Q3 2021 MedAvail Holdings Inc Earnings Call

Beginning on slide pharmacy partner to the top risk bearing clinic operators in the marketplace.

With that I'll now turn the call over to Ramona to provide a review of our third quarter financial results.

Thank you Ed I am very excited to be joining <unk> and look forward to partnering with the team as we continue to execute on the business growth strategy.

Turning to our third quarter results net revenue for the three months ended September 32021.

$5 8 million, a 19% decrease from $7 1 million in the same period of the prior year.

As mentioned earlier this decrease was due to the completion of a nonrecurring commercial agreements in the three months ended September 32020.

Associated revenue of $4 7 million.

This decrease was offset by a 149% increase in retail pharmacy services sales.

As we have indicated in the past fancy technology sales can be variable from quarter to quarter due in large part.

But are you seeing patterns associated with these enterprise level capital sales.

As Ed mentioned during the third quarter, we deployed 14 that centers in the retail pharmacy services segment compared to 11 in the third quarter of 2020.

Gross margin for the third quarter of 2021 was 3%.

Sequentially from the second quarter, and 70% as compared to the prior year period.

Gross margin in the third quarter of 2020 includes the onetime noncash benefit of $4 $7 million recognized in conjunction with the accounting of a nonrecurring completed commercial agreement from 2018.

Excluding this one time benefit gross margin for the third quarter of 2020 was 11%.

Total operating expenses for the third quarter of 2021 were $11 2 million, a 60% increase from $7 million in the third quarter of 2020.

This expected increase in operating expenses was driven primarily by investments in personnel facilities and other expenses necessary for the continued build out of our operating footprint, including the launch of operations in Florida.

Additionally, we continue to make accelerated investments to automate additional workflow is important to our customer service capabilities, including our investments in compliance packaging.

Adjusted EBITDA, which we calculate by adding back interest expense depreciation and amortization stock based compensation and exclude nonrecurring expenses and other income.

With a loss of $10 $1 million in the third quarter of 2000.

Compared to a loss of $5 1 million and.

In the third quarter of 2020, reflecting the various initiatives and investments in growth you've heard us talk about.

We ended the third quarter of 2021 with $35 $9 million cash and cash equivalents.

We now have accurately $32 8 million shares common stock outstanding and we expect to have a weighted average share count for the fourth quarter of approximately $32 9 million shares.

Turning to our outlook for 2021, we continue to expect at least $21 million net revenue and 45, new <unk> deployments this year.

Regarding our gross margin outlook, we remain focused on improving our gross margins throughout the balance of 2021 as we continue to execute on the initiatives. We have previously discussed.

And with that I'll turn the call back over to Ed for closing comments.

Thank you Ramon.

Thank you for joining the call today with the return of momentum in the third quarter. We look forward to updating you on our progress as we continue to execute in this expanding market with.

And with that we will now open it up for questions operator.

Absolutely, ladies and gentlemen, if you would like to ask a question on <unk> co. Please star one on your telephone keypad now.

Take our first question from Charles <unk> of Cowen Charles Your.

Your line is now open. Please go ahead.

Thanks, a lot.

Thanks for taking the questions.

Maybe Ed if I could first ask obviously.

A strong number of deployments here in the third quarter.

Can you give an update on where we're at so far here in the fourth quarter clearly getting to 14 here you need.

Less loss performance is and what are some of these.

It looks like about 18.

To get to your target of 45, any update where we are where we're at here sort of mid quarter.

I would just say Charles that we are on track to deliver the 45.

For the full year as we outlined and.

We have a good line of sight into those as you would fully expect.

We will be deploying throughout the quarter.

And so they're happening on a monthly basis. So again, we are reconfirming the 45.

Okay, great. Thanks.

Another question here.

I think last quarter you talked about.

Changes in the board of pharmacies that has caused some delays to get.

Sure.

Sites really up and running any kind of update there I think you had talked about eight to 12 week delays, but I'm wondering if that has.

Some of those timelines have improved at all.

We haven't seen any changes.

Charles I don't know.

Not anticipating any for the balance of the year.

Obviously, we take that into consideration as we are moving forward in deploying right now and just as a note in Florida.

Isn't the board of pharmacy inspection.

There are in California, and Arizona, and Michigan and so.

So we can move a little quicker in Florida, but theres been no change to the.

Other states that we mentioned earlier.

Great and then maybe just two quick ones.

One is on utilization.

Revenues came in better than we were expecting.

Have you seen volumes.

Kind of come back I know other companies have talked a little bit about.

Some delays in elective procedures.

Yes.

As well as maybe some higher COVID-19 related expenses, just curious what youre seeing there and then lastly, maybe a question for you Ramona.

As you kind of come here and so we're working with the team what are you what would you what would you list in terms of your priorities.

Sure.

As you think about helping metadata here, taking the next step.

Thanks.

So thanks, Charles So I'll just jump in with the from a clinic volume perspective, and I'll say patient visits.

We have seen improvements quarter to quarter.

Spec to see those to continue into the fourth quarter as well.

You did comment on the.

Board of pharmacy approvals, which we continue to see similar timelines as we've discussed previously obviously, we've taken that into consideration in any planning.

But the what we what we are seeing is the traffic patterns improve in <unk>.

Which is very encouraged again as we come into the back half of the year for the last part of the year I should say.

Ramon.

Hi, Charles.

Yeah coming in Utah.

Don.

Many key areas for us to focus on will be too.

Clearly our continued topline growth in both segments of our business.

We want to continue to drive programs around our efficiency and productivity.

Again, our operating unit.

Example, we know we have an agreement with Mckesson.

The growing fulfill by the end of this year.

And then finally, we will continue to focus on improving our overall financials with the company.

Reducing our overall cash burn.

Probably a little buckets that we will spend the majority of our time.

That's great if I could just follow up on the partner with Mckesson would that alleviate the need for your central pharmacy is to do some of the refill work and that would leave that to Mckesson.

What would your central pharmacy would be doing more first fill prescriptions them.

Sure.

Yes.

Go ahead Diane.

The what.

Mckesson is going to be doing for us Charles is packaging.

<unk> medication into say 30, 60, 90 day vials, we would then process that order in our pharmacy. So what did you get any saving us.

The pill count into the breakdown by customer.

And then also the inventory management, because they would be managing the inventory out there and.

Okay, what kind of financial labor reduction.

Alright.

So is that I would say that next layer.

Yes, Yes, you would because we are just beginning to roll it out.

And we're evaluating right now the percent of our refills that will be driving through that process, obviously moving up we want to maximize it but I don't have a specific number right now.

Your savings, but we certainly are counting on this to improve our productivity as we move into 2022.

Great Alright.

Alright, thank you.

Thank you Kevin as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.

Our next question from Brooks O'neil of Lake Street Capital Markets Brooks. Your line is now open. Please go ahead.

Hi, guys. This is Travis spangler filling in for Brooks and thanks for taking my question.

I see that <unk> signed opened three spot or X locations in Florida, given that Inova care operates more than 30 clinics can you discuss the opportunity to get into the other 27 clinics or so.

I would say.

But we are in discussions with all of our enterprise customers with regards to continued growth.

So.

I can't speak for <unk> internal plans, but.

We with the offering we have can have a direct impact on patient adherence and satisfaction, which is very important to them as a business. So we are going in there with an expectation that we will have the right to earn that business.

Got it and one more question do you guys see a shift.

Your home delivery option or the patients like the opportunity to pick up their medications at the end of the clinic visits.

It's it's a little.

Both when we have the.

Patients are in chronic medications some of them choose to pick it up when they're visiting the clinic others prefer to have a courier home delivered certainly when we see first fills we do see.

A large number of those filled at the site.

Itself, but the chronic medications for patients can choose either.

<unk> to receive their refills.

Sounds good thanks, guys for answering my questions.

Thank you Brooks, we also have a follow up question from Charles <unk> of Cowen toss.

Your line is open. Please go ahead.

Great. Thanks, Thanks for taking the follow up here.

Yes.

I wanted to talk about sort of the commitment here kind of seeing 100% growth.

Revenue for next year, when you look at that number where do you think the.

Puts and takes are the kind of achieving that and clearly it looks like we are.

Tracking.

In line with maybe not a little better on deployments, which means some of those sites can be generating revenues ramping sooner than maybe we had been expecting.

What do you think are kind of the swing factors.

Should think about as we kind of round out this year.

Next year.

Or is it Charles the obviously.

The deployment of the go live of the 45, we have.

Put in this year, we'll put a maturing very important so the timing of the go live of those will be important and then the I'll say the cadence as we get into next year.

Quarterly deployments as you know, we we haven't provided any guidance for next year, yet and volume of sites.

But you do know from this year that the vast majority of our certainly the first half sites that we deployed were deployed in the last.

Part of June so.

It was not a lot of benefit.

So we're hoping that as we move into this year or into 2022, I should say that we have a smoother cadence based on the number of clients. We have the majority of these were operating in.

So that will be very key for us as we get into 2022, but the main driving factor will be continued scaling of the sites that we have we exit this year with within the ground.

Is it fair to think obviously this year most of the deployments are back half weighted because of.

Switching of the contract manufacturer.

Can you just quickly update us data and would you expect then the cadence of deployments.

Going forward here in 'twenty, two and beyond starts becoming more even throughout the year or is there any kind of seasonality that you might expect in terms of how some of these clinic partners think about deployments.

So the contract manufacturing is going very well.

That is not an issue as we go into 2022.

With regards to the seasonality.

You don't see a seasonality, although I would say that.

Early in the first quarter.

People arent, usually deploying in late fourth quarter or the next year.

Our slowing things down a bit and it's mainly a holiday season and hours of operation. So.

Other than that there's really no seasonality that that we see from a deployment perspective.

And then as I said, we haven't provided guidance for next year, but we certainly will be expecting to have a smoother cadence as we move through 2022.

Great and then maybe if I could just ask one more here.

Obviously, a lot of efforts here in Florida, It sounds like a very fertile ground to be.

We're making inroads in Texas.

Texas has been on the radar for you guys.

Update on how you're thinking about further state expansions.

So you're absolutely correct that Florida is a very very significant market for us and based on the signings we've done in Florida. So far we've got a very large footprint.

Within that state just looking at the sites that are current clients have theres a significant opportunity.

Most of those clients certainly not all but most of the Florida clients as well as other clients, we have ever presence in Texas.

That is.

State that we are having discussions with our customers.

About that state, but Theres also a couple of others that are in play as well so.

We have two things.

About the growth path that we're on and how much we want to open up at one time, but we're certainly having very active discussions on a number of states with Texas, certainly being one of the key wins as we've talked about before.

Great and I'm, sorry, if I could just ask one more here if we think about.

The rate the deployment schedule and sort of the cadence of it.

Assuming that all your partners, we're willing to deploy it quickly.

What is right now you are sort of your capacity.

Maybe in a quarter to be able to deploy because clearly the 2014. This quarter I think you did 12 basically at the end of the second quarter.

No.

What are you kind of think of as sort of your Max capacity in terms of resources to be able to deploy.

Currently and maybe maybe your plans or expansion of that capacity.

Yes.

I'm not going to declare a specific max.

Charles because it really is.

Driven by as we deploy.

In our sight.

The actual installation physical deployment of the technology is not usually.

The longest part of the plan, it's the education of the staff that were.

Clinic, we're going into it.

It's our hiring and training of our Cam So our clinic account managers.

So we have ramped up our recruiting capability, our education training capability.

Usually the rate and pace that the client wants to move and as we see more demand to move faster then we will have to ramp up our internal skills to do that.

Again, it's not a physical installation thats more of.

US hiring and putting the people on the street in training and educating the staff of each of the clinics.

But as you Steve noted.

We did <unk> and we will.

More than that in the fourth quarter to get to our 45 for the year.

Is it possible to exceed 45 or is that just more of a timing issue on.

The roadmap you have with your partners just given that you seem like you did a little bit more in the third quarter. Then you kind of were indicating last quarter.

Does that free up kind of space to do a few more or is it just.

Just kind of sat here, what I would say Charles is we're not we're not changing the 45 guidance right now.

Okay great.

Thanks, a lot.

Thank you very much Charles we have no further questions. So I will hand back to Ed for any closing remarks.

Thank you all for taking your time in joining us and we look forward to updating you on our next call.

Have a nice evening.

Okay.

This concludes today's call. Thank you for joining you may now disconnect your lines.

[music].

Sure.

Yes.

Yeah.