Health In Tech, Inc. (HIT) Earnings Call Transcript & Summary

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Fall Investment Conference 2025. The next presenting company is Health In Tech, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Julia Qian, CFO of Health In Tech. Ma'am, the floor is yours.

Thank you, Matthew. Good morning, everyone. I'm thrilled to be here to share the story of our company. Health In Tech is a digital-enabled insurtech platform company. We are changing the health care through the digital innovation. So why we want to do that? And this is a huge market when we're looking at that $6.6 trillion market with health care, $4.9 trillion and insurance $1.7 trillion with very little innovation and the transparency in the market. Our customer is the small business. Small business is 45% of the GDP and 99.9% of the U.S. business, they are small business, 34.8 million of the people working for the small business. It is a huge contribution for the country. However, it has been very challenging for the small business owner to shop for the medical insurance plan for their employees. It's local transparency, it's always expensive and it is slow. Our platform is here to provide alternative solution. So what does our platform do is anything the business need for their health care plan, we qualify the vendor, we created the program, that's all in our platform. You can envision it's almost like Amazon alike. Anything you need is there on the platform. And then the business owner employer is able to customize the program based on their needs. At the same time, we are underwriter for the insurance company. So why does the insurance company need us? Because they don't need to have many human underwriters sitting on the desk in front of the desk to underwrite one group at a time, they gave us risk underwriting criteria, and they will create the program using machine learning and AI and bundling the medical health care plan and the insurance together become a medical insurance for the small business owner. So that is how we can turn from a 14 days, 3 months purchasing cycle to just about 2 minutes to 10 days. This is a remarkable reduction, about 90% of the time for the business owner shop for their employees' health care plan. And how do we make that happen? There's a few pieces to it. One is we have tailored the coverage started with SMR. One of our fully owned subsidiary, we create intelligent plan designed just for the small business employers and you can customer that, and it's very easy to do. The other one is when we look at it as underwriting capability, we turn from 12 or 14 days linear process to just about 2 minutes. And you can see from the slides, traditionally through a broker, get the information, send to the underwriter of the insurance company, then review, then they get involved on the internal divisions, then come back and forth with questions, then they go through the proposal process and in the end, they take about 12 to 14 days. And once we get underwriting criteria from the insurance company, then we make that program. Everything to do with the logic is programmable. That's how we use machine learning and AI to make that very fast. So just about 2 minutes, we can produce 4 tiers and the 12 plans become bundable proposal. That speed and the flexibility allowed us to be in the 50 states. We directly contract with 8,000 -- over 8,000 hospitals, 1.4 million clinic. That also enable us to get the service much more affordable rate, and we are able to, as a platform, pass these savings to the small business owner in the form of reduced the cost of the health care. Additionally, because of the way we distribute our product in the different states, we are very focused in those areas, we can get a better contract and better pricing. So as of the second quarter of this year, we are in the 50 state, but just for the self-select, most of the customers in the 41 states, despite our business in the 50 states, some of the state, our contract rate is not as good as the other large insurance company. Those are the states, the big insurance company in the market. So that's the reason we're in the 41 states. We have near 1,000 of the business customers, 24,000 of the enrolled employees. So you can think about every business they need to give the medical insurance to the employees and the employees working on those businesses is about 24,000 employees. In terms of individuals, it's about 50,000 because we also -- when we count employees, if there is a family and the spouse, we count as one enrolled employees. Through the 878 third-party agency broker and TPA, we are able to distribute our product very effectively through our platform. So look at the financials. In the second quarter, our revenue was $9.3 million, 86% year-over-year growth. For the first half of the year, our revenue was $17.3 million compared with the entire last year, '24 was $19.5 million. We achieved 89% of the revenue that last year just met about the half year. Meanwhile, we are able to accelerate our growth, but keep the profitability and increase the profitability. So on the second quarter, our adjusted EBITDA was $1.6 million, 134% year-over-year growth. In the first quarter -- first half of the year, our adjusted EBITDA was $2.8 million, exceeding entire year 2024. So lease performance is a good testament of the acceptance of the product and how the technology disrupt insurance sectors. So we are able to achieve that without a seasonal good management team. So if you look at our management team and start from Founder and CEO, Tim Johnson, Tim has been long-term series of the entrepreneur and worked in AIG and worked in the insurance sectors. And then you look at our technology, the head of tech working in Airbnb and eBay and [ Hyperion ] insurance as well as the startups, we are able to bundle the knowledge and the insurance and the technology together and create our platform, our growth Chief Growth Officer, Dustin, is very well known on the sector. He is the editor of the Forbes News and also Optimed Health, worked in the various different brokerage firms for the insurance company. My background, I worked in Citigroup. I was in Citi Fintech and I worked in the manufacturing, in Johnson & Johnson, General Motors and the capital markets. So what I see is the entire world is transitioning to the digital to the AI. And insurance sector is about 10 years behind the banking. Banking probably is 10 years behind the manufacturing in terms of the system simplification and digital disruption. So $6 trillion market really with very little innovation is a huge opportunity for us to use AI, use technology and simplify the business process to make health care insurance much more simple, easy, much more affordable for the small business. How do we make money? So we make money on the 2 ways. One is we generated revenue from underwriting model. So as I previously explained, and the insurance company give us risk underwriting criteria and it's their risk, their criteria with we are the platform, we use the data, we use the calculation, make that much faster and simple and reduce the human interactions. We make revenue from the as underwriter from the insurance company as a percentage of premium. It's all success-based. We also make money, the revenue generated from the program. The program is our platform fee and we're selecting the vendor, we qualify vendor. We're building up the different customized program. So those are the fee charged based on the success as well is a flat fee per employee per month, PEPM. These are the 2 factors. And when we sell our platform, sell medical insurance plan to a small business owner, we generate revenue from these 2 revenue streams, underwriting revenue and the program fee. Combined together, these become the key driver for our business and the enrolled employees has become a leading indicator of our business. So we've been growing very fast in different states through different distribution model. Let's look at the financials. And I highlighted a little bit of the financials before. And in the slides, you can see the second quarter financials and the first half of the year. We grew both on the top line revenue and also bottom line income before income tax. And you can see it's 1.9x or 1points7x growth from 2025 versus 2024. And we have a high-quality growth. The reason is being our income from -- before the income tax, we grew 2.6x increased from $0.6 million to $1.5 million for the first half of the year. The adjusted EBITDA also grew while adjusted EBITDA is about 16% of the revenue in terms of the percentage of revenue, increased 500 basis points from 11% of the first half of the last year. We generated $2.8 million of adjusted EBITDA just for the first half of the year. The second quarter is $1.6 million. Cash and accounts receivables. So cash as of the second quarter in June, our cash position was $8.1 million cash and versus last year June, $2.2 million. We went public in December, we closed on the Christmas Eve. We raised a little bit more than $9 million gross proceeds. net is near $6 million net proceed. so you can see our cash flow is positive and we generate more cash for this year. Accounts receivable, we -- despite of the revenue growth, our accounts receivable reduced from $1.5 million to $1.3 million. And just to give some idea, the second quarter of the revenue is $9.3 million, our accounts receivable is only $1.3 million. with the solid financial performance and innovative solution that disrupt the insurance and the medical health care sectors, we are able to have accelerated growth. So look ahead, we are very confident our growth trajectory momentum will remain. That is part of the presentation. Now I'm open for questions.

So we see a few questions from the audience. And the first question we have is, do your competitors have the same revenue compensation business model?

That is a great question. So we don't have direct competitors. The reason being is some part of underwriting components today we see is part of insurance company. So the insurance company, they are our platform, they don't provide the service for other insurance company, number one. Number two is really we haven't seen the insurance company drastically use AI, reduce their underwriter and pay based on success. So that's why we have not seen that part. The second part is in terms of create health care plan, which is customizable and the employee can choose against open platform that we have not seen that in the market. So with this combined, we just do not see we have any company doing exactly what we do. There are certain of the function residing of the different small parts or some parts of the insurance company or some parts of brokers or some parts of other divisions, but no other company put that together, integrate together as the platform company like us. I hope that answers your question.

Okay. Another question we have is, you ended Q2 with $8.1 million cash and positive operating cash flow. How are you prioritizing between R&D sales expansion and new product launches?

Yes, that's a great question. So as a tech company, we constantly evaluate the investment between the technology and the sales expansion. Currently, we have 6 major projects ongoing. We prioritize the short term, midterm and the long term in terms of revenue. So we were looking at some of the product we can push on the market, we will generate immediate revenue. And for instance, in the first quarter earnings, we're talking about we scale up our capability to a group has a medium to large size. So it means the business have employee from 5 to 150. We call that small business and the medium-sized business is 150 employee above towards 1,000 employees. On that space, when you reach to 300, 500 employees above, it takes about near 3 months just to shop for the medical insurance for the employees. The reasons being HR need collecting all the data and the back and forth takes a lot of time. And our platform is able to reduce that time from 3 months to 2 weeks. So we are able to get that platform to be enhanced and the project to launch in the third quarter. So now we're in September, obviously, we are going to wrap up the third quarter and in October, November, when we do an earnings call, we will be able to announce the successful launch. So that is a great example when we're looking at that because that will give us significant business when we can build up the Q4 and January. This is where most of the company changed their insurance plan. Yes, the question, yes, we have a discipline in our management team. We have a weekly executive meeting. We continuously prioritize what is cash inflow, where is the market competition, how we want to invest in the software solution versus where the revenues come from. So this will allow us to open up the next level of the growth we are targeting to the medium size of the company.

Okay. So next question we have is, when you win new business, what cost advantage do you have versus existing solutions?

Sorry, can you repeat your questions?

So when you win new business, what cost advantage do you have versus existing solutions in the market?

Okay. So when we win the business and so number one is our platform is free to use. So we give employees the opportunity to shop for their medical insurance plan. We don't force anybody to purchase our plan and neither do we think that will be a good idea for the company just to come to the platform, give the codes not able to buy the plan. So we make the experience very fast and simple unlike other places is [ aggregator. ] So when you look at something, you like it, you click the buy button, you just received many, many phone calls from the third party try to sell you something and you are not able to buy. So one is the speed to market. The other is with a direct contract to the hospital and the clinic, we're able to pass through the benefits to the employee. So when we win the business, it is really from the 2 fronts. One is speed to market. It save times all the time. Two is we're able to have a plan a little bit more affordable versus other platform or versus other insurance company because we have a direct contract, we're able to provide these benefits and it's free to use. So when the small business owner come here, they look at the plan, they can get a response quickly and relatively cheaper. Obviously, that's how we win the business. Next question.