players especially but if they do get a big player, that would be a huge kind of Pelant but

Simon Erickson  44:16

yeah, this is really good data. I mean, NPS is 66 is really high. That’s really good. Yeah.

Maxx Chatsko  44:24

Yeah. Yeah, like other than revenue growth, they have everything else. Yeah, they just they scale it and it’s like Steve said people are gonna like oh, wait,

Steve Symington  44:33

yeah, how is this so cheap, right. And like you mentioned, Maxx operating cash flows positive, which helps when you’re not technically profitable. I mean, what there was like a penny per share and adjusted earnings. I like Dana’s we’re all in the background like what is this is interesting.

Dana Abramovitz  44:51

I have to after my first call, I have to like not see you guys. I close the view and I just feel focus on my slides. And it’s just me. And I’m just doing my thing. Because if you if I see that you guys are doing things, I’m gonna do what? You know. Or like, even if you make a little like, you know, like, what is that, then I’m gonna think that you’re like, oh, what does she say? You know? Yeah, so I can’t I can’t look at

Steve Symington  45:17

this. We’re doing what we do. Right? Curious.

Dan Kline  45:22

So other than the food, that restaurant was great, I mean, revenue is a really big piece of it right? Like, I’m pretty confident don’t get customers but that is a big hurdle.

Maxx Chatsko  45:35

Yeah. Let me just about you, Dan.

Dan Kline  45:41

Sorry, it just, it just felt like a statement that was like, you know, a little, like, you could say that about a lot of companies like other than revenue, like,

Steve Symington  45:50

it’s like, all the pieces are there. Now they just need to execute.

Dana Abramovitz  45:53

Yeah, and that’s the thing is, you know, so they had an I didn’t want to, like, say his name, um, you know, just, you know, I don’t like, I don’t need to make people feel bad. But like, their middle CEO, I don’t think he did a very good job. Yeah. Um, and, you know, like, just, you know, like that acquisition, and, you know, there’s the integration, and, you know, things just didn’t go well. And then, you know, he like, kind of left pretty rapidly. And, you know, may have came in, and, you know, I, you know, I think she’s doing a good job, I watched some videos with her, and she, you know, is very knowledgeable, and she speaks well, and, you know, I think that she’s, you know, moving in them, moving them in the right direction, you know, using the help friends to grow, and like that they, you know, took advantage of the COVID pandemic, and, you know, just, you know, put these things in place pretty quickly, just because they had the platform to do that. I don’t like that, you know, they let people go, um, you know, but I think that a lot of companies, you know, like, I considered it myself, you know, using the pandemic to kind of get out of a bad situation. Right. So, you know, like, you know, kind of gently, you know, like, no, like, seriously thought about, you know, closing my business and just, you know, like, us use the pandemic as a way to say, you know, like, it’s time to be done. And I think that, you know, they were able to do that, you know, just to kind of reduce expenses. I don’t get I don’t love that they had to do that. But I understand that they did.

Dan Kline  47:48

I think you’re very right about the climate going forward, though. Like we’ve seen it with educational benefits. Every big company is trying to find ways to be more appealing without paying a lot more. So. Something like this is a nice little layer. Yeah.

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