FOXO Technologies Inc. (FOXO) is a pioneering company dedicated to commercializing revolutionary epigenetic biomarker technology. With a relentless focus on advancing the field of longevity science, FOXO is poised to redefine the relationship between individuals, healthcare providers, and insurers. Through its innovative offerings, the company aims to empower people to take control of their health and wellness, while also providing valuable data-driven insights to the life insurance industry.
Company Background
FOXO Technologies Inc., formerly known as Delwinds Insurance Acquisition Corp., was originally formed in April 2020 as a publicly traded special purpose company for the purpose of effecting a merger, capital stock exchange, asset acquisition, reorganization, or similar business combination involving one or more businesses. The company completed its business combination with FOXO Technologies Operating Company on September 15, 2022, changing its name to FOXO Technologies Inc.
FOXO Technologies is commercializing epigenetic biomarker technology to support groundbreaking scientific research and disruptive next-generation business initiatives. The company applies automated machine learning and artificial intelligence technologies to discover epigenetic biomarkers of human health, wellness and aging. Prior to the business combination, FOXO Technologies Operating Company maintained two wholly-owned subsidiaries, FOXO Labs Inc. and FOXO Life, LLC.
In February 2023, FOXO decided to not move forward with the launch of FOXO Life Insurance Company due to market conditions and lack of sufficient funding following the business combination. As a result, on February 3, 2023, the company consummated the sale of FOXO Life Insurance Company to Security National Life Insurance Company.
Financials and Liquidity
The company faced challenges related to its liquidity and capital resources following the business combination. For the nine months ended September 30, 2023, the company incurred net losses to common stockholders of $25.97 million. As of December 31, 2023, the company had a working capital deficit of $14.10 million and a total stockholders’ deficit of $14.10 million. The company’s operations used cash of $6.17 million for the nine months ended September 30, 2023.
For the fiscal year ended December 31, 2023, FOXO reported an annual net loss of $26.45 million, with annual revenue of $145,000 and annual operating cash flow of -$6.65 million. The company’s annual free cash flow for the same period was also negative at -$6.65 million.
The most recent quarter ending September 30, 2024, showed significant improvement with revenue of $1,196,000, net income of -$1,946,000, operating cash flow of $203,641, and free cash flow of $203,641. This represents the company’s first quarter reporting healthcare segment revenue, making year-over-year comparisons not applicable.
As of September 30, 2024, FOXO had a cash balance of $34,000. The company’s debt-to-equity ratio stood at -0.76 as of December 31, 2023. The current ratio and quick ratio were both 0.08 as of September 30, 2024, indicating potential liquidity challenges.
Product Development and Evolution
In the early years, FOXO’s primary focus centered on developing two core product offerings: the Underwriting Report and the Longevity Report. The Underwriting Report was designed to leverage a single assay testing process to generate a panel of impairment scores that could be applied by life insurance underwriters to more efficiently assess clients and provide personalized risk assessments. Meanwhile, the Longevity Report was conceived as a customer-facing consumer engagement product that would provide actionable insights based on an individual’s biological age and other epigenetic measures of health and wellness.
As the company progressed, FOXO also expanded its reach into the realm of Bioinformatics Services, providing data processing, quality checking, and analysis services to third-party clients using the company’s proprietary cloud-based epigenetics, longevity, and methylation pipeline. This ancillary offering has evolved to become a primary focus, as FOXO recognizes the growing demand for its expertise in navigating the complex landscape of epigenetic data.
In 2023, FOXO made the strategic decision to pause its sales of new life insurance products and move existing producers out of its Managing General Agent (MGA) distribution model. This shift in focus allowed the company to conserve cash resources and dedicate more resources to the development and commercialization of its core epigenetic technology and Bioinformatics Services.
Strategic Acquisitions and Growth
The year 2024 has proved to be a transformative period for FOXO. The company made two significant acquisitions that have expanded its reach and capabilities. In June 2024, FOXO acquired Myrtle Recovery Centers, Inc., a behavioral health services provider, and in September 2024, the company acquired Rennova Community Health, Inc. (RCHI), which owns and operates the critical access designated Scott County Community Hospital in Oneida, Tennessee.
These strategic acquisitions have been instrumental in FOXO’s evolution. The Myrtle acquisition has allowed the company to leverage its epigenetic expertise in the community health and addiction recovery settings, while the RCHI acquisition has provided a revenue-generating healthcare operation that is expected to contribute over $20 million in annual revenue, positioning FOXO for accelerated growth.
Business Segments
FOXO operates through two reportable business segments: Healthcare and Labs and Life.
Healthcare Segment The Healthcare segment began with the acquisition of Myrtle on June 14, 2024, and expanded with the acquisition of RCHI on September 10, 2024. Myrtle offers substance abuse treatments and services provided on either an inpatient, residential basis or an outpatient basis. Currently, Myrtle offers alcohol and drug residential detoxification and residential rehabilitation treatment services for up to 30 inpatients.
RCHI’s hospital, Big South Fork Medical Center (BSF), has 25 inpatient beds, a 24/7 emergency department, and provides ancillary services including laboratory, radiology, respiratory, and pharmacy services. BSF is designated as a Critical Access Hospital, a rural hospital classification.
For the three months ended September 30, 2024, the Healthcare segment generated $1.19 million in net revenues. However, the segment reported a loss of $47,000, as Myrtle incurred a $356,000 loss, partially offset by $309,000 of income from RCHI. For the nine months ended September 30, 2024, the Healthcare segment generated $1.21 million in net revenues and reported a loss of $114,000, with Myrtle incurring a $423,000 loss and RCHI contributing $309,000 of income.
Labs and Life Segment The Labs and Life segment is commercializing proprietary epigenetic biomarker technology to be used for underwriting risk classification in the global life insurance industry. The segment’s Bioinformatics Services provide data processing, quality checking, and data analysis services using FOXO’s cloud-based bioinformatics pipeline. The segment also anticipates recognizing revenue from the commercialization of its research and development activities, which may include its Underwriting Report, Longevity Report, or other commercialization opportunities.
For the three months ended September 30, 2024, the Labs and Life segment generated $8,000 in net revenues and reported a loss of $382,000. This represented a decrease in net revenues of 25% and a decrease in segment loss of 7% compared to the prior year period. For the nine months ended September 30, 2024, the Labs and Life segment generated $23,000 in net revenues and reported a loss of $1.25 million, a 34% decrease in net revenues and a 34% decrease in segment loss compared to the same period in the prior year.
The decrease in net revenues and segment loss for the Labs and Life segment was driven by lower royalty revenue and reduced life insurance commissions as the company ceased placing policies from its legacy agency business. This was partially offset by minimum royalties and maintenance fees due under the KR8 Agreement.
Financial Performance
Financially, FOXO has faced some challenges in recent years. However, the company’s financial performance has shown signs of improvement in the third quarter of 2023, with FOXO anticipating a reduction in losses of over $10 million compared to the previous quarter. This improvement can be attributed to the company’s focus on operational cost reductions and the progress made in the commercialization of its epigenetic technology and Bioinformatics Services.
The revenue and profitability of the newly acquired Myrtle Recovery Centers and RCHI operations are expected to improve over time as the company integrates these businesses and scales operations. The company primarily operates in the United States.
Future Outlook and Initiatives
Looking ahead, FOXO remains committed to its mission of transforming epigenetic science into innovative solutions that empower individuals and support the life insurance industry. The company is on track to commence the commercial rollout of its VITHAR™ AI Health Coach, a subscription-based, direct-to-consumer product that leverages FOXO’s epigenetic data and AI capabilities to provide personalized health and wellness recommendations.
Furthermore, FOXO recently announced a non-binding agreement for a proposed merger with M2i Global, Inc., a company specializing in the development and execution of a global value supply chain for critical minerals. This potential transaction, if completed, could further diversify FOXO’s business and provide additional growth opportunities.
Conclusion
Despite the challenges faced, FOXO has demonstrated resilience and a clear vision for the future. The company’s strategic acquisitions, focus on cost optimization, and innovative product development initiatives position it well to capitalize on the growing demand for epigenetic-based solutions in the healthcare and insurance industries. The recent acquisitions of Myrtle Recovery Centers and RCHI have expanded FOXO’s Healthcare segment, which now generates the majority of the company’s net revenues, though the segment continues to report operating losses.
The Labs and Life segment has seen declines in net revenues and operating performance as the company shifts its focus, but it remains an important part of FOXO’s long-term strategy. As FOXO continues to navigate the evolving landscape, investors and industry observers will undoubtedly keep a close eye on the company’s ability to translate its technological prowess into sustainable financial performance and shareholder value, while also monitoring its progress in integrating and scaling its newly acquired healthcare operations.
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