DocGo Inc. Q4 FY2021 Earnings Call

Greetings and welcome to the DocGo Fourth Quarter and Full-Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Halper of LifeSci Advisors. Thank you, sir. Please go ahead.

Thank you, Danna. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than the historical facts are indeed forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect DocGo’s business, financial condition, and other operating results. These include but are not limited to the risk factors and other qualifications contained in DocGo’s annual report on Form 10-K, quarterly reports filed on forms 10-Q, and other reports and statements filed by DocGo with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. DocGo expressly disclaims any intent or obligation to update these forward-looking statements. So at this time, it's now my pleasure to turn the call over to Stan Vashovsky, Chief Executive Officer and Co-Founder of DocGo. Stan?

Thank you, Steve. And thank you to everyone for joining our conference call, our first, since closing the acquisition between DocGo and Motion Acquisition Corporation, which we announced back in March 2021 and finalized on November 5. I'll make a few remarks about our business and then turn the call over to Andre to review the financials. We will then take your questions. 2021 was by almost any measure, a very successful year for our company. Andre will cover the financials in detail, but I want to hit on a few of the highlights. We are pleased to report that our full-year 2021 total company revenue of $318.7 million, which was well ahead of our expectations. This represents growth of more than 239% over the $94 million in revenue that we reported for the full year 2020. Similarly, we are reporting an adjusted full-year 2021 EBITDA of $25.1 million, representing solid profitability and a substantial improvement over the adjusted EBITDA loss of $8.1 million that we reported for the full year 2020. We also reported positive net income for the full year and the fourth quarter, which also represents significant improvements relative to the net losses that we've reported for Q4 2020 and the full year 2020. It is important to note that COVID testing-related revenue is estimated to be approximately $110 million. For 2022, we're taking a conservative approach and are not including in our projections any COVID testing revenue after the end of the second quarter. However, we see strong demand from our customers for both mobile health and transportation services and are comfortable issuing a full-year guidance of $400 million to $420 million for 2022. This represents a 26% to a 32% increase over 2021 or a 65% increase if we exclude non-recurring COVID testing revenue from the second half of both years. Taking a step back for those who may not be familiar with our story, DocGo is a leading provider of last-mile healthcare delivery services. What does that mean? We deliver high quality, affordable healthcare services to patients where they are when they need it most. We operate in two distinct divisions, mobile health and mobile transport. Mobile health, the most significant driver of our growth, brings in-person healthcare to patients where visits to a doctor's office or hospital may not be necessary. Many companies provide patient care in non-traditional settings. What differentiates our mobile health business is DocGo's use of highly trained licensed practical nurses and paramedics who work under physician licenses in our network of medical practices across the United States. This allows our clinicians to work in their much broader scope of practice than they have been used to in the past. This innovative model has enabled DocGo to build a large cost-efficient labor force to facilitate the host of medical treatments that are traditionally provided by more expensive nurses, physician assistants, nurse practitioners, and medical doctors. This approach has enabled DocGo to significantly scale up our medical workforce during a national labor shortage and facilitate a wide range of high-quality medical treatments and interventions to patients at a much lower cost. By leveraging this workforce to provide care to patients in their homes, their offices, and in non-traditional settings, we help avoid costly and unnecessary visits to the emergency room. Our services include bedside procedures, preventative care, medicine administration, monitoring, and various vaccinations, EKGs, ultrasounds, fusion therapy, and much, much more. We contract directly with government agencies, corporations, and hospital systems, and then provide services directly to their members. We get paid by the contracting agency instead of the patient. As mentioned, we employ a large number of licensed practical nurses and paramedics in addition to regular nurses, PAs, and MDs, who are used primarily for training and to provide medical supervision. I think it is important to note that we employ the majority of our practitioners. They are not contractors. We believe this leads to more satisfied customers and loyal employees, and ultimately better care for our patients. A key metric that demonstrates our employee satisfaction is DocGo’s stellar ratings on leading internet employment portals. Hundreds of our employees have left reviews of their experience working for our company. We enjoy a 4.2 rating on Glassdoor and a 4.1 on Indeed, scores that are far higher than our competitors. We have provided mobile health solutions in 29 states and are licensed to provide these services in even more markets across the United States. Given the very low penetration rate in our industry currently, there remains a significant amount of opportunity for us to pursue while in parallel continuing to grow in our established markets. Between 2019 and 2021, our total revenue, excluding COVID testing grew at a compound annual growth rate of 182%, reaching $207 million in 2021 compared to just $48.3 million in 2019. This stellar growth is driven by the inclusion of revenues from several large new and expanded global health contracts, and the continued geographic expansion of our transportation business. One very notable contract that we announced in January that will help drive future growth is with Aetna in New York and New Jersey. This multi-year contract gives us the opportunity to offer unique on-demand medical services to a total population of more than 2.5 million people. This is a significant opportunity for us, even if we convert just a small percentage of these patients to our direct-to-consumer home services. One of the new services we’re most excited about is our direct-to-consumer offering. As medical copays and deductibles continue to increase, we see an opportunity to provide cost-effective treatment alternatives directly to patients who are seeking medical treatment for non-emergency conditions. We are in the early stages of piloting this B2C offering and have plans to take the learnings from this pilot and expand these services to several markets in 2022. One of the unique aspects of our mobile health service is our purpose-built technology platform that plugs seamlessly into existing healthcare ecosystems and provides better coordination of care designed to be used by patients and their families, care providers, and facilities among its many core functions and benefits. It integrates with electronic healthcare records from well-known leaders in the field, such as Epic and Allscripts, ensuring that all patient information is in a single repository. In addition to resulting in better coordination of care and superior patient experience, these complex EMR integrations provide DocGo with a significant competitive advantage. Our other offerings in medical transportation, which basically refers to providing Uber-like on-demand ambulance patient transfer solutions between clinical settings. This is not emergency 911 work. Our fleet of over 300 ambulances provides pre-scheduled high-acuity medical transportation. While we have a small number of wheelchair vans and medical sedans, 99% of our transportation revenue comes from high-margin ambulance transport. We’ve developed a CapEx light model for our ambulances where we lease vehicles through GE Capital for five-year terms. At the end of the lease period, we’re able to return our vehicles and upgrade to the latest models. We maintain partnerships with some of the largest and most highly regarded healthcare providers in the industry, including Fresenius, Jefferson, UCHealth, Northwell, and HCA. These long-term multi-year contracts are increasingly moving away from fee-for-service agreements to a lease hour model where we provide vehicles, equipment, and staff for a daily fee. This provides our customers with dedicated resources to help expedite patient transfers, a rebate feature to help them lower costs as they increase scheduled efficiency and provides us with better revenue predictability and gross margin performance. Via our strategic partner relationship with Fresenius, Jefferson, and others, we are contracted for over $500 million in potential revenue. Between 2019 and 2021, revenue in the medical transport business grew at a compound annual growth rate of 35%, reaching $84 million for the full year 2021 or just about 26% of our total revenue. We currently provide medical transportation services in 11 states with additional licenses pending. At this point, I’d like to hit on a few operational highlights from the quarter. We announced a partnership with Carnival, the world’s largest cruise line, to deploy medical teams on ships to augment existing medical staff. This is in addition to the embarkation services that we already provide and which we are expanding to additional ports. We now have a growing partnership with Visiting Physician Services to provide in-home non-emergency services for older adults and homebound patients in New Jersey and the surrounding tri-state area. Visiting Physician Services is the largest geriatric house call practice in New Jersey and this partnership will allow them to serve a larger patient base with faster response times. We introduced additional services, including mobile health to residents in San Diego, California, and a mobile suboxone treatment to address homelessness in New York. These are just a few examples of the diverse range of services that we offer. Turning to market opportunity, the U.S. addressable market for our services is significant and largely untapped. Virtual healthcare has seen rapid growth in recent years, propelled largely by COVID. In addition to being a tailwind for our 2021 business performance, the relationships we’ve established have enabled us to prove the value of DocGo’s mobile health services with a range of new customers and expand those relationships in many cases to include additional service offerings. It has been estimated that $250 billion, or approximately 20% of all Medicare, Medicaid, and commercial outpatient office and home health spend, could be virtual. However, some $80 billion of this virtual care requires some form of physical follow-up. Currently, there is no broadly available at-home solution for in-person clinical services. Additionally, the medical transportation industry is highly fragmented and growing steadily due to the aging of the population as well as the greater prevalence of chronic disease. Combining the opportunities we see in both mobile health and transportation, we estimate the total addressable market for our services in the United States alone to be approximately $102 billion. Similarly, a recent report by McKinsey concluded that up to $265 billion in medical care currently delivered in healthcare facilities will be shifted to home-based care by 2025. This represents a 3x to 4x increase as compared to today and companies like DocGo who are able to provide care in the home seem to be among the biggest beneficiaries of this shift. Clearly, we have barely scratched the surface, but with the investments that we have made, particularly in the area of technology, we believe we have created a significant competitive advantage. At this point, I'd like to turn the call over to our CFO, Andre Oberholzer, for the review of our financials.

Thank you, Stan. Good morning. Total company revenue for the fourth quarter of 2021 amounted to just over $121 million, representing growth of 289% as compared to the $31 million reported for the fourth quarter of 2020. The year-over-year revenue growth was driven mainly by the contributions of revenue from several new and expanded Mobile Health contracts. Mobile Health revenue for the fourth quarter of 2021 amounted to $102.6 million, as compared to $15.8 million in Q4 of 2020, up approximately 6.5 times. Medical transport revenue amounted to $18.7 million, up 21% from $15.4 million in Q4 of 2020. It is important to note that excluding COVID testing-related revenue from Q4 of both years, Q4 revenue tripled year-over-year, reflecting strong momentum in our core businesses. Adjusted EBITDA grew to $17.3 million in the fourth quarter of 2021, even with significant investments made in regional expansion and infrastructure versus an impressive EBITDA loss of 2.9 million in the prior year quarter. Net income amounted to $20.3 million in the fourth quarter of 2021, which represents a substantial improvement over the net loss of $4.4 million in the fourth quarter of the prior year. This reflects the strong increase in revenue during the fourth quarter while certain overhead costs remain in line with prior periods, allowing a larger proportion of additional revenue to drop to the bottom line. I also want to point out that net income in Q4 2021 includes the gain of $5.2 million relating to the remeasure of warrant liabilities which has no impact on cash flow or operation. Turning now to our full-year results. Total company revenue for fiscal 2021 amounted to $318.7 million, representing growth of 239% over $94.1 million reported for fiscal 2020. It reflects a 4.5% improvement versus our prior guidance. Mobile Health revenue for fiscal 2021 amounted to $234.4 million, up 659% from $31 million in the prior year. Medical transportation revenue amounted to $84.3 million, up 33% from $63.1 million in fiscal 2020. Gross margin for fiscal 2021 was 34.4%, representing a 100-basis point improvement from 33.4% in 2020. The increase in gross margin was largely due to a shift in revenue mix towards higher margin Mobile Health revenues. Margins were negatively impacted by higher costs related to subcontracted labor, an increase in overtime during the launch of several mobile health projects in an expedited fashion, and to a lesser extent, increased labor rates. As new markets mature, we expect to see improved margins. Generally speaking, we experience lower margins during the launch of new projects, as we focus on the timely launch of operations and usually rely on higher-priced subcontracted labor. Once we get past that initial launch period, we are able to drive margins higher target margins as we are able to schedule more efficiently with DocGo employees. In 2021, adjusted EBITDA grew to approximately $25.1 million or 7.9% of revenue, even with all of the investments made in regional expansion and corporate infrastructure. This compares to an adjusted EBITDA loss of $8.1 million in 2020. As a reminder, adjusted EBITDA is a non-GAAP measure representing earnings before interest, taxes, depreciation, amortization, and also adding back stock compensation and the impact of the warrant liability re-evaluation as well as adding back non-recurring expenses incurred in connection with our public listing. Please refer to our earnings release for a reconciliation of adjusted EBITDA and net income. Net income amounted to $19.2 million during fiscal 2021, which represents a substantial improvement over the net loss of $14.8 million in 2020. Net income for 2021 included a $5.2 million gain from the revaluation of warrant liability. Excluding this non-cash and non-operational item, our operational net income amounted to $14 million or 4.4% of revenue for the year. As of December 30, 2021, our cash and cash equivalents total $175.5 million. Total proceeds to the company from the public listing amounted to approximately $158 million net of transaction expenses. Note that we have insignificant debt of approximately only $2 million. Finally, to support our growth, we hired over 900 new employees in Q4 of 2021, bringing total hires for calendar year 2021 to over 2,300, and the total number of medical providers to over 3,800 as of year-end. Now turning to 2022 outlook. Stan mentioned earlier we anticipate fiscal 2022 revenues to amount to approximately $400 million to $420 million and we estimate adjusted EBITDA between the range of $35 million to $41 million. At the midpoint, adjusted EBITDA is estimated at 9.4% of revenues within 2022 versus 7.9% in 2021. In terms of segments, we expect that the Mobile Health segment to continue to contribute approximately 70% to 75% of revenues with medical transportation as the remainder. That concludes my remarks. At this time, we ask the operator to open the call for questions.

Thank you. Our first question is coming from Mike Latimore of Northland Capital. Please go ahead.

Great. Thanks. And congratulations on the great year there. I guess just two questions on the medical mobility or mobile transport side of things, can you talk a little bit about the growth rate you might see there, the catalyst for maybe a little bit of accelerating growth on that side of the business? And then the second question is just on gross margin. What maybe give a little guidance on where you see gross margin going this year?

Yes. Mike, sure. In terms of transportation and the acceleration growth, that's largely dependent on the amount of licenses we can secure throughout the various states. We made announcements a few weeks ago. We acquired two new licenses. We hope to do at least five possibly seven new markets in 2022. We have several LOIs out with small organizations to acquire their current licenses. With our business model we don't just go into a market and start looking for business; before we even issue an LOI, we first look at how many Fresenius locations are in that market. How many of those patients we can actually serve? We build out a detailed performer and then if it makes sense, we go all in and try to make a compelling offer to buy out that license. This gives us some visibility into the kind of revenue and profits we can generate in that market. Our goal is to get revenue generating as quickly as possible, usually within a couple of weeks after signing and securing that license. So, to answer your question, hopefully, we’ll add another five to seven markets in 2022. In terms of growth, we tend to grow our transportation business at a rate above 35%, maybe 40% per year. We've been doing that consistently for several years. Don't see any reason why that trend should change anytime soon. If we're lucky and if we can get our hands on more licenses, we can definitely look to accelerate that. We're definitely not capital constrained in any fashion. We have plenty of capital, plenty of cash on the books to do those transactions, and anyway, they tend to be small. As we've spoken about in the past, when we acquire these licenses, they have no limitations to the number of vehicles that we can deploy. We can launch one ambulance or 1,000 ambulances; it's an operator's license, there's no limitation on those. In terms of gross margin, there is some loss of margin in the first 90 days or so when we do a Mobile Health project. The reason for that is we often need to start up very quickly, in various locations where we may not have a presence. So, we'll work with one of our 30-plus medical staffing agencies that we have contracts with. They will provide the temporary personnel. We provide the more advanced medical trained person to train them and get them ready for the project that we're launching. With almost all of our staffing agreements, we have the ability to convert those employees to W2 after day 60 or after day 90 without additional fees. So, we often give up some margin in the beginning by using an agency, but after day 60 or day 90, we ultimately aim to convert them to W2 employees and not have the temp agency provide the staffing any longer. After day 90 in Mobile Health, our target is about 51% to 52% gross margin, and that's our target moving forward whenever we do a Mobile Health project. Sometimes they're a little bit more profitable depending on the type of services being performed in that contract, but our target gross margin in Mobile Health is about 51% to 52%, and transportation is about 40% to 43%.

Great. Thank you.

Sure, Mike.

Thank you. Our next question is coming from Sarah James of Barclays. Please go ahead.

Hi guys. This is Steve Braun on for Sarah. Just had a question on the COVID revenue assumption in 2022. Just wanted to see – so you said that it was a 65% growth excluding the second half of revenue from 2021 and, I guess like 2022? So, I just wanted to see like how much you're assuming, and then like, if you can give us a split between Q1 and Q2?

So, at this point, we're anticipating COVID testing will start to subside. It's hard for us to give you any accurate data because frankly, we have not received that many notifications to reduce them just yet, but we expect to start receiving those notifications shortly. I don't want to share any information that's not accurate. We are assuming by the end of the second quarter, COVID testing revenue goes to zero. I do believe there will be some continuous COVID testing beyond the second quarter. Keep in mind, Steve, we do not do consumer testing, and almost all of our business is municipal. We work for counties, cities, and states, and it's quite unlikely that municipalities will reduce municipal testing while COVID still exists. We are taking a conservative approach in our forecasting for our guidance; we're simply assuming a worst-case scenario that COVID testing will go to zero after July 1, and that revenue will be replaced and supplemented by other mobile health services.

Okay. Great. Thank you.

Sure, Steve.

Thank you. The next question is coming from Ryan MacDonald of Needham & Company. Please go ahead.

Hey, Stan and Andre. Thanks for taking my questions and congrats on a great finish to a really strong year. Stan, really want to talk first about the demand environment and perhaps what you're seeing, and maybe you could parse it out between municipalities and health systems. On the health system side, are you seeing any sort of tailwind from demand given the severe staffing shortages that these systems are going through right now and how that might be impacting the business as we think about the 2022 outlook?

Hey, Ryan, great to hear from you again. Yes, I mean look demand is going strong. There are staffing shortages throughout the country. Hospitals, nursing homes, and urgent cares are all short-staffed. They all need more nurses and physician assistants, and it would be almost irresponsible for us to further add to that strain, and that is the reason why we want a different model. We sincerely believe that nurses and physician assistants, nurse practitioners spend a big portion of their day doing skills and tests that are well below their level of training. So rather than spending top dollar doing basic tests and procedures, our approach is to hire licensed practitioners like LPNs and up-train them to do those types of services. It's a lot more cost-effective and doesn't add strain to the existing staffing shortages we're seeing throughout the country. Demand on the municipalities is strong. We are excited about what we'd like to see as one of the most comprehensive homelessness programs in the nation. We have contracts in Pennsylvania and New York for those programs and we are now in discussions to do a pilot in California. We have been getting a lot of positive media from our engagements with municipalities and in several cities, we provide mobile urgent care units to lower-income communities that have difficulty accessing quality medical services aside from hospitals. Overall, the demand on municipalities and healthcare systems is strong. Hospitals are consistently looking to add additional services, and providing opportunities for patients to be treated at home rather than in hospitals is being very well received. We are constantly presenting our program to new hospital systems that express interest in learning more about our offerings. Initially, the medical community may have been skeptical regarding our approach, but we have now demonstrated that the model works well. Our team is constantly busy, which is always a good thing, and besides local municipalities and hospitals, we are also participating in large state and federal RFPs using our concept of lower-skilled licensed practitioners up-trained to deliver certain clinical services. With our ample existing cash reserves, we wish to aggressively pursue these larger at-scale state and federal contracts, and we are optimistic about potentially winning a few of those in 2022.

Excellent. That's really helpful color, Stan. I appreciate that. As a follow-up, perhaps for Andre, great to see the strong performance here in gross margin in that leased hour model starting to flow through the model in the fourth quarter. As we think about fiscal 2022 and some of these assumptions around what the implied guidance there might be for gross margin, can you talk about how sort of the leased hour model continues to flow through the model, but then also, we're in an environment now where we're seeing fuel costs rise quite significantly? Can you just remind us of what the potential impact that has on the gross margin outlook as well? Thanks.

Sure. I'll speak to fuel costs first, as that’s a popular question. So, in our guidance, we’ve assumed that fuel prices will average about $4.30 a gallon for this year. Year-to-date, prices are running about $3.71, so we are below our guidance. If cash prices increase by another $1 to an average of $5.30, that will result in about $1.05 million in additional fuel costs, which translates to approximately 39 or 40 basis points on gross margin. So, yes, there is some impact, but it's relatively minor compared to other industries like airlines. In terms of gross margin, Stan mentioned that in a mature market for transportation, we trend around the 40% range, and for Mobile Health, we see gross margins around 50-51%. In 2021, you may have noticed that we weren't quite on that trajectory. This was mainly due to launching several new projects where we had to rely on higher-priced subcontracted labor to meet demand. As we progress through 2022, we expect to see margins improve as we have fewer expedited launches on a larger revenue base. Our target goal for mobile health remains around 51-52% gross margin. As our markets mature, we aim to achieve these margins more consistently for both: Mobile Health at about 51% and transportation close to 40-43%.

That’s helpful color. Congrats again on the amazing quarters.

Thank you. And just to clarify, the long-term goal we discussed is a three to five-year outlook, just for clarification.

Thank you. The next question is coming from David Grossman of Stifel. Please go ahead.

Thank you. Well, good morning. I'm wondering, Stan, if you could talk, I know you don't disclose a backlog number or anything like that, but maybe you could discuss just a little bit about the visibility that you have going into the year based on the contracts that you actually have in hand, or perhaps on the recurring revenue that you typically get.

Sure. David, good to hear from you again. When we look into 2022 and guidance and incremental revenue, we go through quite an exhaustive process with all senior management using a ground-up approach. We consider several key factors. The five key points that we take into consideration when we come up with our number are as follows. First, looking at revenue from existing Mobile Health contracts, which are relationships we service and that are looking to expand existing programs; second, we assess Mobile Health contracts already contracted and in the pipeline to be implemented — these are funded contracts with start dates within 30, 60, or 90 days; third, we consider Mobile Health contracts in the pipeline with greater than a 75% probability of closing, which we monitor through our Salesforce platform; fourth, we evaluate our expected transportation expansion, focusing on secured markets that have not launched yet; and lastly, we account for some small, non-significant, or non-material M&A opportunities. This thorough process takes time, and we ensure that everyone within our management team believes in the final revenue numbers that we share. That's how we arrive at the guidance for 2022.

Got it. So, in that context, plus your thoughts about COVID, the cadence of the quarters in 2022 are probably pretty difficult for all of us to predict. Is there any guidance you can give us in terms of how to think about the cadence of both revenue and EBITDA as the year progresses, given this unusual year that we're in?

Yes, I definitely see it as an unusual year because we expect COVID testing to drop off over Q1 and Q2. Therefore, it has become complicated to project on a quarter-by-quarter basis due to this transition year for us. However, we've gone through our five-step process and historically, we have never missed guidance. Given our previous performance, we are confident in the numbers we've shared. Some people may perceive the guidance as conservative, but as a company, we tend to be on the more conservative side of things. If we perceive a favorable outcome in the year as the quarters progress, we will consider increasing our guidance afterward. But yes, as we have discussed, it is challenging to predict exactly how revenue will emerge on a quarterly basis.

All right. And maybe I can just ask it a different way. Is it logical to think that based on your parameters relative to COVID, we might see sequential declines in revenue for March and June, and then establish that as a base to increase revenue sequentially in the back half of the year? Is that – and listen, if you can comment, you can comment, but I’m just curious if that's at least the logical assumption to go with as we think about 2022.

I think it's safe to say that as COVID testing revenue starts dropping off, we have a healthy backlog of agreements above average that will capitalize on the available labor workforce to engage on new projects. Our challenge is timing it well to ensure we secure new agreements, as we anticipate that COVID testing revenue will begin to drop off and we will ramp up to start fulfilling new contracts.

All right. Got it. Thanks for that. And then just one last one. Andre, I think you said that there was a $5.2 million… was it a gain? I'm sorry, I didn't catch the exact description of what that was in the fourth quarter. Could you mind just repeating that?

Yes, sure, no problem. So, the net income, as well as adjusted EBITDA for the year and quarter includes a $5.2 million gain related to the remeasurement of warrant liabilities. When we merged with Motion back in November, we inherited that warrant liability. At the date of that transaction, Motion's stock was priced at $10 a share, therefore, we valued the warrant at that price. By the end of December, when we closed the year, the stock price was down in the $6 range. So, that downward valuation resulted in a significant reduction of that warrant liability. Thus, this is just an accounting item, a mark-to-market accounting approach. This gain is not representative of operational performance; it behaves similarly to stock option treatments.

Got you. So, going back to January, you pre-announced your quarter, you exceeded that. What was the difference between, I think it was about $108 million and what you actually reported? What accounts for that delta between the pre-announcement and what you reported?

Yes, we had several new projects that commenced in November and December. As a part of the accounting process termed ASC 606, we make estimates on revenue bookings based on our collection history of customers. With several new projects, especially those without a prior collection history, we originally estimated lower collection percentages to be prudent. Once we entered January and February and completed our audits, we received payments on some of those projects. Thus, the reserve we had initially set aside for short payments or non-payments was reversed back into income, which can cause some discrepancies. It’s a typical part of the financial closing process reviewing subsequent receipts.

Got it. One last question, can you just give us some sense of what to use for the share count in 2022, given that 2021 was an unusual year, and if there are any non-GAAP adjustments expected for 2022?

At the end of December, we have 100 million outstanding shares with an additional six million warrants, with about half being public and half private. So, on a fully diluted basis, it's approximately 106 million. We also have about five million related to earning out from the transaction that requires us to hit certain price points. For example, the first earn-out is hit when the stock reaches $11.50. Thus, estimating exactly when we will earn those shares is challenging. We also have about six million stock options, though some are vested and some are not. So, the outstanding shares are about 100 million, six million warrants, and five million earn-out shares for the future. The stock options won't add significant amounts to the immediate share count.

Got it. Great. All right, guys. Thanks very much.

Thank you, David.

You're welcome.

Thank you. Our next question is coming from Richard Close of Canaccord Genuity. Please go ahead.

Yes, thanks for the question. Congratulations on a strong year. I just wanted to clarify what was the COVID revenue in 2021? Did you say it was $110 million?

Yes, we estimate that the COVID testing-related revenue was about $110 million. We estimate it because we do not conduct consumer testing; almost 100% of our testing contracts are with municipalities, where we are compensated by the shift of labor rather than per test conducted. Therefore, distinguishing the revenue can be complex. In some cases, we receive a nominal upcharge for specific activities, but it generally gets commingled with our overall lab contracts, which can make it challenging to segregate precisely. Thus, the estimate is as close as we can determine.

Got it. Just to be clear on the guidance, you mentioned that 2022 is expected to show growth excluding the second half of COVID revenue. What is the expectation for COVID in the first half? Did you provide a specific dollar amount?

We haven’t specified an amount because we don’t want to put out numbers that we're not absolutely certain about. Although we see volumes decreasing and some personnel agreements being reduced, we are cautious about predicting when municipalities will lower staffing demands. Hence, we internally budget for gradual reductions leading up to Q2, anticipating a complete drop in revenue by Q3. It's difficult for us to predict exact amounts without risking a degree of inaccuracy.

Okay. Thank you. Are the two licenses you secured recently from the acquisition conducted in Maryland and Pennsylvania?

Yes, that's correct.

Okay. With respect to EMR integration you called that out. Is there thoughts on getting a Cerner or Oracle integration, or does that matter?

Yes, we have integrations with several large EMRs, particularly Epic and Allscripts. We've completed some work with Cerner in the past, and while we can deepen that integration, the focus is determined primarily by customer demand. With our extensive relationships with our hospital systems, we’ve been able to achieve extensive integrations. These integrations can be significantly complex, and our success in this area is largely due to the strength of our contracts with hospitals. When they call on their EMR provider and insist on our integration, it helps accelerate the completion of these projects. Although we have also integrated into about 20 other EMRs, the key customers we focus on tend to be on the larger side.

Okay. And a question regarding Aetna. Is this a new channel for you or a new customer base on the payer side? Can you talk about the marketing and onboarding costs associated with driving revenue in that business?

That's a great question, Richard. The direct-to-consumer market excites me, especially with high copays and deductibles. We're piloting a service with a partnership from Canada that is performing well, and we’re establishing plans to launch that service in the United States. The Aetna agreement represents one of the first major contracts we've secured for our D2C offerings. Unfortunately, we do not have a lot of information to share at the moment. Aaron Severs is heading this initiative for the company, and initial testing has provided positive feedback from select customers. Although this pilot program is still under development, if successful, it will allow us to tap into a considerable TAM, benefiting DocGo for years to come. Once we have more information to share publicly, especially regarding our expansion in the U.S., we will definitely do so.

Thank you. This brings us to the end of our question-and-answer session as we are out of time. I would like to turn the floor back over to Mr. Vashovsky for closing comments.

Thank you. That concludes our call for this morning. We hope you found the call informative, and we believe we were successful in conveying our enthusiasm for the year and beyond. We have significant opportunities ahead of us, and I look forward to a very successful and exciting year. This concludes our call, and I want to sincerely thank everyone for joining. Have a great day.

Ladies and gentlemen, thank you for your participation and interest in DocGo. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.