Q1 2021 Medavail Holdings Inc Earnings Call
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Ladies and gentlemen, and welcome to the net of vials 2021 first quarter earnings conference call.
My name is Bethany and I'll be coordinating your crude for you today.
If you would like to register to ask the question during the Q&A session at the end of the presentation. Please press star followed by one on your telephone keypad.
I will now hand over to your host Carolyne pool of Investor Relations to begin Caroline over to you and you are ready.
Thank you and thank you all for participating on today's call.
Joining me are and Kilroy, Chief Executive Officer, and Brian Ferguson, Chief Financial Officer.
Earlier today, Matt avail of Holdings released financial results for the first quarter ended March 31 2021.
A copy of the press release is available on the company's website.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 and <unk>.
Statements contained in this call that relate to expectations or predictions of future events results or performance or similar statements are forward looking statements.
All forward looking statements, including without limitation those relating to our operating trends and future financial performance the impact of COVID-19 on our business and prospects for recovery.
Expense management expectations for hiring growth and our organization and reimbursement and market opportunity and expansion and guidance for revenue gross margin and operating expenses and 2021 are based upon our current estimates and various assumptions.
Also management May make additional forward looking statements and response to your questions.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements and do not guarantee future performance.
Accordingly, you should not place undue reliance on these statements and should not rely on them and making an investment decision without considering the risks associated with such statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section and our annual report on form 10-K filed with the Securities and Exchange Commission and SEC on March 31 2021.
This conference call contains time sensitive information and is accurate only as of the live broadcast today May 12 2021.
Net of our holdings disclaims any intention or obligation except as required by law to update or revise any financial projections of forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to Ed.
Thank you Caroline and good afternoon, everyone and.
Thank you for joining US we have started 2021 with a solid first quarter of 30% sequential revenue growth from fourth quarter 2020.
As a reminder, our business model has two business segments. The operation of our technology enabled high touch retail pharmacy, using our proprietary technology and processes known as our retail pharmacy services segment.
And the sales for provision of these technologies to large customers to support their own pharmacy operations known as our pharmacy technology segment.
During the first quarter, we again had meaningful contribution from both our retail pharmacy services and pharmacy technology segments and as we discussed in our last call remain on track to open operations in Florida in July.
Our double digit sequential revenue growth was driven by the continued strong demand for pharmacy solutions that improve medication adherence and patient satisfaction as well as growth and our pharmacy technology business as.
As we have discussed on previous calls our value proposition is fueled by our embedded on site pharmacy model in which we are viewed as a true partner to clinics and care providers on.
Our on site model consists of our proprietary robotic dispensing platform called the Med Center.
Our full time clinical account manager or Cam for short of.
Backed by Tech enabled the telephone Missy platform, including a central pharmacy.
Let me give you a real life example of the value of our on site service inaction.
And one of our clinics are onsite clinic account manager was reviewing the day's list of patients prior to the clinic opening.
Many of these patients were customers of our pharmacy, So our clinic account manager through the tailored CRM platform. We have deployed to the in clinic was able to review of the pharmacy status and history of the patients the.
<unk> identified that of patient had not filled one of their medications and had not responded to our pharmacy outreach, we notified the doctor who spoke with the patient during their visit and confirm the criticality of continuing to take the medications.
Well on the exam room or team confirmed the medication was available in the Med center in the clinic and we were able to fill the medication for the patient prior to leaving the site.
This is a great example of real time collaboration due to the embedded nature and technology platform that traditional pharmacies mail order or home delivery organizations simply cannot replicate.
This type of value creation is what allows us to continue to expand within the clinic networks of our current clients as well as continue to recruit new patients within our installed clinic sites.
When you combine this with our ongoing investments and innovation and the expansion of our footprint in new geographies and it gives us confidence that we are well positioned for continued growth.
Now, let's turn to our financial results for the quarter on.
Our retail pharmacy services revenue was $3 4 million for the first quarter of 2021, representing a 164% year over year increase and a 35% increase from fourth quarter of 2020.
We opened one new site in the quarter with a number of our clinics postponing installations well they focused on COVID-19 vaccination programs.
Our pharmacy technology revenues increased 430% year over year in the first quarter of 2021 to $609000. This business segment has also experienced some delays and expected sales as some customers postponed orders, while focusing on their COVID-19.
<unk> response initiatives.
Regarding our 2021 outlook, we now expect to reschedule a number of our spot of Rx Med center installations towards the back half of the second quarter as we see clinics returned to normal operations. Once the main COVID-19 vaccination drive has concluded.
And the sites begin to ramp back up to pre COVID-19 operations.
Given that our revenue growth is dependent on our Med center implementation rate, we are revising our full year revenue guidance. We are now projecting full year net revenue of 27% to $31 million.
That said, we do expect to deploy a minimum of 45, new clinics with spot Rx in 2021. This is the same number of minimum installs as we had previously expected for 2021. So the only thing that has changed is the install tie.
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We do not expect the impact of the implementation delays on revenue to persist as we return to a normalized healthcare environment and we continue to expect strong sequential revenue growth throughout the year.
Despite the difficulties presented by the pandemic as you can see the business has continued to grow robustly.
And we continue to be very excited about our opportunity to approximately double our revenue this year.
Demand for our solution remains strong and the states, where we currently are operating including Arizona, California, Michigan and very soon and Florida.
Turning to gross margin outlook, we project improving gross margins throughout the balance of 2021, driven by a number of specific initiatives such as reducing the cost of delivery and improved procurement terms.
Our model is highly scalable and repeatable.
Continuing our growth requires us to expand to additional markets within the regions and new regions.
As we enter a new region, we bear the cost of building out and Resourcing. The central pharmacy ahead of deploying med centers to generate revenue in that region.
Gross margins, then expand as we recruit customers and work to acquire their full of medicine cabinet add new sites to the market and begin to enjoy the economies of scale. This brings.
This trend repeats itself for every new region, we enter.
This geographical expansion of our network is an essential strategy to facilitate our continued growth and is expected to continue for the foreseeable future.
At scale, our cost structure works to our advantage as we do not have to carry the overhead costs of the large retail store footprint that traditional pharmacy operations have.
We are very excited to be entering the important Florida region in the second half of 2021 and believe this further demonstrates the highly scalable and repeatable nature of our business model and the potential for the future growth in target markets across the U S.
During our last earnings call. We had stated that we were planning to open our first central pharmacy in the state of Florida by mid 2021.
Today, we are pleased to announce this facility is expected to open and the Orlando area in July.
The central pharmacy should allow us to service both of the Orlando and Tampa areas.
We are thrilled to be bringing our spot of Rx technology and concierge service to the Medicare population in Florida are force target States.
We are also pleased to announce we have signed two significant retail pharmacy services customer agreements to deploy our pharmacy solutions in clinics with high volumes of Medicare patients.
Channel health, a leading provider of value based care has agreed to deploy our spot of Rx solution and there are four sites in the Orlando area.
Second we have signed an agreement with access health care physicians, another leading primary care network and Florida to install our spot Rx solution and an initial for sites in the Tampa area.
Access healthcare is a multi level of service practice with more than 110 locations in Florida.
We look forward to very strong and the lengthy partnerships with both channel and access health care.
Overall, the Florida market remains extremely compelling to meta bill in total we of an annual market opportunity of $3 7 billion.
In Florida with hundreds of potential clinics for our spot Rx solution.
The recent analysis conducted by L. E K indicates that over 80% of physician groups with value based care contracts do not have dispensing capabilities and most are assuming part D risk our.
Our business development team and Florida continues to be extremely active and working to build a strong pipeline of value based care clinics, who operate within that market.
I will now touch briefly upon of key product initiatives, we are working on to position us for further sustainable long term growth.
Our team has procured technology to enable us to offer compliance packaging expanding our full suite of pharmacy solutions.
As many of you know compliance packaging solutions bundled together different prescriptions into separate pouches labeled for each day for dose within the day.
And this way the patient opens one pouch per dose containing all of the required medications instead of having to remember which pill to take.
And having to manage many different bottles at once.
With some patients on 10 or more medications with very times and frequencies of dose you can see how this could become confusing for many patients and therefore impact adherence.
A number of our current clients, especially those who provide home health services have asked us to begin to offer compliance packaging, which is proven to help patients remain adherent to their medications.
Since many of these patients are on multiple chronic medications, our new technology should enable us to bundle and clearly labeled and medications instead of providing them individually. We view this as an important opportunity for expansion within our enterprise customers, we expect our compliance packaging.
Solution to go live in May.
In summary, we are extremely encouraged by our progress during the first quarter and strong performance and the difficult environment presented by the pandemic as mentioned, we expect revenue to approximately double over 2020 as a result of <unk>.
<unk> net to new geographies and customer expansions supported.
Supported by the tailwind of value based care initiatives, and a large and rapidly growing Medicare population.
With that I'll now turn the call over to Ryan to provide a review of our first quarter financial results.
Thank you Ed.
Turning to our Q1 results net revenue for the three months ended March 31, 2021 was for <unk> zero million.
A 185% increase from $1 4 million and the same period of the prior year.
These results were driven by a 164% increase and retail pharmacy services sales.
And a 430% increase and our pharmacy technology sales.
As Ed mentioned during the first quarter, we deployed one med center into the retail pharmacy services segment compared to five and the first quarter of 2020.
Gross margin for the first quarter of 2021 was 8% as compared to negative 1% and the corresponding prior year period.
The improvement in gross margin was driven by improved purchasing and lower DIR fees, partially offset by higher utilization of our delivery service and continued reimbursement volatility.
Total operating expenses for the first quarter of 2021 were $10.0 million and.
And 81% increase.
From $5 5 million and the first quarter of 2020.
This expected increase and operating expenses was driven primarily by investments and personnel facilities and other expenses necessary for our continued build out of our operating footprint, including the launch of operations and Florida.
Additionally, we made accelerated investments to automate additional workflows and important to our customer service capabilities, including the investment and compliance packaging as discussed by Ed earlier on this call.
Adjusted EBITDA, which we calculate by adding back depreciation and amortization.
Dock base compensation and exclude nonrecurring expenses and other income the net loss was negative $8 $9 million from the first quarter of 2021 compared to negative $5 2 million and the first quarter of 2020, reflecting the various initiatives and investments and growth.
And you've heard us talk about.
We ended the first quarter of 2021 with $47 6 million of cash and cash equivalents.
We now have approximately 31 9 million shares of common stock outstanding.
And we expect to have a weighted average share count for the second quarter of approximately $32 6 million shares.
Turning to our outlook for 2021, we remain cautiously optimistic about the remainder of the year.
As Ed mentioned, we expect to reschedule of number of our spot Rx Med center installations towards the back half of the second quarter as our clinic partners continue their important vaccination of work.
As the result, we now are expecting net revenues and the range of $27 million to $31 million compared to our previous guidance of 27% to $34 million.
We continue to expect our sputter X deployments to be weighted towards the second half of 2021, given the recent focus of our clinic customers on COVID-19 vaccination program.
Nonetheless, our expectation of 45 in clinic deployments for 2021.
Which we had factored into our prior guidance for 2021 remains unchanged.
Regarding our gross margin outlook, we expect to see continued gross margin improvement over the course of the year.
The health care delivery environment and begins to return to more normal operations.
And as we continue to execute on our gross margin initiatives.
And with that I'll turn the call back over to Ed for closing comments.
Thank you Ryan in.
In summary, we are pleased with our first quarter performance. This was a strong quarter financially and operationally on.
Our team has continued to perform very well.
And as we grow we are bringing in some excellent new people, who are adding important depth and additional skills and experience to the organization.
And it is an exciting time for us and we remain extremely enthusiastic about our company's future and our growth prospects.
We are committed to continue to deliver growth and make the necessary investments to maximize the long term value for all stakeholders.
With that we will now open it up to questions on.
Operator.
Ladies and gentlemen, and if you would like to register to ask the question. Please press star followed by one on your test.
Thank you Pat now.
The first question comes from Charles <unk> from Cowen and Charles Your line is open. Please go ahead.
Yes, thanks for taking the questions and and congratulation guys on the announcements today.
And just wanted to ask really two questions first on <unk>.
On the guidance here.
The kind of said in terms of total deployment do you expect it to be the the same as originally intended but it's a matter of timing here.
For the quarter itself.
Outperformed relative to what we were expecting here.
Maybe you can touch on sort of what you think where we are in terms of getting back to more normalized levels as we kind of exit the pandemic here, maybe some sort of the trends that youre seeing and given there was commentary.
The other week from some companies reporting that.
Talking about pockets of weakness in terms of certain types of utilization just curious if youre seeing any of that or is that just the kind of a different market segment compared to the Medicare population.
And so just trying to put two and two together between sort of the guidance and sort of what per unit per.
For deployment kind of.
The revenue is thanks.
Sure. Thanks Charles.
A couple of comments so first of all.
As we've talked about before.
With the challenges that our clinics of had with regards to COVID-19.
And then a number of things one is they've altered some of the workflow within the clinic itself and the number of face to face visits and secondly, as you can imagine with the Medicare population, there's a level of at the time nervousness about going into clinic.
We have seen.
Over the past number of weeks and and a little I'm going to say months, but more weeks.
Is are the volume and the clinics face to face visits of climbing.
Although it's ramping back up to where we would've expected it to be and that'll take a little bit of time, but it is climbing and and the second thing is that as we mentioned that a number of our clinic partners of now step forward and wanted to begin the planning process to deploy new sites, both our current customers with the.
<unk> sites and.
And some new customers with new site, so that's encouraging as well, but again, it's I can say on a ramp back up it's not a switch that's being just flipped on.
Okay, Great and then just another question on on on.
On channel and access health care here.
What is the timing because I think when you talk about four to five deployments if I remember correctly that that was not net that didn't really include.
These Florida clients did it and if so like.
You are announcing it today and the central pharmacy starts in July.
Are their deployments from these two new accounts going to be in the back half of this year or should we think of it more as of 2020 to start really.
Well so when we think about with regards to who is in her of we had a view of we'd be entering Florida. This year.
And we had an assumption and the 45 of of how many sites. We thought we could do and Florida, we havent, obviously disclosed down to that level, but you can assume that and our 45, we had an assumption that a handful of sites would be going into Florida.
With regards to the deployment of the two announcements we made today I would say that I cannot use our Michigan.
As an example, we opened the the pharmacy in Middle of December and we deployed the first clinics really went live towards the end of January.
The approximate timing we attempt to have with with.
Some of the clinics, we've signed so you can expect us.
To begin to deploy some of these new clinics approximately that timeframe. After we open our central pharmacy and July.
Okay and then just the last question you talked about how some of your existing clients are now talking to you about expanding adding potentially new sites.
Any of those within the 45 that we're talking about for this year or is it really these will all be additive to next year.
They would be and the 45 for this year.
So we do of clients, who have now come back and said, Okay. We want to start planning for additional new sites.
Their network, which is really our model.
Entering and enterprise customer deploying being successful and then expanding throughout.
Their network, that's really as you know our model and we're seeing that resurgence as well, but it's and it's in our expectation of the <unk> 45 for this year.
Okay, great. Thank you.
Sure. Thanks Charles.
The next question comes from Brooks, I know of Lake Street capital.
Your line is now good afternoon guys.
Sure Hi, guys.
I was hoping and maybe I missed the but can you just talk a little bit about what youre seeing and the seven key target markets that you brought in is it more or less the same.
Are the customers and those markets are the experiencing the same kind of.
The impact.
Impact from COVID-19 and in response to COVID-19 that you were talking about.
Two and extend in the Florida market.
And so so Brooks I would say the answer's, yes debt.
As we look across our our fleet of installs and the in the for states. We're active in right now.
Most of our clients had.
Change the workflows or clinic processes during COVID-19, but have begun to ramp back ramp out of it. So what I mean by that is beginning to see more.
The patients face to face because that really is a big part of their business model. So we're seeing starting to see more activity and the clinic, which is encouraging for us. So I think things are returning but as I was saying to Charles and it really is the Ah <unk>.
The ramp back up again, it's not a it's not a switch going on so we'll expect to continue to improve and the third and fourth quarters.
Alright, all of that makes total sense and then you mentioned I think.
One of the things that you are seeing which is totally understandable as more utilization of your debt.
Drive to home.
Service versus in the clinic, but I was curious if you have data are you seeing any difference in terms of adherence, which I think is the one of the key elements of the benefit of.
And the lead center deployments and whatnot.
So with regards to adherence we continue to operate at or above a five star rating for adherence. So extremely high grade. The major reason why our clients want to do business with us.
Whether we're doing home delivery or in clinic.
<unk> been saying.
And we're still delivering the same level of of.
The compliance what I would say is that a number of our clinic partners as we talk to them.
We're putting some initiatives in place to align our dispensing with the patient visits so get more of the patients coming into the clinic walking out the door with the rebuilds in hand, not just first fills and so that's important because there's been a number of different studies over time that of.
And done that pointed to filling your prescription at your point of care can have a positive impact on adherence and so you know.
That really is one again one of the reasons why people like our models because we can service the patient with both home delivery and in clinic dispensing.
Sure all that makes sense and just ask one more.
I am excited about the compliance packaging the opportunity I see that as the big opportunity I'm. Just curious if you feel like you can deploy that.
And the dispensing machines and the same way you do with medications today or will it require some change and the way you handle.
The dispensing those packs.
No in fact.
We the way its package because of their packaged and and usually put in a box that sense of the customer those boxes and ease.
The defense and our Med Center now as you would know since its compliance packaging, it's specific to an individual but thats a really good example of a patients coming into the clinic for a visit we ensure their medication that is compliant packaged in the med center and ready for them and they can pick it up when they leave the appointment.
So absolutely we can handle it and we absolutely will be.
Doing that as we go forward.
Great. Thank you very much for taking my questions.
Thanks Brooks.
We have no further questions. So I'll hand, the call back to Ed to conclude.
Thank you very much operator, and I would just like to thank everyone for joining us today and I wish everyone. A great evening and we'll talk to you at our next earnings call.
Have a good evening.
Thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you for joining you may now disconnect your lines.
Yeah.
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