Q1 2022 MedAvail Holdings Inc Earnings Call
Report on Form 10-Q filed with the Securities and Exchange Commission. This.
This conference call contains time sensitive information and is accurate only as of the wife broadcast today May 12 2022.
<unk> disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And with that I'll turn the call over to Mark.
Thank you Caroline good afternoon, everyone and thank you for joining us.
Following four months as CEO of meta Vale I am more confident than ever by the tremendous opportunity. We have ahead to deliver cost effective pharmacy prescription dispensing and prescription counseling at the point of care.
And directly address the gaps in appropriate medication utilization faced by value based providers.
During this call I'll start with a review of our first quarter performance and then turn to our business objectives.
Mona will then provide more details on our financial results.
In the first quarter, we continued to focus on execution and we're pleased by the strong momentum that we delivered across our businesses.
Net revenue in the first quarter was $9 1 million.
Representing 126% growth year over year.
Retail pharmacy services generated $8 $8 million in revenue for the first quarter of 2022, representing a 159% growth over the same period in 2021.
While pharmacy technology revenues declined 130% year over year in the first quarter of 2022 to approximately $265000.
Pharmacy technology revenue can be variable from quarter to quarter due in large part the customer purchasing patterns associated with enterprise level capital sale.
Pharmacy technology represents a significant growth opportunity for <unk> Vale and is a key component of our path towards profitability.
As a reminder, we sell our hardware and importantly license, our software and systems and provide maintenance to our platform, which creates highly predictable and profitable recurring revenue and.
In the first quarter, we achieved a milestone with the completion of our integration with epic Willow and the availability of our Med center platform in the epic App Orchard Gallery.
The App Orchard program enables developers to integrate their healthcare it solutions with the epic EHR and allows health care providers, who use epic willow.
Epics outpatient pharmacy management systems to access the Med Center platform.
As a result, we expect to expedite deployments with epic health system customers and drive adoption across enterprise partners using epic Willow.
Notably we are currently working with our first epic Willow partner to complete our full integration, which we are targeting to be completed later this year.
Currently there are approximately 350 integrated delivery networks, using the epic Willow pharmacy software in the United States.
Additionally, our technology team recently completed a rewrite of our med dispense software that is intended to enable greater flexibility and faster deployment of our med centers.
We believe that this new version of our software will enable an easier user interface to facilitate faster enhancements of our technology program for patients and providers.
Finally, we welcome industry veteran Matthew Broome, who joined our team to lead the initiatives and pharmacy technologies.
Matt will be instrumental in implementing and optimizing our strategies to accelerate the growth of this segment.
As a former customer Matt understands the strong value proposition that we offer with our med center platform to improve provider satisfaction reduce costs and positively impact patient medication access and outcomes.
Turning to retail pharmacy services and spot Rx, our highly scalable hub and spoke pharmacy model. We ended the first quarter with 88 dispensing units, representing a 29% increase from 68 at December 31 2021.
Net cumulative deployment at the end of Q1 2022.
92 units.
We continue to drive our corporate strategy to leverage our expansion with current clinic partners and broadened our footprint as they continue to build their networks.
For example, our partnership with Oak Street continues to grow.
In the first quarter, we contracted to add four de novo sites in Arizona.
One of our key target markets, which will utilize both of our existing Arizona hub pharmacies in Phoenix and Tucson.
Street entered Arizona in 2022 with value based primary care centers located in Phoenix and Tucson for adults on Medicare.
Importantly, Oak Street has agreed to deploy spot Rx in all of their clinics and Arizona in line with our past installation practices and we are excited to continue to build our partnership and become Oak streets pharmacy partner of choice.
<unk> health operates more than 100 comprehensive primary care centers across 19 states pushing your adults.
Another example is our partnership with <unk> Medical group and.
And our growth alongside their network expansion, we previously highlighted than in the first quarter, we deployed and began installations for 11 spot Rx locations at IMA sites in central Florida to enable spot Rx access to patients across the <unk> network of 'twenty, one medical centers.
Leveraging our pharmacy hub in Orlando.
We are pleased to announce that we have plans to open five additional sites with IMA in Orlando and Tampa.
The majority of these sites will be de Novo clinics and continue the partnership expansion with IMA to embed these medical centers directly into all IMA medical centers.
With the spot Rx model IMA patients who will receive.
Immediate access to prescriptions at the <unk> medical centers pre contactless next day home delivery for all prescriptions and over the counter medications.
Follow up care calls from a local spot Rx pharmacy after receiving a prescription.
Refill reminder, calls on all chronic medications to schedule free delivery or in clinic pickup and instant access to spot our ex pharmacist be at kiosks or phone.
As a reminder, <unk> patients and medical centers across Central Florida with over 70, physicians and nurse practitioners servicing over 40000 Medicare patients.
We are encouraged by this continuing momentum with each of our partners that Leverages, our current hub pharmacy infrastructure.
We anticipate most of these sites will be dispensing by late this year.
<unk> ramping of revenue is anticipated to be longer in de novo sites as our partner clinics are building their patient panels and scaling the sites.
Importantly, we believe we are effectively positioned to realize our large market opportunity.
And we are currently focused on three key objectives, one increasing dispensing net centers and optimizing utilization to drive profitable growth.
Two expanding pharmacy technology, leveraging epic Willow, and Mckesson enterprise, Rx integrations, and three reducing costs across the enterprise.
As part of our focus on driving profitable growth.
Call, we previously laid out our objectives to achieve improved margins.
Driving prescription volumes optimizing our prescription mix.
<unk> cost of goods sold and improving reimbursement.
Part of our strategy is to standardize processes and reduce inefficiencies such as our reliance on ineffective vendors with respect to our patient contact center to drive efficiencies.
Cost savings.
And better patient care.
We have also highlighted a procurement strategy for sourcing pharmaceuticals at optimal cost to drive the utilization and the appropriate mix of medications.
As an example, most recently we benefited from the inclusion of hepatitis C. Anti virals as part of our efforts to add in high value specialty medications.
Patients often face barriers to access the specialty medications such as obtaining prior authorization.
Our team is leveraging our embedded pharmacy model powered by our Med Center technology to directly address patient access to these medications in collaboration with providers, while delivering any counseling need at the point of care.
While dispensing specialty medications can fluctuate quarter to quarter because of the high cost and relatively low volumes we.
We're excited for the opportunity to use our data for purposes of determining the most effective medication mix to deliver better patient care.
Overall, we delivered growth and expansion in the first quarter and made meaningful progress in pharmacy technology with the epic Willow integration as we March into the remainder of 2022, we continue to be focused on driving efficiencies and refining our operational strategies in <unk>.
Are there to deliver long term profitable growth and maximize value for our shareholders.
With that I will now.
Now ill turn the call over to Ramona to provide a review of our first quarter financial results.
Thank you Mark.
Turning to our first quarter results net revenue for the three months ended March 31st 2022.
$9 1 million.
126% increase.
$1 million in the same period the prior year.
This was aided by a 159% increase in retail pharmacy services that more over the same period in 2021.
As we have indicated in the past.
Technology revenue can be variable from quarter to quarter due in large part to customer purchasing pattern.
David with enterprise level capital sales.
As Mark mentioned, we ended Q1 2022 with 88% in units.
29% increase from 68 at the end of Q4 2021.
Net cumulative deployment.
And Q1 2022 was 92.
As a reminder, we define dispensing units.
Sites that are like.
That is a payer that was accepted.
<unk> Board approvals.
Wayne clinical staff.
Nickel account managers.
Gross margin for the first quarter of 2022, plus five 5% as compared to seven 9% in the first quarter 2021.
Consolidated margins in the first quarter 2021 benefited from the higher contribution from the pharmacy technology segment.
Segment gross margin improved from two 6% in the first quarter of 2021.
Four 1% in the first quarter of 2022.
Total operating expenses for the first quarter 2022.
$14 3 million.
34% increase from $10 million in the first quarter of 2021, our pharmacy operations and selling and marketing costs increased a bit.
Think about growing firms the med center portfolio.
General and administrative costs increased.
The higher.
Compensation and executive severance costs in the first quarter of 2022.
Adjusted EBITDA, which we calculate by adding back interest expense.
Depreciation and amortization stock based compensation.
Non recurring expenses and other income to net loss.
The loss of $11 8 million in the first quarter of 2022 compared to a loss of $8 9 million.
First quarter of 2021.
What's been growth in placements.
We ended the first quarter of 2022 was $5 $3 million of cash on cash equivalent.
Subsequent to the end of the quarter on April 4th we completed our first closing of a private placement financing common stock.
The gross proceeds of approximately $40 million.
The second closing is expected to subsequent follow on July one 2022, following the satisfaction or waiver of the conditions to closing.
Approximately $10 million in gross proceeds.
We believe that we have sufficient capital to fund our current operations.
Turning to our outlook, we continue to expect 25 net new units in 2022.
Regarding our gross margin outlook, we remain focused on improving our adjusted gross margin and the operating costs throughout the balance of 2022.
And with that I'll turn the call back over to Mark for closing comments. Thank.
Thank you Ramon.
Thank you for joining the call today, we look forward to updating you on our progress in the coming months.
With that we will now open it up to questions.
Operator.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad now.
Our first question today comes from Charles <unk> of Cowen Charles Please go ahead.
Yes, thanks, Thanks for taking the questions and congrats on the quarter here great.
Great progress being made.
Maybe first if I could just I don't know in the press release, it and see if theres a share count that you could share for the quarter.
Thanks, Carl I'll, let Dow Ramona answer that question.
Hi, Joe.
I don't have the share count.
But we will get to that.
Okay.
Alright, and that just just wanted to move on here, obviously, a lot of great progress.
With your partners.
Maybe talk about sort of the discussions.
With someone like an Oak Street for example, the decision to Arizona after going with Michigan.
Has there been any discussions with some of these companies in terms of partnering into their existing sites because it seems like right now, particularly with those streets are all de novo.
It seems a little bit obviously, a little bit more mix just curious how those.
What does the discussion like them.
Any opportunities to move into existing places.
Yes, Charles it's a great question I think we have.
Ongoing engagement with all of our partners around both de Novo sites and existing site I think in the case of Oak Street coming to Arizona. They follow a specific pathway for de novo sites, rather than acquiring new clinics in a new market and so.
That's why we're following that pathway with them.
The Arizona market versus where.
In a setting where theyre having existing click.
Clinics in the Tampa market, where we'll actually be able to to work with them on those and so we're balanced between de novo's, an existing site and we're bound based on their progress. We're also looking at dish.
Additional markets with them, where they have existing sites that would make sense for us to potentially open up new hubs pharmacy.
Great that's helpful and maybe talking about <unk>.
The initial sites.
And the four de Novo.
Sorry, five de Novo was this always contemplated when you guys announced this.
Partnerships last year.
I guess the question is is this sort of on track with your expectations or is this perhaps moving faster than you might have anticipated.
Yeah, Charles I think when the original agreement was signed in the fall timeframe. It was for four initial clinic site.
Once we began to implement and our partner IMA was able to see the benefits.
I'm, having a spot Rx pharmacy embedded in their clinics.
They wanted to accelerate the partnership which is what we expected and that opened up the additional 17.
Through the end of last year sort of contracting and getting them ramped up this year and its now opening up the rest of them there.
Their site as they bring them online so that's where the five.
Additional clinics will get at it so theyre similar to sort of an oak Street, where they want us to be in each one of their clinics and obviously that benefits us because they are in the central Florida market, which lines up very nicely around our Orlando hub.
Great Thanks for that.
Hey, just wanted to obviously you kind of reiterated sort of your outlook for net disposal sites and margins.
<unk>.
Just looking at the Opex.
G&A kind of had a step up here, how should we think about overall opex.
As we move through the course of the year.
And then similarly around stock based compensation.
Thanks.
Yeah, absolutely look at Q1, we had some costs.
Associated with the transition of the new senior management team as well as <unk>.
Version from a third party.
First for a new vendor.
However that will not be expected to continue in Q.
Many quarters I would say, there's about 10% to 15% statements and the expenses in Q1.
So for the rest of the quarters.
Adjusted appropriately.
As far as the stock based compensation all of those weren't disclosed.
Executive came onboard.
And then just to get to your other question. Your earlier question 30.
$32 9 million roughly in outstanding shares.
As of March 31, 22.
Yeah.
Great that's helpful.
I'm, sorry, I might have just missed it just now so you are saying in the G&A line Theres about 10% to 15% that was sort of one time.
So we will kind of come off.
In the G&A line.
Or is it yeah, that's not continue that's correct.
Okay.
And then I guess.
Lastly for me it really as we think about.
Moving through the course of this year Mark the technology side.
<unk> has always been.
I think an opportunity for the company and I know you and I have spoken about it in the past where.
This because there's a lot of change.
Places, where this the message would make a lot of sense for health systems to implement.
I know you brought on a lot of new leadership to help in this regard can you kind of give us an update here, what's going on decided business.
Sort of how to think about the outlook for this.
Going forward here.
Yes, I appreciate the question and I appreciate the acknowledgment we brought on a.
Our new sales leader as well as the VP of sales to focus on technology first and foremost that we announced before.
So very excited to have Matt Broome join the technology group, He's actually the executive Vice President and GM over the entire business former customer show he understands the product very well the value proposition.
Any potential innovation that we need to do to increase that value proposition et cetera sales team up for success.
Also like we've talked about we've completed the epic App integration work and now we're going to do our first epic partner full integration that will allow us to just understand.
How fast will actually be able to deploy it will help us build a playbook for deployment and.
And reduce the time to implementation.
Do you feel like the team is building a pipeline we have a lot of inbound.
Request for information.
And we're moving those through our our sales model.
Appropriate Lee I do believe it's going to take some time to set that up and build to what we're doing in this year is really setting up 2023.
For substantial growth and I believe we've said this before but for.
This current year, we anticipate that the revenue will be.
Very similar to <unk>.
Revenue from 2021 for the technology business itself.
That's helpful. And then so just to be clear right. The epic integration that you guys have been working on that's really geared for the technology business I guess, most group practices don't really run epic as often.
Is that a fair way to think of it and then also maybe any kind of progress on integrating with Cerner.
And some of the other major.
Hospital EHR.
Yes, I think when I think about epic will I mean, theres about 350, <unk> integrated delivery networks right health systems that leverage that pharmacy management system component of epic and Thats really our target.
Audience.
Roughly 350 sites.
But they have multiple places where you could place the med center inside of a site think urgent care emergency room.
Et cetera, and so the community based practices that they participate in and so we think theres a large opportunity in that group.
Of itself and the other thing is we do have the interface with the Mckesson enterprise system, which.
Previously it was not being.
<unk> advertised and sold and so we've made an effort to actually.
Identifying and go after that particular market as well so.
We're trying to expand inside of the two integrations we have.
And then will that customer demand really drive what our next integration point will look like whether that.
To your point sooner or some other ambulatory EHR.
Product that that really will be driven by customer demand.
That's great and I am sorry.
If I can ask about then you talked about building the pipeline Youre getting inbounds.
I guess two questions around that.
Existing sales force.
How much do you have to.
Complement or add to to be able to take advantage of these kind of inbounds and building. This pipeline and then second on the implementation side.
Is it the same kind of team.
But you have currently that implements at the clinics that can also implement it.
That health system or is it a very different skill set that's needed.
Yeah. So good question on the sales side.
Side, we're actually.
Restructuring the teams slightly we're bringing in account management.
Actually help our sales team as they are transitioning a partner from sort of the sale into the integration and implementation phase and so we think that's going to be a significant help to the existing team such that we don't have to augment our current sales team, we will keep monitoring in Mt.
Pipeline gets larger sales team can support we would certainly add but at this point, we don't have to find a site that will need to add sales as we've added in account management and then on the implementation crime. We do have a team that's already.
Focused on implementations for technology sales, so there's no need for us to add additional resources. There at this point again, we think we're largely.
Scaled appropriately for the implementations that we have and we have that skill set inside such that we can ramp up and ramp down and those skills are transferable, whether we're implementing a clinic or whether one of our spot or explanation or whether we're going to implement a technology sale, they're largely very similar.
The minimal differences our team can actually flex between the two business segments.
Great and then.
Joe just to keep going on here, but.
When we think about the dispensing side. So you have a <unk>.
<unk>.
Dispensing sites in the market.
I know when you guys did the raise you kind of gave some details around sort of what the median revenue per site was versus sort of the 75th percentile, which kind of gets you to the $1 million per dispensing, so I kind of bucket.
Can you give us.
Some.
Characteristics around the new sites that youre going into particularly let's say in this first quarter.
How do you feel about <unk>.
Sort of what the revenue opportunity.
<unk> is on the current sites.
And so.
And maybe tied to that but what are you seeing in sort of the utilization environment I know some of the hospital companies.
Kind of maybe revised a little bit on on their assumptions for utilization just curious your thoughts there and what you're saying.
Yes.
Ill take question and I'll, let Ramona ad.
Any specific she wants as far as the sites that we brought live largely have been in the Florida market.
And we track them on a weekly basis against our expectations and again the majority of those sites are tracking at or above our expectations.
That the entire market is.
At least at what we would have expected at this point and again that market is fairly young for us being less than a year old obviously and.
So what we do is tracked our expectations, which is in line to sort of what we talked about in the first quarter around those historical ramps and.
I think that is a reflection on the work that the team has done to qualify and quantify each one of those individual clinic such that they're performing within the range of expectations I think on the utilization side, we've seen utilization I think come back sort of pre COVID-19.
Market based on what we're hearing from our partners with their patient visits.
<unk>.
That component and then also what we're seeing on the prescription side coming out of not only our new claims but are.
Our new spot Rx med centers as well as our existing base.
Ramon I don't know if you have anything else you wanted to add.
Yes.
Yes.
No Mark I know you covered everything.
Yeah.
Great and then maybe one for ammonia then.
Just the.
Inflationary pressures, obviously wage inflation.
Supply chain issues I'm curious anything, particularly as you think for manufacturing new med centers.
Dare to consider as we think about sort of the Florida outlook and your expectation for Opex.
Yes.
Sure Yeah.
Continue to monitor the market.
Inflation pressures.
We have not yet.
A large impact to our business will continue to monitor that where we feel good about where we are today with <unk>.
Yeah.
Combined to put in place.
Our risk mitigate.
With respect to met centers et cetera, and with the labor market, we've been very fortunate to be able to fill our physicians at the reach that we've expected. So so far.
We have not had a large impact.
We continue to monitor and be on top of that.
Okay.
Great.
Thanks, a lot I appreciate all the comments.
Sure.
Thanks, Joe.
Okay.
Thank you for your questions Charles I'll now hand back the call to Marc Doyle for any final remarks.
I want to thank everyone for attending the call. This evening have a good night and take care.
Thank you for joining today's conference call you may now disconnect your lines.
[music].
Yes.
Okay.
Yeah.