UpHealth Inc (UPH) 2022 Q1 法說會逐字稿

Welcome to the UpHealth Inc. First Quarter 2022 Financial Results Conference Call. (Operator Instructions) I will now turn the call over to your host, Shannon Devine, Investor Relations. Ms. Devine, you may begin.

Thank you, operator. During today's call, management will be making forward-looking statements. Please refer to the company's SEC filings, including the company's annual report on Form 10-K and quarterly report on Form 10-Q to be filed for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements.

UpHealth cautions investors not to place undue reliance on any forward-looking statements. The company does not undertake and specifically disclaim any obligation to update or revise the statements to reflect new circumstances or unanticipated events that occur, except as required by law. Throughout today's call, we'll refer to pro forma revenues, pro forma gross margin and adjusted EBITDA. These metrics are not determined in accordance with GAAP, and therefore, are susceptible to varying calculations. Definitions, calculations and reconciliation to the financial statements of these non-GAAP measures can be found in the tables included in our press release. We believe these non-GAAP measures of helps financial results provide useful information regarding certain financial and business trends and the results of our operations.

I will now turn the call over to UpHealth CEO, Ramesh Balakrishnan. Ramesh, you may begin.

Thank you, Shannon. Welcome, everyone, to UpHealth's First Quarter 2022 Earnings Conference Call. Please refer to our website to review the presentation that captures our discussion.

Please join me now on Slide 5. I'll dive in our time with you today by saying that I hope you've seen this morning's announcement from UpHealth's Board of Directors stating that Samuel Meckey will be joining UpHealth as Chief Executive Officer in July.

Sam has been a successful global leader in health care at publicly traded companies for almost 20 years. If you haven't seen the press release we issued earlier this morning, I urge you to read it for more details about Sam's background and career. He was most recently Executive Vice President and the Head of Healthcare at EXL Service. His experience and expertise span health care services and technology solutions, and he has consistently driven results with operational excellence. I am confident that Sam will lead up health into a new phase of dynamic growth and innovation, and I'm very pleased that he is joining the company.

Until Sam comes on Board, I will continue to serve as CEO. Once he begins as CEO, I will work closely with him to ensure a smooth transition and begin a new role at UpHealth as the company's Chief Strategy Officer, with a focus on strategic initiatives and partnerships.

The past few quarters for us as a public company have been a time of growth. We have completed the integration of our operations and continue to execute on strategic priorities for growth and profitability. Everything we do is led by our vision to reshape and transform the massive health care industry to take health care to a next level with better access, quality, cost and outcomes.

And I'm once again incredibly proud of our team. The team is the engine behind our growth. So we also thank them for the hard work, creativity and dedication that has brought us this far.

Slide 6 presents the framework for today's report. We will first take you through a brief business review and share some of our recent wins, then Martin Beck, our CFO, will walk you through the Q1 earnings. We will open the call to questions and answers at the end of our presentation.

Before I hand the call over to Martin to go over the detailed financials, I would like to touch on some of the quarter's highlights and business wins, and we begin here with Slide 8. We'd like to start with our investment summary. The core reasons that make UpHealth a growth story with potential to build substantial value with solid profitability. We offer a unique and differentiated set of advanced technology products and services with substantial competitive advantage especially as many incumbents struggle with technology debt accumulated over decades.

We have demonstrated solid performance across our 3 business lines, all of which operate in large markets with critical needs.

We continue to show strong revenue growth $36 million in Q1 2022 compared to $33.9 million in Q4 2021, a sequential 6% increase and an 18% increase from pro forma Q1 2021 to Q1 2022, and this growth combined with margin expansion to 43% in Q1 of 2022.

We continued shift of revenue mix towards higher-margin product lines that provide the foundation for increased profitability. Integrated Care Management generated $2.6 million with a gross margin of 63%. Virtual Care Infrastructure generated $15.6 million, 43% of total revenue with a gross margin of 47%. Services generated $17.7 million of revenue, 49% revenue with a gross margin of 35%.

We have a solid cash and working capital position to meet our growth needs for the year.

On Slide 9, you will see that we have had a good start for 2022. We performed well and hit our revenue targets of $36 million and also enhanced gross margins to 43%. Our Integrated Care Platform, SyntraNet went live at the largest health plan and the largest specialty mental health plan participating in CalAIM, California's ambitious initiative to innovate how we deliver services and care for the Medicaid population. Medicaid is the largest public health plan in the United States, providing benefits for almost 90 million individuals.

The platform was also opened up to provider networks delivering enhanced care management and community support services, a critical element of the CalAIM initiative. Our virtual care platform, Martti won 4 large and long-term contracts for language integration with a total additional value of $15 million. In some of these wins, we also displaced leading competitors. Increasing consultation volumes on the Martti platform also drove higher revenue and an 11% increase in gross margin quarter-over-quarter because of operating leverage. We closed 3 new provider network contracts with health plans for our behavioral health services: Florida Blue, New Directions, and Bright Health. We also expanded contracts with third-party administrators for the Veterans Administration to deliver behavioral health services to veterans.

We continue to execute on our company-wide transformation initiatives focused on growth profitability, execution excellence and organization discipline. This quarter positions us well for continued success in 2022.

We've committed guidance for the full year of revenues between $205 million and $233 million, gross margin between 42% and 43% and adjusted EBITDA between $14 million and $19 million, representing 7% to 8% in EBITDA margin.

Turning to Slide 10. Our products and services help transform health care around integrated models of care that can deliver improved access, quality, cost and outcomes. Collectively, our business lines bring the capabilities needed for the next chapter of digital health with unmatched capabilities through 3 integrated business lines: Integrated Care Management, Virtual Care Infrastructure, and Services.

Turning to Slide 11. Our Integrated Care Management platform enables managed care organizations, health care providers, counties and governmental agencies implement a wide range of programs to improve health for some of the most complex populations. We have a little over 8 million lives on the SyntraNet platform.

In Q1, the business generated $2.6 million in revenue. Q4 2021 and Q1 this year saw decreases in revenue from this business due to timing of revenue recognition. We expect this year to be the last quarter affected by these timing issues. We continue to integrate internet with other technology and services. We have implemented the ability to launch Martti video collaboration from SyntraNet, providing an additional and powerful channel for care teams to collaborate. With this integration, we have the ability now to bring integrated language interpretation and translation services to SyntraNet' clients, specifically health plans and counties. We've also launched a campaign to bring the capabilities of SyntraNet to health systems that are Martti customers and who are also in various value-based alternate payment arrangements.

We are also engaged in 2 proposals to provide services to manage health combined with the technology capability of the Integrated Care Management platform. These proposals are part of our attempts to add advisory and managed care services to the integrated care technology offering.

Note that we continue to make strong progress in our efforts to collect outstanding receivables from a European customer that were written off as bad debt expense in the fourth quarter of 2021. We continue to expect a positive resolution of this matter.

Turning to Slide 12. With $15.6 million in revenues in Q1, the market platform continues to win substantial contracts to provide language interpretation. We continue to also gain market share with some recent wins that have displaced leading competitors. We now have a presence in partnership with U.S. health systems across 2,300 facilities and locations. In India, we have seen tremendous growth in consultation using the HelloLyf virtual care platform. We provided 173,000 consultations at our digital clinics in Q1 '22, up from 42,000 in Q1 of '21. And we expect continued expansion of volumes at our digital clinics and health centers in India.

Turning to Slide 13. Our Services business, MedQuest and UpHealth Behavioral had Q1 revenues of $17.7 million. We delivered medications, manufactured and personalized across all 50 U.S. states and comprehensive Turning to Slide 13. Our Services business, MedQuest and UpHealth Behavioral had Q1 revenues of $17.7 million. We delivered medications, manufactured and personalized across all 50 U.S. states and comprehensive behavioral health programs to veterans, first responders and other populations. We also added provider network contracts and our in-network with Cigna, Blue Cross Blue Shield and New Directions among other health plans. We have approached 2 health care providers and systems to deliver telepsychiatry visits integrated with the Martti platform. This integration establishes a foundation for an expansion of Martti-based services we can provide to current clients.

On Slide 14, you will see that our customers and the entire health care spectrum across academic medical centers, integrated health systems, community hospitals, managed care organizations, counties and governments. And our clients represent some of the largest and most prestigious institutions in these segments.

Turning to Slide 15. Our products and services address the needs of very large markets, and we are uniquely positioned and the intersection of 3 fundamental core capabilities, Integrated Care technology platforms, Virtual Care Infrastructure and technology-enabled services that are required for the digital transformation of health care. We compete with company at the network capabilities provided by our individual business lines. The products and services we offer as an Integrated whole, however, is unique and substantially differentiated. Most clients today are looking for integrated solutions rather than attempting to implement these integrations of disconnected solutions themselves.

Even with our specific business lines, we have significant competitive advantages. Our Integrated Care platform is unique and being designed from the ground up for connected care fonts. Our Virtual Care Infrastructure is unparalleled in the ability to bring virtual care model to primary specialty, acute and critical care. And our services enabled with technology are evolving to fill a critical gap that allows our clients to expand and manage programs to optimize health.

I'd like to turn now to some truly inspiring case wins and accomplishments from the quarter. Turning to Slide 17. You'll see that Martti had 4 major contract wins with an estimated $15 million in new contract value. With Ascension Texas, Ascension Michigan, Ascension Indiana and Wellstar. The language is most in demand at these new facilities are Spanish, Vietnamese and Burmese. And these interpretation services that we offer with the Martti platform continue to provide a fundamental and critical service to address disparities and access to care, and we have numerous testimonials in addition to the quote on the slide on the tremendous impact we have in patients' lives.

Turning to Slide 18. I we have seen tremendous growth with our HelloLyf platform, our virtual care infrastructure to provide affordable and high-quality primary infusion critical care to population that currently have limited access to care. We now have 505 active digital clinics with 29% growth in patient consultations from Q4 '21 to Q1 '22. We've seen over a 4x year-over-year growth in consultation, and we have a significant impact on the population that we serve, many individuals spreading the word of our clinics and services virally through where is now.

Turning to Slide 19. We recently extended our contract with Alameda County to continue the expansion of Alameda's social health information exchange and community health record. We will add data sources, organizations and programs to deploy various integrated care initiatives across the county. This very innovative efforts developed over the last 3 years is fundamental to achieving the ambitious goal set by CalAIM, the Medicaid program we mentioned earlier. The capabilities we provide to county are essential to coordinate care and manage help for individuals and populations with complex medical behavioral health and social determinants of health.

Turning to Slide 20. We are providing increased access to behavioral health services for veterans and first responders with additional provider network contracts with health plans, including Florida Blue, New Directions and Bright Health.

This expansion of access to high-quality and comprehensive behavioral health services is especially critical today as providers are seeing increasingly severe levels of mental illness, addiction and drug overdose.

Turning to Slide 21. I'd like to now touch on key points of our transformation program. The program is executing on our strategic priorities for growth, profitability, operational excellence and discipline working closely and intently with a leading global consultancy, we have made substantial progress on our priorities.

On Slide 22, you'll see our focus for the transformation initiative. It is to realize the full potential of our businesses that represent the greatest opportunities for growth, SyntraNet, Martti and HelloLyf. With SyntraNet, we are enhancing and packaging a comprehensive suite of data integration, analytics, care management and workflow solutions to enable our clients to more quickly implement integrated care initiatives.

Our goal is to provide these solutions in prepackaged and preconfigured solutions that are equipped to implement with best practice protocols and guidelines embedded inside them. With Martti, we are leveraging our continued competitive wins to provide not only the leading solution for language interpretation and translation but also to deliver a wide range of teleconsultation use cases in a model that connects patients to provider networks that already deliver the care. As we have seen post the pandemic, this model of virtual care is preferred substantially over ad hoc consultations with providers that do not build long-term relationships with patients.

With HelloLyf, we will scale and optimize our digital clinics, health centers and hospitals across India, focusing on the configurations that deliver the highest return on invested capital. We will also launch advisory and managed care services combined with the SyntraNet technology platform to help our customers implement programs as they adapt to new models for payments, care delivery and population health management.

In addition to the product and services initiatives we've described, we are also implementing numerous initiatives to drive operational synergies across the company and processes for innovation, efficiency and governance.

On Slide 23, we've highlighted some of the accomplishments to date of our transformation program. We completed an extremely comprehensive planning projects that identified initiatives to meet our goals with clear deliverables (inaudible) and time lines. We refined a go-to-market strategy to deliver SyntraNet to different customer segments as a set of ready-to-go package solutions that we expect will increase pipeline, shortened sales and implementation cycle and also broaden the scope of potential customers.

With an integrated company-wide sales team, we were also able to increase sales volume for the Martti platform with 9 RFP wins, some displacing leading competitors. Initiatives to gain operating leverage also resulted in an increase an 11% for gross margins of the Martti platform. We've implemented and optimized processes to better manage revenue forecasts, budgets, trends and cash as well as contracts and compliance.

If you now turn to Slide 24, the goal of the initiative in our transformation program is to deliver growth, profitability and cash flow operating performance and discipline and to create the organizational structure and culture needed to establish ourselves as the market leader. For growth and profitability, we're focusing on specific concrete initiatives related to our business lines with the greatest potential was growth in margins. Initiative and as operating performance includes driving operational leverage, creating company-wide shared services, optimizing and automating processes around sales, operations, procurement and administration.

On organizational structure, we completed a blank sheet redesign of our organization consolidating a number of functional areas across the company, including sales, marketing, finance, HR, communications, products and technology. Culturally, we're driving an organization committed to a clear definition of roles, ownership, accountability and rewards for performance.

To summarize then before I hand it to Martin to get into more detail on financials for the quarter, our first quarter has been strong financially meeting projections on revenue growth and profitability and continuing the transformation of the company to a cohesive global public peer prices.

We are solidly positioned to execute and meet our financial targets for 2022 and to drive continuous and profitable growth in the years ahead. We closed significant contracts, increased clients and revenue, introduce new products, and we continue to execute on the our transformation program initiatives.

We are excited about the future, and we are well capitalized to become a leading source and digital health with a unique an unmatched combination of technology platforms, virtual care infrastructure and services.

With that, I will turn the call over to Martin Beck, our CFO, to go into more details on our financials.

Thanks very much, Ramesh. We appreciate everyone joining us today. Before I begin my review of our first quarter results, I want to first comment on the presentation as it pertains to the results and comparison periods. Recall that we completed the merger transactions on June 9, 2021, and so it was only from that date forward, but we have consolidated results that we can report on a GAAP basis.

In addition, due to timing factors related to the various business combination transactions as well as the global scope of our operations. It was not possible to provide consolidated results on a GAAP or pro forma basis for Q1 2021. This is the first full year that UpHealth's financial statements will include all the businesses combined in the June 9 transactions.

Turning to Slide 26. You'll see that revenue for the first quarter of 2022 was $36 million, which was in line with our expectations. This represents an 18% growth over Q1 2021 numbers, which we reported on a non-GAAP combined basis and represents a 6% growth rate over Q4 2021 revenues. The gross margin was 43%, and the adjusted EBITDA was negative $1.3 million.

On Slide 27 now, looking at revenue breakdown by segment on a GAAP basis, services, which again includes our digital pharmacy and behavioral health businesses, with the largest contributor with $17.7 million or 49% of the first quarter's total revenues.

Virtual Care Infrastructure was next with $15.6 million of revenue or 43% of the total. Integrated Care Management had GAAP revenue of $2.6 million or 7% of the first quarter total. We expect that our revenue from Integrated Care Management will increase significantly during the remaining 3 quarters of the year as new contracts are added.

Moving along to Slide 28. The company's revenue mix continues to shift towards the higher-margin Virtual Care Infrastructure and Integrated Care Management segments, which increased from 48% of Q4 2021 total revenues to 51% of Q1 2022 revenues.

We expect the revenue contribution from Integrated Care Management and Virtual Care Infrastructure to return to levels that we reported in Q2 and Q3 of 2021 as revenue and Integrated Care Management ramps up over the course of 2022. Together, we expect those higher-margin businesses will account for an increasing percentage of total revenues going forward.

On a geographic basis, 90% of first quarter revenues came from the United States, and 10% came from India. The company's gross margin on a GAAP basis was 43% in the first quarter, up from Q4's gross margin of 22%, which was adversely affected by the expense recognition issues at Integrated Care Management, which we discussed on our last call.

First quarter margins by segment were as follows: Integrated Care Management 63%; Virtual Care Infrastructure, 47%; and Services, 35%. We view gross margin as a key metric for UpHealth and it's being useful for comparing our results to peers.

Accordingly, let me also provide some additional color on our gross margins from a trend perspective as well as framing them within the context of our overall financial model. Gross margins at Integrated Care Management increased from minus 169% to 63% as a result of not having to recognize expenses associated with the Group's European contract. Gross margins in Virtual Care Infrastructure increased from 39% in Q4 2021 to 47% in Q1 2022, largely as a result of operating leverage in the U.S. telehealth business. Gross margins in the Services segment increased from 34% to 35% from Q4 2021 to Q1 2022 as a result of higher volumes in our behavioral health businesses.

First quarter net income on a GAAP basis included a $4.8 million reduction in the fair value of the derivative liability associated with the convertible notes. This revaluation is the result of changes in the company's stock price during the first quarter. The reduction in derivative liability was recorded as a gain on fair value of derivative liability, the component of other income in the company's consolidated statements of operations.

UpHealth's first quarter adjusted EBITDA was negative $1.3 million, which was along with revenue, in line with our expectations. Adjustments were made for the previously mentioned change in the value of the derivative liability and for certain nonrecurring expenses, including consulting and restructuring expenses. As a reminder, adjusted EBITDA is a non-GAAP measure, and we've included a reconciliation of GAAP operating loss through adjusted EBITDA in the press release.

I want to spend a few minutes discussing the company's liquidity position. As of March 31, 2022, the company had an unrestricted cash balance of $52 million and $22 million of current portion of debt, which is made up predominantly of notes to shareholders. The company repaid its forward share purchase agreement according to the terms of that contract on April 9, 2022.

As we noted on our year-end call, we repaid approximately $20 million of relatively high coupon Indian debt in 2021. We're in the process of refinancing this debt with lower coupon rupee-denominated debt and expect to complete that refinancing sometime during the course of the next 2 quarters. We continue to make strong progress in our efforts to collect accounts receivable from a European customer that were written-off as bad debt expense in the fourth quarter and continue to expect a positive resolution of that matter.

We are confident that our current cash position and the financial performance of the business, which we continue to expect to become operating cash flow positive during the third quarter will provide us sufficient liquidity to execute on our current growth plans.

If you'll turn to Slide 29. As I mentioned during our last earnings call, we expect strong revenue growth and solid gross margins to continue in 2022. We're forecasting 2022 revenues of $205 million to $233 million, an increase of 38% to 56% over 2021, and gross margins of 42% to 43%. We're forecasting adjusted EBITDA of $14 million to $19 million in 2022 with improvements stemming from expense consolidation and the realization of some of the operating leverage inherent in our businesses.

Over the next 5 years or so, also to maintain annual revenue growth of approximately 35%, increased gross margins to 45% to 50% and to increase our adjusted EBITDA margins of 15% to 20%.

Closing on Slide 30, I want to reiterate what Ramesh said with respect to our transformation work. We're making substantial progress toward our integration and transformation goals, and that work is unlocking revenue and cost synergies. I'm excited about the future of our UpHealth and look forward to a strong year.

That concludes our prepared remarks. Operator, we're now ready to take questions.

(Operator Instructions) And our first question comes from Mike Wiederhorn.

Congrats on the quarter. You touched quickly on the revenue collection. Maybe you can talk a little bit more about the moving parts this quarter. and last quarter and whether you have confidence around collecting the revenues that are in flux over the next few quarters. Let's start with that.

Mike, it's Martin Beck speaking. How are you?

Good, good. How are you?

Good, thanks. So yes, as you know, we wrote off $15.6 million of receivables that were booked in Q2 and Q3 of 2021, we did not recognize any revenue in Q4 or Q1 from that customer. And we have been aggressively pursuing collection of that outstanding receivable balance -- we are in daily, weekly contact with the customer, and we feel that we're making progress there. I can't put a date on collection. But as I said in my prepared remarks, Mike, we're confident that we're going to collect that full amount.

Great. You put out a release earlier this week around digital dispensary consultations and some great numbers around that in terms of growth. Can you talk a little bit more what is driving that and where you expect that to go based on the recent redeployment from [Congo] also financial implications of that as well?

So what we are seeing, as you know, we have a 505 active digital clinics in India now. And what's driving the growth in terms of consultation is really the ramping up of the utilization of these services by the population we serve. We've also had ramp-up in the utilization at the legacy hospitals, but the primary driver of growth is the now second same of the new digital clinics that we've deployed, where we're now increasing the service volumes at these clinics (inaudible).

Now I'm presuming that's the -- in addition, we've had substantial growth in the Virtual Care Infrastructure around the Martti platform. But I'm assuming, Mike, your question was around the digital clinic we've deployed in India, is that correct? Yes. Okay.

Perfect. Yes. One last question. In terms of -- when we look at the revenue and obviously your guidance kind of what's your comfort level around there and around the predictability about that? And in terms of recurring revenue, how should we think about that going into next year as well versus the onetime contracts?

Mike, it's Martin. I'll take that one. So if you look at our pipeline, we've got pretty good visibility into the next 3 quarters, given the contractual nature of the Integrated Care Management business and the Virtual Care Infrastructure business. And as you saw in 2021, our revenues during that year ramped sequentially quarter-over-quarter.

So we feel confident that we will be able to post our numbers. In terms of recurring revenues, as you know, there's no GAAP definition of recurring revenues. We look at recurring revenues really along the lines of our 2 sort of B2B businesses. That is Integrated Care Management and Virtual Care Infrastructure. So essentially, all of the revenue in Integrated Care Management is under contract and the bulk of the Virtual Care Infrastructure revenues under contract. So it's fair to say that as you look at our total revenue mix, those 2 groups make up about 51% of the revenue, and the vast majority of that is recurring in nature.

Perfect. And I guess the last one, I think you -- on the release, you talked about becoming an operating cash flow positive in the third quarter. Kind of what's your confidence around that? And kind of your capital needs over the next 12 months, how should we be thinking about that in terms of -- obviously, if you need to go to the market is very expensive kind of can you give us color on those issues.

Yes. So if you look at the performance of the businesses in the first quarter, it shows progress at each of the businesses towards that objective of being operating free cash flow positive sometime in the third quarter, and we fully expect to be able to realize that objective. With that, I did mention that we're looking at bringing on some rupee-denominated debt at a lower coupon than the debt we repaid in the fourth quarter, and we're confident that and the really cash flow characteristics of the businesses going forward, give us sufficient liquidity to be able to realize our projections without having to go back to the markets for any capital.

(technical difficulty) Mr. Takkinen, you can begin.

Sorry, it was quite out there for a little bit. Can you guys hear me now?

Yes. Is that Frank?

Yes, this is Frank. Perfect. So I just wanted to ask on the revenue ramp. It's a pretty nice ramp through the back end of the year, you get to see the quarter come in where it did. But it sounds like Integrated Care is going to be a strong contributor to driving that ramp to the back half. So maybe just provide any color you're comfortable with on how we should think about the quarterly cadence of revenues throughout 2022?

Yes. Well, as we discussed on the last call, Frank, we have a significant project in West Africa that we didn't recognize in the first or the fourth quarter. We would expect that to be coming online in Q2 or Q3, along with a couple of other material contracts that will, as Ramesh said in his remarks, provide a pretty significant ramp in the Integrated Care Management set of revenues. And we continue to expect strong performance across the other businesses throughout the end of the year.

Okay. That's helpful. And then -- and I know there's been a fair amount of commentary on it, but I think it's worth circling back to just to make sure we're all fully on the same page the different moving pieces. Can you just give us a pro forma balance sheet before the rupee-denominated debt is refinanced back into debt from cash? Just trying to get a very clear understanding after the forward share purchase agreement was paid back where cash and different debt levels currently stand?

Yes. So obviously, you'll see all that detail when we file the Q. But as I said, we have $52 million of unrestricted cash and $22 million of short-term liabilities. For the forward share purchase agreement that we repaid on April 9 was repaid out of restricted cash. So recall that we had a little bit north of $18 million of restricted cash on our balance sheet at 12/31. We used that to repay the forward share purchase agreement. So our unrestricted cash balance remains north of $50 million. Is that helpful?

Yes. That's perfect. Okay. And then just the last one for me. In the Virtual Care Infrastructure business, you could see the growth there. Can you maybe tease out the growth from HelloLyf versus Martti, because like both are growing nicely, but maybe a little bit more color on the growth profile of each would be helpful.

Sure. So Frank, what we are seeing in the Martti's platform growth is a combination of increased utilization in existing facilities as well as new contracts that are adding to the footprint we have. And as we've mentioned, some of those new contracts are also displacing incumbents. So the increase in total minutes of consolidation through a combination of those factors is what's driving growth in the marquee business.

In the HelloLyf product line, what we're really looking at is a second phase of the deployments of the clinics that we implemented earlier in Madhya Pradesh, which are now ramping up in terms of the number of consultations that we're delivering, substantial increased ForEx last year, 29%, I think, from last quarter. And what we are continuing to do there is address what remains a very substantial demand for this model for health care in India to address the needs of a very, very large population, and we'll continue to see that demand increasing and our capacity to deliver as well.

And just to add a little bit to that, Frank. We were very encouraged to see really the operating leverage in the Virtual Care Infrastructure reflected in the increased gross margin. Our U.S. telehealth business was up 10 full percentage points in terms of gross margin tied to better pricing at higher volumes. So we continue to look forward to see that.

[Technical Difficulty] And I'll turn the call back over to the moderators.

Paul, I'm pretty sure that none of us can hear you speaking. I don't know if your phone is on mute, but we can't hear anything that you're saying.

This is the conference operator. You can hear me. speaking.

Now we can. Do we have any other questions?

I apologize. I was saying that we had no further questions in queue, but let me pull the audience one more time. (Operator Instructions)

And we do have a question from Randy Raisman. I'm sorry, this is Matt Ripperger.

Yes, close enough. Ripperger. Can you hear me? I just... Yes. Just a couple of questions. I can, yes. So the Integrated Care Management of $2.3 million, you said that there was some revenue that was deferred or not recognized in the fourth or the first quarter. Do you mind helping quantify sort of how much that was? And do you anticipate recognizing that in the second or third quarter?

Yes. So Matt, it's Martin speaking. As we discussed on the last call, we did not recognize $8.3 million worth of revenue associated with the project in West Central Africa. We didn't recognize that in Q1 either, but we would expect to recognize it in Q2 or Q3 going forward.

And that's $8.3 million per quarter or annual?

Annual.

Okay. And so I recall that the last quarter, the commentary was you were redirecting assets from West Africa to India to meet demand. Are you still doing that? Or are you reversing and renewing the contract in North Africa?

That is not related to integrated care, Matt. You're talking about the digital clinics, is that correct?

Yes. yes.

So we are -- as you recall, those clinics were not ever shipped to Central Africa. And we are, as we mentioned on our last call, deploying those in India in a model where they are initially deployed at satellite clinics around our hospitals, where they were able to deliver both outpatient care and refer a portion of the patient population to the adjacent hospitals in-patient care, and that is proceeding as we speak.

Okay. Great. And then just a second question, if I could. On the Medicaid waiver program in California and the 8 million lives, how much of that revenue is reflected in the $2.3 million of integrated carrier revenues in this quarter? Or is the nature of the contract such that the revenue contribution to you build as the year progresses?

The -- as we mentioned, there are 2 levels of revenues associated with the population and the revenue increases as an increasing percentage of that population is enrolled in programs.

Got it. But I guess, is that program expected to be a meaningful contributor to revenues in the Integrated Care business this year in '22.

We expect a significant pipeline that is also built up that to be a contributor to the revenue this year.

Okay. In Alameda County, you said that was extended through win?

That contract has been extended through for another 15 months.

Thanks Matt. Thanks to your questions.

I think we're having some technical difficulties with the operator, but this brings our call to an end. I appreciate everybody taking the time and we'll look forward to communicating again on our next call. Thanks very much everybody.