Q3 2020 Trxade Group Inc Earnings Call
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Good afternoon, ladies and gentlemen, thank you for standing by welcome to track sees groups third quarter 2020 earnings conference call. During todays presentation, all parties will be in listen only mode. Following the presentation. The conference will be open for questions.
This conference is being recorded today October 26 to 22020 and earnings press release accompanying this conference call was issued at the close of the market today.
Quarterly report, which includes the company's results of operations for the quarter ended September Thirtyth 2020.
Was filed with the EPS easy today on our call today is track seen groups founder Chairman and Chief Executive Officer sure in a jar and Harvard Dos as Chief Financial Officer.
A replay of this call and webcast will be available for the next 30 days on the Companys website under the NASDAQ and he asks link.
Companys website also includes more supporting industry nation.
At this time.
Turning the call over to Howard Doss, the company's Chief Financial Officer Howard.
Sure Yours.
Thank you operator, and thank you for joining us today I'd like to welcome you to our third quarter 2020 financial results Conference call.
Our press release announcing our third quarter financial results was issued after the close of market today.
As posted on our website we.
We have also published a copy of the presentation that accompanies this call and webcast on our web site and furnished <unk> press release and presentation to the does he see on form 8-K.
Statements made on this call and webcast include forward looking statements. These statements include but are not limited to our outlook for the company.
And statements that estimate or project future results of operations or the performance of the company.
Including the potential impact of COVID-19 out of the company's business and results of operations.
These statements speak only as of the date hereof and the company assumes no obligation to revise any forward looking statements that may be made today in today's press release call or webcast.
These statements do not guarantee future performance and are subject to risks uncertainties and assumptions.
Please refer to the press release and the risk factors in documents, we filed with the Securities and Exchange Commission, including our most recent quarterly report on form 10-Q for information I risks uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements.
In addition, today's call and webcast, we discuss non-GAAP financial measures, which we believe are useful supplemental measures of track States performance. These.
These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results.
You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release.
Unless otherwise stated all financial comparisons in this call will be to our results for the comparable period of our fiscal year 2019.
At this time I'd like to turn the call over to surrender ARPU, the Companys Chief Executive Officer.
Sure in the floor is yours.
Thank you Howard.
Before we walk through our financial and operational results for the quarter.
For those of you did the company I'd like to walk you through how we have evaluation I think the vein independent pharmacies procured drugs.
The year to the launch of our company outstanding drug Cold has an independent pharmacy than continue.
Keenly level.
Timing of fishing process.
No in fact or transparency fair market price or what others are paying for the same drug.
Traditional wholesalers would provide unparalleled payment guns slow delivery created to pick a conundrum for the opportunity right.
Proximately 22000 independent pharmacies nationwide.
We identified this marketing efficiency as well as the incredible potential and.
These independent pharmacies, which together maintain approximately 78 billion in annual purchasing power.
Receded to launch tracks.
We design will own and operate a business to business that based market platform.
Bringing together the nation's independent pharmacies.
Creditor national pharmaceutical supplies.
To provide a uniquely efficient and transparent buying and selling process.
Our platform, let's independent pharmacies, no doubt receiving a fair price from competing for players that favre payment tons and often the next day delivery.
We believe this could artico price transparency and economy of scale and competition among suppliers.
Sub 10% reduction in pharmacies total annual drug put just caused.
That drug levels savings of up to 90%.
Pharmaceutical products.
Our platform saves pharmacists from having to manually compare prices across distributors.
Saving hundreds of hours of unnecessary labor annually and eliminating negative reimbursement are fulfilling it prescription at a loss.
Our revenue model is simple, we charge that Pete and 4% transaction fee based on the value of a drug put changes.
The acted on our platform similar to pick off are we felt like model.
To date Weve seen incredible success in garnering attention from independent pharmacies nationwide validating our business model.
We currently have it on 11800 pharmacies on our platform.
Presenting over 50% market penetration into the 22000 independent pharmacies nationwide.
Our growth drivers for the track fit platform our tool for.
One increasing the average purchase per pharmacy, so that pharmacies transact and increasingly hypersound does have their total drug purchase.
Praxair platform.
Second continuing to expand our market penetration, adding new independent pharmacies to our network.
Don't proceeding to our third quarter 2020 financial and operational results.
We continue to see strong revenue and net income growth compared to the same quarter in 2019, while returning to profitability and continuing to grow average spend for pharmacy on our proprietary platform.
We continue to expand our affiliated services offering during Q3.
Daily Medicine subsidiary bottom how to launching bottom class b.
B to B platform that bundles pelley help COVID-19 recessed assessment tool and a personal protective equipment purchasing tools through a secure mobile dashboard for corporate clients.
We're excited about this platform has evolved say fundamental trust problem that impacts at par safety security policies to more effectively come back cold 19 in the book.
Bottom also announced a prescription sailings partnership with single care free prescription saving service.
This partnership and has this bottoms enterprise Trinity Health solutions.
This is Christian discounts offered to a national seasonal local pharmacies to promote the benefit to uninsured patients and an underserved community.
And the capital markets trends.
We were proactive toward the third quarter were attending three investor conferences.
They'll be.
100, what sort of comfort.
2020, Collyer institutional Investor Conference on Hep C. Wainwright 22.
22nd annual Global investment conference.
All with the goal of enhancing broader investment.
And as a whore going company.
I'd like to now turn the call over to our Chief Financial Officer, Haagen Dazs to walk through some key financial highlights from the third quarter of 2020.
Thank you Soren.
Revenues for the third quarter of 2020 increase to 174% to $6.3 million compared to revenue of $2.3 million in the same quarter last year.
The increase in revenue was primarily due to strong personal protective equipment sales in the third quarter driven by the COVID-19 pandemic.
Gross profit in the third quarter of 2020 increased 47% to $1.9 million or 30.5% of revenue.
Compared to a gross profit of $1.3 million or 56.7% of revenues in the same quarter last year.
The increase in gross profit was primarily attributable to high volume lower margin sales of personal protective equipment.
Also known as PPD.
In our Integra pharma unit.
The percentage of gross profit will continue to be determined by the mix of PE and tracks a platform sales.
Operating expenses for the third quarter of 2020 were $1.8 million compared to $1.1 million in the same quarter last year.
This increase is primarily due to non cash stock comp stock based compensation expenses.
Expenditures and marketing expenses.
Net income in the third quarter of 2020 was <unk> point.
0.1, $4 million or two cents per basic and diluted share outstanding compared to net income of.
Point.
$3 million or zero per basic and diluted share outstanding for the same quarter last year.
Adjusted EBITDA or a non-GAAP financial measure increased 150%.
$670000 compared to $270000 in the same quarter last year.
Looking at the balance sheet cash and cash equivalents were $6.6 million as of September.
2020.
Compared with $4.1 million as of June Thirtyth 2020 the.
The increase in cash was due to a decrease in accounts receivable and inventory at the end of the current quarter compared to the last quarter.
We do not currently foresee a need for further capital to support our business.
Sharon.
Overall, I'm pleased with our strong it all together revenue growth and increased profitability in the third quarter as personal protective equipment sales.
Core platform growth over the same period in 2019 continued to be key drivers of our business.
As a founder of track fade I firmly believe we are well positioned to continue to create sustainable value for our stockholders.
I look forward to continuing operational execution at the fourth quarter.
Into 2021 and beyond.
With that I'll turn it over to the operator to begin question and answer session operator.
Thank you Sir we will now begin the question and answer session.
As a reminder, if he has a question.
Please press star followed by one on your Touchtone phone if youd like to withdraw your question press. The star followed by the two and if you are using speaker equipment, you will need to lift the handset before making your selection.
And our first question comes from Brooks Oneil with Lake Street Capital markets. Please proceed with your question.
Yes. Good evening, guys I was hoping perhaps you could give us a little more information about the breakdown of the revenues between ppb and correct Jade.
Pharmacy related revenues and could you tell us if there was any revenue related to your tele health initiatives as well.
Oh, what do you want to take that question.
Yes, absolutely the and the.
Our 10-Q, we break out by segment.
So for nine months ended September Thirtyth track say the platform had about $4.3 million in revenue.
Our pharmacy had about $1.3 million revenue.
Integra pharma, which is our.
Our wholesaler had about 9.5 million in revenue and bottom how is just starting to identify some revenue we're at about $25000 there.
Okay and can you talk a little bit about how you see the margin trend.
Unfolding, maybe over the next year or so.
We usually don't give all right.
Oh, great so projections smoke, but really the continues to operate as I mentioned before type company.
If if you're looking for a tech margins on the platform list continues to see them.
But on the TV side, because we have to procure the drug on supply and demand related to pull those margins as well.
We see the continuous effect on the quarter on a lot of but I know it was due to.
Comment on the PBM side, followed if you want to add anything. Please go ahead.
No I think that's that's right Sharon.
Brooks.
The gross margin percentage is really going to be driven by the.
How PBC sales are as I'm sure sure as a.
Percentage to the to the platform revenue.
Because that's I mean, that's really what's going to drive it. So if we're fortunate enough to have a good pp sales going forward.
Then you'll get the compression on that gross profit revenue.
Margin, if you don't and that margins are going to be larger.
Sure, but those pp sales are profitable RP.
Absolutely.
Yeah, that's great. Okay, and then and just curious and I think I saw you file 100 million shelf.
Tonight after the close in I appreciate your comment about needing.
Needing additional capital or are you just doing that kind of bottom Jen.
General prudent corporate governance, or how do you think about it.
Well not to my broker who is being followed up on the last quarter.
So definitely as I mentioned, we are the south has been placed it's a three year shelves as youre aware put the operational or we don't need the cash, but any strategic opportunities are going to come into play I would definitely like to raise the capital and bumps through into the shelves come into play.
Okay I'm sorry, thank you very much for that clarification and all that makes sense. Thanks for taking my question.
Thank you.
And our next question is from key Mannheimer with Dougherty and company. Please proceed with your question.
Thanks, Good afternoon, congrats on a good quarter guys.
To what to what degree or to what would you attribute to the flattish platform revenue sequentially.
Thanks, Jim I'll plus to give it.
Shot at it and then I'll, let politics plant.
How do we increase the pro forma sequentially quarter on quarter, the flat growth might have come in and the percentage of cc that we collect some a band orsa genetics. So in this quarter. We might have included in the bag and Thats, what do we see the flat revenue in the second half I mean in some of these remote locations where are you seeing.
Hi riots are happening and stuff some pharmacists are still sat down and.
So those are the two had an effect on our flat growth upsell our thoughts on revenue.
Okay.
Okay.
No no you you hit it right on the Hudson.
Okay. So just so I'm clear surrender that I heard you right. It's part of it is a mix of brand versus generics.
Ordering.
Okay. Okay.
Okay and in terms of those growth drivers you talked about one.
Increasing average purchases per pharmacy and the other.
Adding new net new pharmacies to the network. What is what is maybe you could talk a little bit about the rate during.
During the quarter at which you added new pharmacies, and if you could characterize how that same store growth.
Your pharmacy base is trending.
Sure Yeah, I mean, we have typically going now some of that lost 2090 to about 17% growth.
And we've seen that for promising purchased per.
Bob based last quarter to this quarter, we see all of us at 4.52% growth or what have you seen anything.
Okay. The other numbers Howard, let us take it over.
No I think.
I think Jamie.
One of your questions is the average spend for pharmacy and we.
We actually saw that on a sequential basis go up from the end of the second quarter to the third quarter.
And I think the number of new pharmacies.
We added about 144, this third quarter, which is a little less than we've added in previous quarters and I think part of that is a little bit of a headwind with the goal of it.
As far as the pharmacies are focusing on other things right now as opposed to.
Different outlets to purchase.
Makes sense, Thanks, Howard and my other question would be I think you know.
Many of US are wondering in terms of the Integra line, how sustainable is that.
Those p. PE revenues I mean, I know in Q2 at the onset of the 10, Dennis we saw a big Spike there it sure looks like it will sustain.
That level of demand in Q3, I mean is this is this the right run rate to be to be modeling the PE.
Sales. Thank you.
Well, Jim thus far but I'd model that can we still see the effect. So there is a still a supply of Oh.
Supply and demand disruption there I don't see that all have the same expected growth in the past couple of quarters like December usually the slow months for the pharmacist approaches.
And I'll, let somebody have a second rail maybe hitting them. So we see a supplier situation. So all the costs that was piloting a DPP glower a mask and stuff.
So I don't anticipate and similar growth, but at least we can see some impact a little bit there on the pp sales this quarter also.
Makes sense last question from me then if I could did you see any impact from flu vaccine demand during the quarter and what's your expectations for Q for Q4.
Sure well again.
Yes, indeed, yes, so we see that and or more for a couple of hours out of it and especially the anti psychotic coming from China or finished goods that are coming from India or still have some supply issues that were unable to.
Meet that demand that's going to be another reason why we will see a flat go up to an hour I would also.
So we could not supply that.
That medication.
I see okay, thanks, and great progress. Thank you.
Thank you.
Our next question is from Howard Halpern with Taglich Brothers. Please proceed with your question.
Congratulations on the quarter guys.
Hello.
On the PE side, though is it strictly the demand from your independent pharmacies or are you have you work towards maybe.
Getting some business from state local or school school contracts for Dps.
Well, that's kind of course, our EPS. So we do still look outside the pharmacies, but they stayed and Oh.
Allstate, FEMA us and high schools schools and stuff like that yes to answer your question yes.
Okay and act as.
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Part of it.
Well well part of that ERP going forward also include.
[noise] rapid testing.
You know products for independent pharmacies and state and local in addition to masks and other.
Other around.
Protective equipment.
Okay, Great question Ali I wish I could.
Taleo commodities I think relations SK last along follow that CDC guidelines that so yeah.
It was that old block for these independent pharmacies.
I think our conductive.
And that can be passed K a test.
Our site is that old fashioned yet so we can see the spike in.
Sales since we haven't identified Thats a players for these rapid test pitch on but its unfortunate that these independent pharmacies cannot educated depends on tight unless some of them. They have a tail. They were okay certification. So still there following the call.
Fortunately the CDC guidelines.
Hello.
Open up yeah, we can see the slots so question yes.
One other thing comes along with that the fees that test kits or longer payable.
Okay and.
If you could just go over a couple of the initiatives you.
Our undergoing on bottom health Tele health services, because as my heading into the winter.
The winter months and this spike is occurring more people probably be back you know okay.
And so what what are you doing to you know grow that business.
So is there a ceiling.
Lots of bottom class, a primarily the employer solutions, but to bring in a safe and cost towards the unwind like to provide to the logos that we want to see the growth going on that aspect topic.
Second thing, we partner with a prescription drug company.
Company Coaxing okay.
But off a bit harder on cooking million patients in the that's gone called card program, Oh or they can go while our bottom how close to them.
I'm, sorry, I, what I'm going to have as I mentioned, although the reason was a bottom out but part of not them against us and we said patients had never leave the house in order to talk about but that's that doesn't deliver using our independent pharmacies.
They can get a discount card.
So be it.
Okay and one last question modeling question.
Share based compensation should we continue to model it at that.
100000 level or is that going to start coming down.
Oh, I do want to take up well.
Yes.
Okay, they've got their holiday.
Oh.
Yes, I'm, sorry, yes, yes, yes, yes, I'm sorry the.
The non.
Non cash compensation will probably come down into the fourth quarter.
As far as what.
What it's going to look like in future years, that's really kind of more up to the board and how they are and the compensation committee and how they structure the bonuses at end of the year yeah. Okay. Okay.
Okay. Thanks, a lot and keep up the great work that.
Foreign policy.
And our next question is from Carla core resign with Dawson James. Please proceed with your question.
Hey, guys great quarter of course.
Wanted to see a couple of things on the balance sheet standout deposit inventory deposit for a million also inventory up.
Considerable at many medications normally aren't.
Something you inventories. So is this all the PE.
Yeah, Carlos Thanks for the question, what's the most likely to be.
Fine too because all the production line you got to get into the production ramp to meet the supply and demand yes to answer your question yes.
So far as the logistics are you receiving an inventory and having to send it out yourself.
As far as the logistics and sometimes there are some of them are coming from the overseas and stuff. So you have to.
Putting the deposit 60 to 90 days.
Got it got it one other quick question. Another 22000 independent pharmacies and you work with a over half of those and I know, we talked and then some of them that shut down temporarily during the March two who knows what period of time, maybe maybe till August.
Did it what kind of the percentage did you have that has not opened yet or actually closed because the financials. During this time.
Okay, Let's remember, we don't know how coal on coal, but we are continuously monitoring how many about pharmacists are okay bye.
The supply of the bat disruption going on.
Ah I don't have that Oh, hi, there.
How many are still it did it did most of them I'm not per se, but most of them that were closed down for a couple of months was I'm sure hurt yourselves, a little bit our nail open again for the future. So.
Okay, all right that's it thanks.
Thanks Carlos.
And we have reached the end of our question and answer session and I will turn the call back over to series for any closing remarks.
Thank you operator, I'd like to thank you all of you for joining or call or webcast.
We were unable to offset any of your questions. Please reach out to our IR from MZ group would be more than happy to assist.
Thank you again for joining us today.
I look forward to continuing to update you on our ongoing progress growth.
Hey, My mother, the replay of this call and webcast will be available for the next 30 days on the Companys website under the NASDAQ Mads Bank.
And that more information regarding the financial information disclosed on this call and webcast, including a reconciliation of non-GAAP financial information.
Can be found in our press release, which we have filed after the close of the market today.
Thank you all.
Thank you for joining the call you may now disconnect. Thank you and just briefly.
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