Q2 2020 Trxade Group Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by.
Im just track say group's second quarter 2020 earnings conference call.
During today's presentation, all parties will be in listen only mode.
During the presentation. The conference will be open for questions. This conference is being recorded today July 27 2020.
Earnings Press release, a company. This conference call was issued at the close of market today.
I don't think report, which includes the company's results of operations for the quarter at June Thirtyth 2020, well be filed with the FCC Tomorrow morning.
And our call today is truck say groups founder Chairman and Chief Executive Officer, Serrano accuracy, and how we're <unk> Chief Financial Officer.
Before we begin I'd like to remind everyone that statements made on this call and webcast, including those regarding future financial results and industry prospects are forward looking and may be subject to a number of risks and uncertainties that could cause actual results could differ materially from those described in the call.
Please refer to the company actually see pilots for less so associate her breast.
We're also refer you to the company's website for more supporting industry information.
I, just sorry, I'd like to turn the call over surrender at your outlook, the company's Chief Executive Officer, Sir the floor is yours.
Thank you operator, thank you everyone for joining us today.
I'd like to welcome you to our second quarter 2020 financial results Conference call.
The first earnings call, we have heard as a public company.
Before we walked through our financial and operational results for the quarter.
Those of you know to the company I'd like to walk you through we are Oh, we already what do you wish Nizing buffet independent pharmacies procured drugs.
Prior to the launch a public company banning drug courts as an independent pharmacy was an extremely laborious the timing appreciate process.
No inside our transparency into your freight market price, what others are paying for the same drugs.
Traditional wholesalers, who will provide an photo bill pay when times slowed antibody.
Year to pre could come onto unfold approximately 22000 independent pharmacies smashing alike.
Well identified this marketing efficiency.
That's what I've done incredibly potential in these independent pharmacies.
Which together maintained a 78 billion.
New approaches in problem.
Proceeded to large truck sales.
We designed on an operating business to business that best bucket platform, bringing together the nation's independent pharmacies that could or national pharmaceutical suppliers can provide a uniquely accretion transplants buying and selling process.
Oh platform. That's these independent no that data receiving get paid a price from competing suppliers on a big payment terms and often with next day delivery.
We believe it gets an article price transparency.
Pardon me upscale and competition in longest suppliers lead up to 10% reduction pharmacies total annual drug purchase costs.
The drug Halaven savings of up to 90% on certain pharmaceutical products.
Our platform saves pharmacies from having to manually compare prices across distributers saving hundreds of hours of unnecessary labor annually, eliminating they could do reimbursement in some cases filling the prescription at a loss.
Our revenue model is simple.
We Georgia percent goes off transaction fee based on the value of drug Pirquitas transacted on our platform similar to pay Pal our recent like model.
To date.
I have seen incredible success in garden, having attention from independent pharmacies nationwide validating our business model.
We currently have over 11700 pharmacies, not all platform representing over 50% market penetration into the 22000 independent pharmacies nationwide.
Oh growth drivers for Treximet platform arc to quote.
One increasing the holidays purchase this port pharmacy, so that pharmacies transact and increasingly high percentage.
Older drug tortures is through our trading platform.
To continuing to expand our market penetration, adding new independent pharmacies to our network.
No proceeding to our second quarter 2020 financial and operational results.
I was particularly pleased but dollar growth in the second quarter compared to 29 team achieving record quarterly revenues, while continuing to grow average spend per pharmacy on all the proprietary platform.
Oh, it's clear that sort of basis offering continue to expand without telling medicine subsidiary bought them how to put together.
Shaping up to be a critical healthcare service to thousands of customers across the United States.
We recently appointed female health care to execute who asked didn't marotta as the president of bought them how to spearhead our tele medicine that forwards in which we see a significant opportunity as more and more consumers shelter and plays you did the Corbett 19 pandemic.
Asked anything until the leader with a cure business acumen and expertise in China market development.
I'm confident in his ability to drive adoption of bottom how long this bought implores seeking to provide unique health care products to their workers.
As it relates to individuals seeking a low cost convenient way to speak with a doctor.
On the capital markets friends.
We have made exciting progress over the last several months.
What fighting our balance sheet.
Uplisting to Nasdaq.
Being added to Russell Microcap Index, I know today, posting a first earnings call.
We continue to mature as a public company Oh progress. This year is a testament to these efforts.
Well before we go in for the I'd like covered das the CFO to walk through some key financial highlights from the second quarter all 2020.
Thank you Saran wrap.
Revenues for the second quarter off 2020 increased 244% to a record $6.6 million compared to revenue of $1.9 million general same quarter last year.
Sequentially. This represents an increase of 199% when compared to revenues of 2.2 million in the first quarter of 2020 <unk>.
The increase in revenue was primarily due to personal protective equipment sales. So it shows that 95 math and sanitizer products.
These products were sold by our Integra pharma unit as a response to the corporate banking pandemic.
Gross profit in the second quarter of 2020 increased 72% to $2 billion or 30.4% of revenues compared to a gross profit of $1.2 million or 60.7% of Robbins and the same quarter last year.
Increasing gross profit was at lower margins, which was primarily due to lower margin sales up the personal protective equipment and are integral far in Europe.
Operating expenses in the second quarter of 2020 were $2.5 million compared to $1 million in the same quarter last year.
This increase is primarily due to non cash stock based compensation expenses.
What's included executive bonuses for 29 team.
I see expenditures and marketing expenses.
Net loss in the second quarter of 2020 was $542000 or loss of seven cents.
Per basic and diluted share compared to net income of $60000 or one cents per basic and diluted share the same quarter last year.
Adjusted EBITDA, which is a non-GAAP financial measure increased 525% to $500000 compared to $80000 in the same quarter last year.
Looking at the balance sheet.
Cash and cash equivalents were $4.2 million as of June Thirtyth 2020, compared with 7.7 million as of March 31st 2020.
Hey, sizable portion of this cash usage was due to inventory purchases shredding personal protective equipment sales to address the covert 19 pandemic.
Hey, notable driver of our sales in the core.
I should also note that accounts receivable and inventory increased to $3.5 million and $1.8 million respectively as of the ended the quarter.
Compared to only <unk> point $9 million and point $4 million, respectively as of March 31st 2020.
Which helped our total current assets only decline a point $3 million compared to March 31st 2020, even with the decrease in cash.
As a pandemic subsides we.
We don't expect to carry the same level of inventory going forward.
And we do not foresee a need for further capital to support the business.
Thank you Howard.
Overall, I'm pleased with our growth in the second quarter laying the foundation for what we hope would have been incredibly here.
But what's driving this growth.
Of course, the platform growth that along with personal protective equipment sales.
We continue to meet or exceed internal projections, but are gladly attaining key milestone achievements.
The founder off track seed I firmly believe that we're better positioned to create a sustainable value for our shareholders that any pre or time in our history.
I look forward to continued operational execution did the second half of 2020 and beyond.
With that I'll turn it over to operate or the beginning the question answer session operator, we'll take it over.
Thank you Sir you will now be getting the question and answer session. As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
If you would like to withdraw your question.
Well start to on your telephone keypad, if you're using speaker equipment, and maybe necessary to pick up your hands that before making a selection.
One moment, please while we Paul Puryear.
Our first question was coming from the line of Gene Mannheimer, probably a security. Please proceed with your question.
Oh, thanks, very much a good afternoon guys and.
Congrats on a spectacular quarter in your first earnings call.
Thank you.
He said that sure certainly surrendered I want to do before we get to the Integra piece, which is which is really impressive I wanted to just ask you a couple of questions about the the platform.
The revenue was down a little bit sequentially.
I was looking for little bit of growth there considering you added you know more pharmacies.
What were the drivers there in the quarter, how much did coal did impact pharma spend.
And how was the same store sales growth or as you referred to as a revenue per per store.
Compared to the first quarter.
Sure I'll take a stab at it and then I'll pass it onto <unk>.
Definitely received Oh, we saw the impact on the call would because most of the stores are being shut down in the month April and latter part of the may but essentially the had all been slower than studied it would things were getting opened up so I don't have the exact presented on the degrees.
How much they bought less but definitely we saw the impact and to presenters calculations Howard if you want to take.
Scott.
Actually I don't have those doctors is right in front of me, but I do know for the younger six months ending June our revenue in trucks I think was about 2.99.
Where the revenue over the six month period in 2019 was about 2.19, so over the six month period of time.
We still have some pretty nice revenue.
Oh, no no doubt no doubt and what what about the same store sales growth or you are you able to quantify that for us.
Hello.
<unk>.
Actually we don't publish that same store sale girls. So I can't really answered that question for.
Okay, but but I surrender mentioned in his prepared remarks, you did grow revenue per store over the over the prior year right.
Correct.
Okay, Alright, what what do you think what are what are the some of these strategies or to our.
Opportunities you see to increase higher revenue per pharmacy.
Swat, a but they're buying from us because if you look at the brand drugs.
The percent days, she's always less likely you have a olson acquisition cost plus or minus pricing there most of the margins, though pharmacies can make it to reimbursement, but generic products. So that's what what does or.
Main focus, even though 75% off or product, but most or platform is a generic entry mining 25% is on the branded drug side. So.
We continue to grow on the branded side. So it's sort of gone down generic side, how can we add more more product list than wanting to board high dollar value product because you're on the pharmacy has set margin plus or minus a person divorces under agenda.
Okay.
Makes sense.
So switching gears then to Integra I mean, you you really knocked it out of the park there with the P. P E revenue.
I'm just wondering if Q2, you know we should view that as I extraordinarily high quarter due to the onset of Kobin pandemic, just sort of peaking there.
I guess, how sustainable are these are these T. P E sales in the back half of the year.
You're absolutely correct, but nobody understands where there's a P.B. opportunity is there a we definitely took the opportunity in the second quarter, how sustainable it is a nobody knows but to be continues to grow the platform I'd see any other opportunities on the PBM side to help over pharmacies.
Because if you look at April all the pharmacies were attacked Upto Sanitizers that no big closed sellers two on how the Saturday as a by month of me I would think change the dynamics. So you don't need it and then they jumped onto the p. It could man like mass on slots blows and.
Isolation Garland.
No as that states are my needing more and more masks, we may see that spike in my requirement.
And that gets to these independent pharmacies or other schools and stops could come to us to buy as went to school start opening up but nobody really knows what the p. opportunity is there. So we cannot quantify that whether it's quite a bit of say my second quarter, but do we see some [noise].
Improvement or.
Let's see the really I don't know what did the percent of the growth.
<unk>.
Sure no that's that's gotta be difficult to forecast.
And tell me you you mentioned well I noticed that you signed some.
The law firm during the quarter. So who's the customer here is that the pharmacy is that the employer or are you targeting both.
Booked but it was clear elsewhere is not allowed to the pharmacy used to execute DC aim you're talking about the P.P. side or you're talking about the testing.
Both both of those.
The babies are everywhere anybody who that customer right, whether it's a lot form our a pharmacy.
Especially the testing side we've executed.
Hey.
Nursing point of care people that are executed the administered the tests on side, we've become as a supplier of those test kits and but clearly there are a CLIA certified FDR pooled antibody testing is not allowed at these pharmacies is still so we could not more any up all the products to these farms.
Well, we went after their employers are point of care facilities do moodys testing kits.
Makes sense, Okay and did you were could you disclose your revenue from coded test kits.
We're not or we don't have any segment good lot Ray recalibrate segmented attracts a farmer.
Piece.
Fair enough fair enough, Okay, one more than from me would be.
On your community specialty pharmacy business.
You'd you'd be done by little bit there as well what metrics can you offer around bottom health Uh huh.
Either in terms of how many kiosks are set up today.
How long the App has been available and if you know how many users there are at this point thanks.
But no problems in but still it's a maturing level.
It is getting stabilized so we don't.
So when its available over the next quarter will hopefully we've tried to get those metrics, but right now it's not about.
All right no they're very fine in terms of.
One final final question then how how are we shaping up for 2020 are you in a position to give any full year guidance at this point.
No not at this time.
Yeah.
Very good thank you and congrats.
Good.
As a reminder, if he would like to ask the question. Please press star one on your telephone keypad.
Our next question something along our outbound Taglich brothers. Please proceed with your question.
Oh, congratulations on the quarter guys.
Okay. Thanks.
I'm going to go back to I guess accounts receivables and inventory or you expect those two numbers to norm go back to more normalized levels by the end of this fiscal year.
Howard can you take that question.
Yes, I do a one of the yeah. The accounts receivable at the end of June was Oh. It was very high Oh, we had about a 2.5 million dollar accounts receivable to one customer and that was paid in July so that came down significantly.
Then the inventory, which is now at about 1.7 million most of that is Oh PPD product.
And we expect to work through most of that or through the end of year, we anticipate that anyway.
Okay and in in terms of the P.B. easing and they are.
Okay, Yeah test kits and stuff do you have multiple sources for.
Yeah.
Products that you're shipping <unk> customers.
Yeah.
No our primary business into 'em for the last 10 years on the platform. If you look at as of the supply chains, those relationships really transitioning into the Gaga, especially in the P.B. side and I realize the testing said, yes, you have a multiple sources to.
It is it's correct.
Okay, and any if <unk> <unk> has come down some.
We would expect gross margin.
Improve as time goes on from this level in the second quarter.
Oh, yes, that's probably I because the tech platform as the one or then because of the product side, the gross margin sort of where it is correct.
Okay and also in term you foresee any larger but any additional large amount of stock based comp in the second half a year.
Oh, we don't anticipate anything at this time.
Okay, so excluding that.
Excluding that from the first yes, I know, sometimes I know in the first quarter you put in the queue. You expect operating expenses around 5 million is that going to be slightly higher this year, even excluding the.
Factories comp.
Howard do you want to take that.
Yes, I think that because of some of the things that we're doing in integra and potentially other ramp up with bottom out a that $5 million Oh may may go up during 2020, a we'll be doing a reevaluation of that and you know disclosed.
The next year.
Okay and in terms of bottom you know you talked about.
Outcomes are using it.
If you could just give a little bit of context on how you're seeing you know people sign up for it.
How did increase a little bit every week that you've seen a and.
And how would how does how would they finding out about it is it through your independent pharmacies that are letting customers know that exists.
That's a one channel but of course, the social media, but that's the primary channel that we would like to mood on but especially on the business to business as I've been down trying to open up a new stores and they cannot all four of these.
Sure answers the ones that are attracted to bottom how.
Because it's a our payments our fee structure. They left on the insurance copay those are bad track to items. So.
The main channels or through our independent pharmacies of course, a second and tertiary are of course, makena calls and social.
Okay, and you expect to sign ups being 100 per month, what do you think you could drive it.
I didn't act in the second half of yet could it be you know.
Well five yeah.
Well, we can give you guys guidance at this time as I mentioned, the App is getting that should be.
Peak inhibition.
Act.
Okay.
Which picking up the speech.
Okay, and one last one ads because you had mentioned that you know schools I guess, primarily K 12 schools are gonna be you know.
Look like they're going to be opening up around the country are you, making plans to market yourself too you know districts around especially in eight of Florida. Since that's where you base, but is that something that you're looking to do actively yes, yes.
Okay, Okay, well keep up the great work guys.
Thank you our next questions come from the line of Andy goal. The gold capital. Please proceed with your question.
Hi, guys, how you doing nice quarter surround I'm not very good ended thank you.
A question on your P. side, you up like a gross margin for that particular side of the business I know, that's all depending on what particular deal you're doing or.
Is that.
I, obviously, that's a lot much lower gross margin business, but is that right now that he sanitizer run at a.
Lower rate or mass, then, let's say gallons or clubs or any of that particular.
Products.
Sure.
Yeah, I wouldn't get up to 25% to 80%.
The supply and demand right.
Big time woman was in April was a bigger margin.
Cost of goods were higher its although depending on the supply and demand at that time, well try to maintain add on 25 30 person gross margin.
That's good I mean, where your supply chain is it coming from overseas is it.
The.
It really oh, a in April to attend a I don't want to pinpoint <unk> no I used to blocked up we had to bring getting from Canada and if so its various sources that we continue to bring yet so.
And then you can can you get adequate supplies are going forward or is it yeah.
Yes, we have solidified from far east do for has an issue into of course or country tell that's an issue in China, then we moved onto Vietnam, Malaysia, or something like that so we already but to find the product.
To bring that they're going to so that we can now started in older stores because the stores also need do sanitizers mascot starts water.
They haven't natural you other natural customer base in your and your pharmacy claims.
Yes, a little bit right I believe some hospitals a couple of hospitals at the time, because that's came through lower pharmacy network asking her theaters. The hospital looking for this kind of Ah things lost a lot on social media teller parameter <unk> yeah.
Have you gotten into any of the states. So stay type contracts are harder to get into or.
We tried to do a sub contracting of that but by the primary contractor could not get to it because you need to have an established Oh I'm sorry, we sold into December wedron or some sort of occasions. So I'm not so four door. So we're trying to fulfill doors.
HM Okay. Thank you very quarter again, thanks, Thanks, Andy Yep.
Thank you. Our next question it's come from the line of Carlo Cosigner Dawson James Securities. Please proceed with your question.
Hi, it's you're in.
Thank you know all the other previous Oh persons I ask all my questions Nick.
Cost of the them. So I don't have anymore I was really looking at the inventories and receivables, but great quarter and I think you in a howard for having the call and so everybody can hear more about the company and though extinguish the rest of my time.
Thank you.
[noise] there no further questions on an acute I'll now hand, the call back over to management for any closing remarks.
Thank you operator, Oh I would like to thank all of your joining for our call I'll go to enable to answer any of your questions. Please reach out to our I O from MZ group, who would be more than happy to assist I. Once again. Thank you for joining us today and we brought to continuing update you on our progress on growth.
This does conclude todays conference you may disconnect. Your lines at this time. Thank you for your participation and have a great evening.