Q1 2020 Earnings Call
Please standby we're about to begin.
Good afternoon, and welcome to the conference call covering how healthy financial results and business update for the first quarter of Twentytwenty on the call. Joining me today I have Carl House, Chief Executive Officer, Mark L. Baum Antero, Chief Financial Officer, Andrew Boll My name is Christie.
Your operator for today's call currently all participants are in listen only mode. Later, we will conduct a question and answer session.
Now you should have received a copy of the earnings press release.
Not received a copy please go to be Investor Relations page of the company's website at www.
Got Harald eight dotcom before we begin today's let me remind you that the company's remarks include forward looking statements within the meaning of federal Securities law.
Forward looking statements are subject to numerous risks and uncertainties.
Many of which are beyond harl helps control, including risks and uncertainties described from time to time FCC filing.
That's how the risks uncertainties related to the company's ability to make commercially available, it's compounded formulations and technologies.
And after the approval of certain drug candidate in a timely manner. We're at all.
Well a list and description, okay risks and uncertainties. Please see the risk factor section of the company's most recent annual report on form 10-K, and subsequent quarterly reports on form 10-Q.
With the Securities and Exchange Commission.
Harry Health results may differ materially from those projected year old disclaims any intention or obligation to update or revise any financial projection or forward looking statements, whether it be has up new information future events or otherwise.
This conference contains time sensitive information and accurate only as of today I.
Additionally, oh, well refer to non-GAAP financial metrics.
Physically adjusted EBITDA and or adjusted earnings a reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's press release available on the website.
With that I would like to turn the call over to Mark on to go over some prepared remarks prior to the question answer session Mark.
Thanks for joining our call today, hopefully everyone has had a chance to read or letter to stockholders, which was posted on the Investor Relations section of our website just after the close of trading today [laughter] before culinary I'll highlight a few items that may be on investors' minds.
Just after we reported fourth quarter results two months ago.
In the middle of what was a fairly strong quarter like nearly every business in the United States, We saw a dramatic shift in our economy.
Which our company was not immune from.
When I said, we're not a central surgeries were halted or ophthalmologists and optometrists customers stop seeing patients, causing a hit to the last two weeks of the quarter. This continued into April however in May as states have begun to reopen we've started to see orders return although not at the.
Pre cobot night Pea level.
As a leader and shareholder apparel health my job in part is to think about the future bar business. However, during this crisis the entire Harold management team has been focused on three key things one keeping our employees safe to reinforcing our balance sheet and extending our cash run.
Wait and three working harder than ever to ensure that we emerge stronger once the cobot 19 downturn abates regarding the first point, we implemented protocols to ensure the safety of our employees and for some employees deployed infrastructure to allow them to work from home.
We then completed numerous scenario analyses to plot or expected cash requirements.
We collaborated with vendors and employees to keep our balance sheet stable delaying certain payments, including previously earned bonuses to all executives employees and fees to our board of directors and management as you know we secured an extra $1 billion from our lender SW K Holdings. Finally, we received a proxy.
Currently $2 million from the Paycheck protection program that has helped keep our hard working employees employed during this crisis. We are proud that we've been able to keep our team intact ready for what we believe maybe a strong snapped back end demand for ophthalmic formulations with the above in mind.
[noise] ophthalmology revenue for the first quarter of 2020 was flat coming in at $11 million compared to 11 million for the first quarter of 2019 total revenue was 11.8 million compared to 12.3 million last year.
Without the disruptions we experience at the end of March we believe we're on course for about 13 million in revenue during the first quarter.
Gross margin was 69% remaining close to our long term target and an improvement upon the 68% for the same period last year. Adjusted EBITDA remained positive in the first quarter at $414000 compared to $753000 for the first quarter of 2019.
An unexpected positive in the first quarter was our sterile injectable wellness portfolio, which was able to fulfill an unmet need and the battle against covert 19, while we certainly expect ophthalmology to improve post pandemic. We were pleased to see a slight spike in our wellness business during the second quarter.
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During this challenging time on top of getting our balance sheet stabilized and focusing on our wellness products.
We've been working to improve our customer experience, including making it easier than ever to do business with Emperor Miss Rx and giving our commercial team more visit visibility than they've ever had.
We've also rolled out.
An exclusive agreement with Doxey me.
To provide telemedicine services to our customers. This was a great success and in the first 10 days over 500 physicians and 125, new physician customers signed up.
I've never been more enthusiastic about our imprimis Rx business and the value that it delivers to the market.
Our shareholder letter covers other exciting near term opportunities such as progress with surface, which now has three I Andy's filed melts progress with its patented non opioid non ivy conscious sedation development platform.
And the expected launch of our vision allergy business and the coming weeks, we're expecting a status update for our temporary pass through application for one of the surgical formulations within our Imprimis Rx portfolio. We also continue to actively work on in licenses of FDA approved products and other new Pat.
Did formulations to sell through our Imprimis Rx platform.
Any of these events or others could be significant value catalyst and we hope to deliver good news on these activities before our next call.
I strongly believe that our business has never been better position to again generate record highs for revenue gross margin in adjusted EBITDA like we did in 2019.
And there are reasons to be hopeful because in states that have begun the opening process reopening process. We're beginning to see orders and these revenues are somewhat ahead of our more optimistic models. So this perhaps bodes well for the coming quarters.
Without further Ado lets jump into the queue in a I'll pause to have our operator poll for questions operator.
Thank you.
Yep.
Please press star one of your telephone keypad at any time to join Nike.
Did you use the speakerphone, please pick up your hands.
[laughter] quality.
[laughter] and just not Nick.
Yes. Please go ahead.
Hey, good afternoon. Thanks for taking my questions I'm glad to hear everyone is sounding healthy you know just a couple of quick ones for me.
<unk> <unk> in its first quarter you highlighted during the fourth quarter you had a couple technological.
Issues, you rolled out a new implementation I was just curious if you know if there was anything lingering there or if you were able to completely work out all the kings and then just as it relates to traction within the market were you able to effectively regain exactly where.
You were.
<unk> air to.
That technical Mysap obviously.
Removing for covered 19 at the at the back half of the first quarter.
Yeah. Thank you. Thank you for the questions Andy and in terms of those those I T issues that we experienced in the fourth quarters and whether we worked out those kinks I can absolutely say that we did and the systems are working better than ever in fact over the last six weeks or so we've made.
Additional improvements without a hitch to those systems, and that's giving us more visibility into the business better.
Access to what customers are buying and and and how and insights into how we can get greater density within an account.
To grow our surgical business as well as other products that we offer from the Imprimis Rx portfolio. Those are critical factors by the way as we seek to add ft approved products into the platform.
But we really have tremendous visibility into who our customers are we have over 9000.
Customer so a very large customer base terms or the traction.
That that we were able to regain I mean, one of the bright spots and I tried to highlighted in a letter is that.
Despite the fact that february's.
Has fewer days then than any other month fewer shipping days.
For the month of February we were hitting record.
Revenues on a daily basis during that month so.
We were on track I would say in the month of March but for this coated 19, a slowdown we're on track to hit 15 million Bucks for that month. So we would we were doing really well going into March.
Have you always a great month, so we made up for.
Those technical glitches and we were on a good glide path towards more records and that's where I think we're going to eventually be as I said the letter we need our country to reopen a there seems to be strong interest on patients to get back into these offices and have these procedures done.
But that they have avoided over the last six weeks or so.
Yeah, great to see that at your your month February just back of envelope in our model relative to our model was much stronger I'm just trying to get them. The gives and takes relative to what was going on earlier effectively last year, but that's good to hear and then when we when we think about.
Just the reopening as its CMS started to implemented on a on.
On a state by state basis, and you mentioned that you in your prepared remarks can you, let let us think or give us some insight into how we should handicap that has it been effectively just a pretty slow.
Reopening restart or in the country are they a states that have started to reopen has there been a bolus in any sort of way of Ah either orders or a patients coming in and also just be kind of curious as it relates to stocking because I'm sure you know some of the ambulatory surgery Center.
Is that you did a ship to earlier, maybe the and be compounded products are beyond use or the big spiders things of that nature would be just interesting data points.
Yeah, So I'll try to address the last part first in you know to be clear.
The key to these relationships in the partnerships that we've made with physicians and in surgery centers across the country is to work with them and so clearly there are some inventories a that may be a b.
They have expired and were working with them and so there there are immaterial costs connected to that so these immaterial inventory write downs.
Our certainly going to happen, but as I said, they are immaterial to us and they're very material, though to our customers and so we're we're only two happy to work with them to make sure that they have the products they need to to reopen.
In terms of the reopening I know, there's you know I say 20, I think there's 29 or so states that are going to be opening a it's some level for elective procedures very soon certainly in the next couple of weeks and I know some executives have tried to handicap percentages.
That they expect revenue to come back yet and I kind of a handicap it a little bit different I I've kind of created this continuum.
From disruption to sort of chunky revenue to initial consistency to consistency and then growth and I would say right now or you know where certainly in the chunky revenue.
Phase of that getting into the initial consistency with some accounts is a states like Texas. For example, we're starting to see a little bit more consistent ordering patterns.
But oh I think the key for US is that the business is not going away. These people are going to need these procedures and they're going to need a vision care.
So we expect them to to occur and and as I said in the letter also a lot of these offices that we're talking to them, they're talking well certainly there won't be summer vacations I think that's done I'm in a lot of offices are talking about unprecedented things such as working double shifts to take care of the.
Back to volume. So these procedures are going to come back.
We have high high confidence, we just need the country to reopen and to do so in a safe and responsible way.
Okay, that's actually extremely useful color and a there's last question was related to the pass through status that you highlighted for one of the imprimis compounded products move would this be situation our product that we should think of that would fall under the three year pass through status under Medicare part B or is it more of that opioids.
<unk>.
Try to pass through status as perpetual kind of like what Pacira has.
Just last question me, Thank you very much.
Thank you Andy and I. Appreciate the question if I, if I think if I answered it accurately would give away the product but.
Needless to say, it's a it's an exciting opportunity. It's it's a there's no guarantee obviously, but it is definitely a needle mover for us and it's something that we're going to know about hopefully fairly soon.
July 1st is the expected date.
When when a pass through if it was granted would become effective so we should know here fairly soon but CMS is we understand it has a bigger fish to fry right now, they're working on telemedicine and and other initiatives connected to covert 19, but we're confident they will get around to completing their work on honor.
Application and we're hopeful.
That you will be able to serve more patients as a result of that work.
Okay, great. Thank you very much a state it's the best of luck on board.
Thank you kindly.
[noise] [laughter] accident.
Good friends I call back over to Mark L. Baum.
Well I hear a house for any closing remarks.
Thank you and that will conclude or call. If you have any questions feel free to.
To reach out to a John Patton, our Investor Relations Associate his phone number is 8587 know for 45 87, well look forward to speaking to you a next time and until then please stay safe and we'll get through this this will conclude or call.
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