Virgin Pulse was one of Richard Branson’s highest-profile flops.

No, I’m not talking about the employee wellbeing company formerly known as Virgin Healthmiles.

First, Virgin Pulse was the UK company’s ill-fated attempt to compete with Apple’s iPod — way back in 2003. Virgin Pulse was the brand name for a line of portable music devices. The last one, which was the size of a silver dollar, looked like this:

Here’s Branson reflecting on his regrets about the misadventure years later:

Obviously, Virgin held on to that trademark though.

It took nearly a decade before the company decided to dust off the Virgin Pulse brand and reintroduce it to the world as an entirely different venture.

Just as the last few Virgin MP3 players left store shelves, what we now know as Virgin Pulse, the employee wellness and engagement company, was starting up in the US as Virgin Life Care.

2005 — Virgin Life Care: Fitness rewards and individual health plans

Virgin Life Care started out both deeper into healthcare and more integrated into the traditional fitness industry than it would be at any other point in the company’s history. The UK-based parent company injected about $250,000 into the startup in 2004 to get it going. It added another $12.5 million over a series of investments in 2005.

Virgin announced the original concept for its US-based health venture jointly with its new partner, health insurance company Humana. Here’s Branson again:

By the end of 2006, Virgin Life Care’s offerings became more clear. Here’s how it described the original version of its platform, HealthMiles, when it announced it had added another chain of fitness centers to its partners:

In the same announcement, Virgin Life Care explained this was not a direct-to-consumer offering unless you were “individually insured”:

The original Healthmiles program offered three ways for participants to track their fitness: a website called LifeZone, a USB-equipped pedometer called GoZone, and a medical device-equipped kiosk called HealthZone. The kiosks were stationed at fitness centers or, in some cases, on-site at employers’ campuses. Here’s what the original HealthZones kiosk looked like:

The original kiosk was (obviously) built by IBM. It included an IBM touchscreen monitor, a blood pressure monitor from A&D, a Futrex body fat reader, an A&D weight scale, cellular connectivity, and a cherry-red paint job. (Kiosks geeks can see more specs on this work of art over at IBM’s website here.)

Healthmiles rewarded participants with a varying number of points for tracking steps via the pedometer and uploading them to LifeZone as well as for visiting a kiosk and having some biometrics taken. The rewards system included ways to convert Healthmiles into gift cards to dozens of retail chains around the US.

2007: Name change to Virgin Healthmiles and another $10M infusion from the UK

In early 2007, Virgin Life Care officially changed its name to Virgin Healthmiles Inc, and its parent company in the UK also injected another $10 million into its coffers.

Around 2009 or so, Healthmiles began to offer participants the option of converting Healthmiles into a check in the mail. Clients could also customize this “Pay for Prevention” incentive by adding bonus payments for completing other wellbeing or HR-related tasks that they wanted to incentivize. This cash reward becomes a key part of Virgin Healthmiles’ marketing and the company typically points to $500 as the maximum annual payment participants could receive (unless their employer also offered their own additional bonuses, as noted above).

In these early years, Virgin Healthmiles touts a 40 percent to 50 percent average enrollment rate across its clients, while some of its clients have shown 80 percent enrollment or higher.

Humana partnership starts to wane

Around this time Humana absorbed HealthMiles Plus, its small joint venture with Virgin — the individual market health plan — but continued offering HealthMiles to its clients. (The Virgin HealthMiles-Humana partnership lasted for a few years, but by 2011 it was clearly over. Humana announced a new joint venture with South Africa-based employee-wellbeing offering, Vitality. The health insurance provided would continue to evolve its own wellness offerings, culminating in its current one, Go365.)

2010 – 2015: One more name change and a new focus on employee engagement

During this five-year period, Virgin Healthmiles begins to hit its stride. The company changes its not-so-scalable strategy of HealthZones in fitness centers, in part, because Fitbit devices and smartphones become ubiquitous. Virgin Healthmiles continues to offer its own low-cost pedometers, but it also integrates with a number of off-the-shelf fitness devices and apps.

(Today, Virgin Pulse still offers the option of installing a Virgin Pulse Health Station on-premises, but it’s not so much a kiosk anymore. It’s an iPad connected to a weight scale and blood pressure cuff.)

The company decides to rebrand one last time, from Virgin Healthmiles to Virgin Pulse, in an effort to de-emphasize the “health” promises inherent in its name. Instead, Virgin Pulse decides that focusing on employee engagement as its core value proposition is a better strategy. (I’ll get into the company’s evolving and additive value prop strategy in a section below).

During this period, Virgin Healthmiles, now Virgin Pulse, also builds its book of business from just a few million in annual revenues to around $50 million by year-end 2015. The company’s annual revenue doubled between 2014 and 2015, which attracts the interest of private equity firms.

From here on out, Virgin Pulse pursues an M&A strategy. It acquires seven companies and also sells itself — twice — along the way. Details on all of that after the Growth Metrics section below.

Virgin Pulse to hit $300M in 2020 revs + Other Growth Metrics

Virgin Pulse is a rare example of a digital health roll-up that seems to be working. The company’s aggressive M&A strategy has led it to $300 million in annual revenue for 2020.

In the chart below, I tried to show how quickly Virgin Pulse has built its book of business. While the company has made at least seven acquisitions to date, four of them had a material impact on the company’s annual revenue. The other acquisitions were either opportunistic or more focused on adding new capabilities to the evolving Virgin Pulse platform.

In 2016 Virgin Pulse acquired two competitors, ShapeUp and Global Corporate Challenge (GCC). ShapeUp had revenues of around $20 million at the time of acquisition and my estimate is that GCC had posted annual revenues around $35 million the year before Virgin Pulse snapped it up. The combination of the three companies pointed to a conservative $100 million revenue year for 2016, which is also the expected revenue figure that Virgin Pulse shared at the time of the acquisitions.

Interestingly, Virgin Pulse has stressed that it has been profitable since at least 2017 — but more likely since 2016. Virgin Pulse counts 1,441 employees in its ranks today, and it will likely post $300 million in 2020 revenue. That’s more than $208K in revenue per employee.

The other big year for Virgin Pulse deal-making was 2018. The company acquired RedBrick Health and Viverae (SimplyWell) that year, which propelled its total annual revenues north of $230 million. RedBrick had annual revenues of around $80 million the year before the acquisition and Viverae (SimplyWell) had posted revenues of about $50 million. Assuming those companies were still growing (and Virgin Pulse was too), this $230 million figure may be a bit low.

One final thought on the 2018 figure: Considering that Virgin Pulse bought SimplyWell in November of that year, it’s likely that the acquisition boosted its 2019 revenues but not its 2018 revenues. So, 2018 may have hovered below $200 million, while 2019 easily pushed the company above that number.

Finally, Virgin Pulse is set to post about $300 million in 2020. Like many employer-focused digital health companies, Virgin Pulse’s revenue outlook is mostly locked in earlier in the year. A recent report from PE Hub, which cited three anonymous sources, said that Virgin Pulse had about $80 million in EBITA in 2019.

The other two growth metrics that Virgin Pulse has publicly shared over the years are related to the number of covered lives that have access to its programs and its number of clients (employers). Neither of these numbers is a particularly great metric for tracking Virgin Pulse’s growth, however, because they include a lot of noise.

Pricing + Virgin Pulse now has 12 million covered lives across 190 countries

Virgin Pulse counted 500,000 covered lives in 2010 and 700,000 by 2011. That figure held steady then jumped to 1 million in 2013, 1.5 million in 2014, and 2 million in 2015. After that, the company didn’t seem to update the figure much, but it did share that it hit 7.5 million covered lives during an interview with CNBC in early 2019.

And for this report, the company told me that it now has more than 12 million clients around the world.

Similarly, Virgin Pulse’s number of clients includes those with access to the program through Virgin Pulse’s health plan partners. Since 2016, the year the number of clients jumped from 250 to 2,200, the figures also include clients who participate in the Global Corporate Challenge, one of Virgin Pulse’s acquisitions from 2016. The number of clients may also count multinational corporations multiple times — once for each foreign office around the world. (Technically separate companies.)

Virgin Pulse told me it has direct relationships with 800 employers today and it has an additional 3,300 clients via its health plan partners. It also operates in 190 countries around the world.

These figures certainly point to growth, but they aren’t as useful for determining financial performance. That’s even true for the company’s early years too when its offering was much more straight forward.

Virgin Pulse prices its original offering at variable rates for public sector employers vs. private sector ones. The difference may be $2.04 per public sector employee per month vs. $4.50 per private sector employee, for example. Virgin Pulse also charges less per employee if the employer an enterprise customer — they get a bulk discount. Virgin Pulse’s covered lives figures also include everyone covered by its health insurance clients, which only pay Virgin Pulse a fraction of the pricing noted above — maybe $0.50 per person.

As I said, too much noise.

How it sells: Virgin Pulse’s evolving and additive value prop

Virgin Pulse has evolved its value proposition strategy a few times over the past five years, and it is probably safe to assume that some of Virgin Pulse’s M&A activity was driven in part by a growing pushback against the ROI of employee wellbeing programs.

In fact, when Virgin Pulse rebranded from Virgin Healthmiles in 2013, the CEO at the time, Chris Boyce said the name change was partly to distance the company from corporate wellness and open up new opportunities focused on employee engagement:

Around this time, there was a push to focus more on employee engagement and talent, because Virgin Pulse thought that was where wellbeing was headed: a convergence of employee wellbeing efforts and talent management efforts. Well, for the most part, it wasn’t.

While Virgin Pulse still believes there is a strong link between the two, in recent years its customers — self-insured employers — have sent them the message that they want employee wellbeing platforms to go deeper to become more clinical.

Virgin Pulse now has a number of different levers it can pull to explain its value proposition thanks to a much broader portfolio of products. Still, ROI is a key one for many customers.

Virgin Pulse pitches its program as saving, on average, $1,000 per year per employee. So, if a company has 20,000 employees, that comes to $20 million saved by Virgin’s count. As you might expect, I couldn’t find any clinical studies on Clinical Trials DOT gov that dug into Virgin Pulse’s claims, but the company did work with analyst firm Forrester to put together an ROI-focused whitepaper. Here’s the premise:

The white paper, which based its data on interviews with four of Virgin Pulse’s large customers who had used the program for more than five years, points to a “conservative 3 percent reduction in attrition rates” thanks to Virgin Pulse. It also found a 14 percent productivity increase thanks to a decrease in absenteeism attributable to Virgin Pulse driving more preventive care.

Internationalization drives focus on productivity over healthcare costs

Maybe it goes without saying that most employers in markets outside of the United States don’t care much (or at all) about reducing healthcare costs for their employee populations. In markets where healthcare is not tied to employment, employers are more interested in increasing their team’s productivity, according to Virgin Pulse. Remarkably, more than three-quarters of the company’s clients are outside of the US.

Getting creative: Human Capital ROI Ratio

In 2018, Virgin Pulse did a study where it looked at the financial results of 49 publicly traded companies who had been using Virgin Pulse for at least two years. The study showed that in the two years prior to their joining Virgin Pulse, the companies’ productivity gains were the same as their peers. It showed the higher the participation was in Virgin Pulse’s program, the more their productivity improved against their peers:

How it built its business and feature set: Seven acquisitions

Every two years, Virgin Pulse acquires two companies. That was true in 2016, 2018, and this year — 2020. I mentioned a few of these deals above when they had a significant impact on revenue. Virgin Pulse’s M&A strategy is not to bolt on their acquisition targets’ platforms. They shut them down — quickly. If the Virgin Pulse platform is missing one of the features a newly acquired company did offer its customers, Virgin Pulse builds those to get to parity before migrating the newly acquired customers over.

Virgin Pulse believes they are in a land grab. When an employer latches on to a wellbeing platform, they tend to be pretty sticky. So, Virgin Pulse’s strategy has been to get as many large employers and health plans on board as quickly as possible. In addition, almost every one of Virgin Pulse’s acquisition brought with it a new capability that was already on Virgin Pulse’s roadmap.

Here’s a quick redux of all six acquisitions along with estimated annual revenues for most of them.

February 2016: Virgin Pulse’s first big acquisitions were announced at the same time. It acquired Rhode Island-based ShapeUp and Australia-based Global Corporate Challenge.

ShapeUp‘s offering was similar to Virgin Pulse in its aims, but its methods were different. While Virgin Pulse focused on extrinsic rewards to motivate participants into action, ShapeUp focused on intrinsic ones. Virgin Pulse gained a more sophisticated strategy for social interactions with this deal. It also brought on a key talent: ShapeUp co-founder and CEO Rajiv Kumar M.D., who is Virgin Pulse’s Chief Medical Officer today. ShapeUp had about $20 million in annual revenues at the time of its acquisition.

Global Corporate Challenge, a 100-day step-counting competition that pits companies from all over the world against each other, continues on as the Virgin Pulse Global Challenge. The original company behind it was a sprawling, international force that typically went by GCC. It kept pricing simple: It cost $99 per participant to enter the GCC and you needed a team of seven to join. I’ve noticed that flyers pitching the competition to employees in Australia and in Canada use the same pricing. During its last round prior to the acquisition GCC had 370,000 participants, which roughly brought in $35 million in revenue. More than anything, GCC helped expand Virgin Pulse’s global footprint. Virgin Pulse went from 250 clients to more than 2,200 around the world.

January 2018: Virgin Pulse opportunistically scooped up another Rhode Island-based employer wellbeing company, Preventure, which likely added a few customers but really just needed a home.

May 2018: Virgin Pulse’s largest acquisition to date was RedBrick Health, which was one of the other employer wellbeing companies that had done well. RedBrick posted revenues of about $40 million in 2016, and I estimate they had gotten close to $80 million by the time of the acquisition. Unlike prior deals, likely because of the size of both companies, this one was described as a merger instead of an acquisition. The big piece of the puzzle that RedBrick brought with it was live coaching. Up until this point, Virgin Pulse did not have a coaching element to its platform.

November 2018: Virgin Pulse acquired another rival, Viverae, which had recently rebranded to SimplyWell just before the deal. SimplyWell brought in $50 million in 2017 revenue. With specific condition management coaching programs tailored for 22 different medical issues, SimplyWell also had more of a clinical focus than Virgin Pulse’s past acquisitions. This deal helped propel Virgin Pulse deeper into healthcare, fortify its coaching capabilities, and add in claims ingestion and claims analytic capabilities.

January 2020: This year Virgin Pulse acquired diabetes prevention program-focused company, Blue Mesa Health. This was a bit puzzling for me since ShapeUp already had a DPP, called Empower. It turns out, Empower got shelved following that acquisition. Blue Mesa brought a fresh, updated DPP to Virgin Pulse, but — even more so — it has become the foundation for Virgin Pulse’s digital therapeutics distribution strategy.

January 2020: Virgin Pulse acquired Yaro this year too. This deal helped Virgin Pulse stake new ground and move into benefits navigation. Virgin Pulse rebranded Yaro’s offerings as Virgin Pulse Navigate, which includes health benefits tracking, a health savings account product, claims histories, deductible balances, and more.

Two exits so far: What was Virgin Pulse worth?

Virgin Pulse has already had two exits. In May 2015, the year before Virgin Pulse went on its multi-year acquisition spree, the company announced outside funding for the first time to the tune of $92 million. As part of that deal, Virgin Pulse’s parent company in the UK sold a majority stake in Virgin Pulse to private equity firm Insight Venture Partners.

Exit #1: Insight bought 70 percent of Virgin Pulse for a little more than $53 million. That valued the company at about $76 million in mid-2015 pre-money.

As I noted above, Virgin Pulse had doubled its revenues from about $25 million to $50 million between 2014 and 2015, but the Insight deal hit the newswire in May of that year so the new injection of cash certainly helped fuel that growth.

Exit #2: Insight Venture Partners ended up selling Virgin Pulse to another private equity firm, Marlan Equity Partners. That happened three years later — in May 2018 — as part of the RedBrick Health merger deal. Of course, by then Virgin Pulse had made three other acquisitions and had grown into a much bigger company. UPDATE: I recently learned that the number I had in this section of the report for the company’s most recent acquisition — $434 million — was too low and that the actual number was $525 million. (My original number was based on the price that Richard Branson’s holding company sold its substantial stake in the company for — which I found buried in a government filing. My assumption was extrapolating out from what he got for his chunk of Virgin Pulse would yield the deal’s ultimate price tag. Apparently not.)

This second exit also meant Virgin Pulse was no longer owned — even in part — by its original parent company, Richard Branson’s Virgin empire.

Exit #3? A recent report from PE Hub said that Virgin Pulse was on the market again, but this time at a valuation approaching $2 billion. According to the report, the company hired Morgan Stanley to begin the process of courting buyers in February 2020.