Alan - 2023 Q2 Letter to Shareholders

• 1️⃣ Step-back on Q2 performance
• 2️⃣ Controlling cash burn and market uncertainty
• 3️⃣ Better positioned than ever
• What’s ahead?

Dear Alan friends and investors,

We have always been obsessed with our mission to empower everyone to live a longer, healthier life, believing it will lead to building a generational company. We consistently try to understand what we should do today to be in the best position in 5, 10, 15 and even more years. That is why we started by first building a health insurance company, while our ambition has always been to be a one-stop health partner.

Today more than ever, seeing the adverse market conditions around us, we believe in building for the long term by making the right decisions today.

Just over two years ago, in January 2021 we were at 138k members with a 0% gross margin. By continuously strengthening our product differentiation and proving our extra value, we are now proud to delight more than 430k members (> 3x) and we expanded our gross margin to over 10%.

In H1, we delivered year-on-year annualized revenue growth of over 40%.

We continue to scale our activities in France 🇫🇷

During the second quarter:

• We expanded our member base by 19k in France.

• We are seeing great momentum in the Large Companies segment (>300 employees) and greenshots within Very Large companies (>3,000 employees).

• Our margin is now sustainably in double digits and follows the annual track record of expansion that we have established.

• We released 4 new offers for independents to better cover the variety of their profiles and needs.

• Given the market potential and the unique timing, we decided to make civil servant reform a key priority.

• Our one-stop health partner positioning resonates better and better with the market.

We also encountered certain headwinds:

• We see under-performance in inbounds (-13% companies created in France compared to last year), degrading B2B Market conditions 

• The current macro environment is leading to intensified price sensitivity from customers.

Most of our 2023 member acquisitions (c.80%) are expected to be booked during H2, and the most relevant part of the year is still ahead of us.

We over-performed in Spain confirming our strong market positioning 🇪🇸 

• We have surpassed the 10,000 Spanish members mark!

• We have beaten our plan in member growth, ARR growth, and margin. 

• We confirmed that our health services (Alan Clinic, mental health offering, etc.) are a growing asset to boost member satisfaction, create a new product category and increase brand awareness:

  • 74% of members are accessing therapy for the first time thanks to Alan.

  • Our mental health service is rated 4.9/5.

Sustained growth and increased margins in Belgium, despite tough economic conditions  🇧🇪

• We have expanded our Belgian membership base by 2,600 over the quarter reaching 29k members (+93% YoY).

• Belgian ARR YoY growth is +124%. 

  • The economic conditions in Belgium have led to many companies slowing down hiring, and increasing layoffs.

• We made great progress on margin, +6.8pp compared to the previous quarter.

• We just launched the self-serve offer we just launched in Belgium to allow small companies (2-9 employees) to select and sign their offer autonomously.

All thanks to huge investments in product differentiation as a one-stop-health partner

One-stop health partner bundle roll-out

We migrated 69% of our customers to our health partner offer and will be done by the end of August (ahead of the initial target of December). It means that all Alan members will have access to our mental and musculoskeletal wellness solution, with more than 50+ accessible therapists in the app (2 sessions included). 

As a result, we stopped onboarding on the Alan Mind app and released all our therapies, masterclasses, and programs in the Alan app.

The Gain self-confidence program, available for all in the Alan App

This strategy is paying off as we are creating the one-stop health partner category:

• 68% of Key Accounts reacted positively or super positively to our pitch and recognized the need for more support on health and specifically on mental well-being topics.

• We have amazing feedback from members & customers on our product; they even fight on our behalf on social media, and we are very thankful for that. We don’t take it for granted. 

• Every week, we hear new members' stories that demonstrate our life-changing impact on them.

We keep improving our offer for members

On optics, we released the first frames of our branded Alan glasses, which are made in France to the highest quality standards, with no out-of-pocket expenses.

Our members can now have all their questions about their coverage table answered in a matter of seconds. Our personalized AI-based assistant enables us to delight them with quick and accurate answers, in line with our determination to make the understanding of health insurance accessible to all.

In terms of customer care, we improved our phone call-back service level agreement, from 3 to 2 days! We are framing an innovative tech-powered hotline leveraging our call-back and voice message solutions.

While building the best health partner experience for customers

We introduced Insights for customers to prompt them to act on their employee well-being (ex: % adoption of our health programs). By increasing the use of the Alan app and health services, customers can reduce employee back pain, staff turnover, and absenteeism.

We also rolled out Bulk invite, our solution to cover all new employees at once making the transition to Alan or hiring peaks management even simpler.

We have opened up access to Direct Billing from beneficiaries which unlocks deals in Retail and larger segments.

We are reducing the cost to serve

• We have reduced our cost to serve by 11% year on year

• This progress has been made possible by:

  • Automated Claim document processing:  We have increased the automation rate by 7% this quarter.

  • Care contact decrease: Strong collaboration between Care and Product led to a smoother user experience and a 28% reduction of care contact vs 2022.

  • Better supervision of overpayments: Important focus was placed on investigating and remediating overpayments. The underlying issue was found, resolved, and will lead to a significant reduction of the current overpayments stock.

We keep increasing the talent density of our team

• We hired 35 new Alaners over the second quarter of 2023, bringing the team to 520 Alaners.

  • Experienced talent has joined the team: Hugo Venturini (ex CTO @Qwant), Marvyn Leroy (ex Staff Software Engineer @Uber)..

• We co-founded Generative AI company Mistral AI as non-executive Advisors, with the incredible co-founders Arthur Mensch, Timothée Lacroix et Guillaume Lample to produce world-class European Large Language Models by the end of the year. 

  • It will help us to be at the forefront of research and access state-of-the-art models. 

Our financial health remains strong and we have maintained a fortress balance sheet.

We have over €200m of cash on our balance sheet and a clear path to profitability that doesn’t require additional capital.

While remaining determined to win the long-term game, we are into the daily details of our burn and operating excellence to secure our financial health, without compromising our mission. 

During H1 2023 we burned €3m less than during H1 2022 despite growing by c.40%.

 Taking a step back, we feel that Alan is in a better position than ever. 

Solid foundations

Despite the unpredictability of events since 2020, including a global pandemic, subsequent lockdowns, tech slow-down, high inflation, higher interest rates, and lower economic growth, we have proven our anti-fragility. The first half of 2023 was no different. 

Our success to date has been built on healthy and resilient foundations:

A true impact

Every day, through the Alan Clinic, our prevention tools, our health stories, our mental health offering, etc. we realize that we have a true (and very rare) impact on the life of our members. Very few companies can claim this, and we are very proud of it. 

To date, we have already accomplished the following:

• Built a Top 20 (out of >400) health insurer in France.

• Built an industry-redefining insurance product and a category-creating one-stop health partner product that:

  • is valued with a 62 NPS from members and a 56 NPS from Admins

  • insures over 430k members and is growing fast!

  • 79% of members downloaded the app and 53% of them open it monthly

• Expanded operations to Spain and Belgium

• Earned the trust of 20,000+ companies who understood the value of investing in the physical and mental health of their employees and have chosen Alan as their solution.

Health issues are becoming a hot topic, companies can no longer avoid treating them

• The difficulty to access affordable care increased, leading 42% of French individuals to forgo treatment. 

• The rise in musculoskeletal (+60% in 10 years) and mental health disorders (60% of employees said they were feeling stressed in 2022), demand a proactive approach that the system falls short of providing.

• Finally, 88% of employees consider that their company is responsible for their mental well-being

We are demonstrating Alan is the best HR investment 

We aim to be the best HR investment companies can make to solve those problems. 

We are rolling out the one-stop health partner offer, helping companies to reduce absenteeism by addressing its root causes:

• Ordinary diseases, facilitating access to care with Alan Clinic

• Mental well-being with Alan Mind therapy programs

• Musculoskeletal disorders with Alan Back Pain program

86% of our key accounts endorse our mental well-being proposition and our members rate Alan's value 4.9/5. We are making steady progress on health services adoption.

Our flywheels to the unstoppable growth

Alan is a compounding company: we have been growing very steadily and have a lot of market depth ahead of us. 

We are gradually building a flywheel configuration where:

• We bring significantly more value on insurance & prevention both to members & customers.

• We can demonstrate the return on investment of picking Alan (less absenteeism, more engagement, more attractivity).

• We will become more and more competitive over time because we have a better cost structure on claims & servicing.

It’s definitely time to build in healthcare. The current state of healthcare, combined with the gradual penetration of AI into all areas of business, creates endless opportunities.

In healthcare, AI stands to dramatically improve some of the unpleasant economics, making the industry the best place to build.

The Q3  strategy remains similar and is adapted to the opportunities ahead:

• 1️⃣ Lead the one-stop health partner category

  • Increase adoption of our health stories by building daily routines for members and a complete revamp of our member experience.

  • Beyond members, focus on the customer health partner experience to ensure that customers perceive and value us as the solution addressing their specific health-related needs (e.g. burnout) with simple, actionable, turnkey recommendations

  • Accelerating our go-to-market on every segment, proving ourselves as the best HR investment.

• 2️⃣ Continue reducing our cost to serve per member by investing in automation, process, and product evolutions, combating fraud, and reducing claim overpayments.

Amidst market challenges, Alan's transformation to a holistic one-stop health partner is gaining momentum. 

We have a commitment in decades to build Alan, in order to impact the lives of millions of people. 

Thank you for your trust!

Jean-Charles, for the Alan team