Harrow, Inc.

Good afternoon and welcome to the Harrow Health's Q4 2020 Earnings Conference Call. My name is John, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jamie Webb, Director of Communications and Investor Relations for Harrow Health. Jamie, please go ahead.

Thank you, John. Good afternoon and welcome to Herald Health's fourth quarter 2020 earnings conference call. Before we begin today, let me remind you that the company's remarks may include forward-looking statements within the meaning of federal securities law. Forward-looking statements are subject to numerous risk and uncertainties, many of which are beyond Herald Health control, including risk and uncertainties described from time to time in its SEC filings. such as the risk and uncertainties related to the company's ability to make commercially available its compounded formulations and technologies and FDA approval of certain drug candidates in a timely manner or at all. For a list and description of those risk and uncertainties, please see the risk factor section of the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Harold helps results may differ materially from those projected. Harold disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of today. Additionally, Harold will refer to non-GAAP financial metrics, specifically adjusted EBITDA and or adjusted earnings, Reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's letter to shareholders available on the website. By now, you should have received a copy of the earnings press release. If you have not received a copy, please go to the investor relations page of the company's website, www.harrellinc.com. Joining me on today's call are Harrell's Chief Executive Officer, Mark Albom, Harrell's Chief Financial Officer, Andrew Boll, With that, I'd like to turn the call over to Mark Baum to go over some prepared remarks prior to the Q&A session. Mark?

Thanks, Jamie, and thanks for joining our call today. I would encourage everyone listening to review our fourth quarter 2020 earnings release and letter to stockholders, which was posted on the investor relations section of our website just after the close of trading today. Before we begin the Q&A portion of today's call, I'd like to quickly touch on a few items to provide some additional color on our business since we last spoke in November. The HARO team showed financial and operating resilience for the fourth quarter of 2020, reflecting a continuation of the momentum we saw in the record-setting third quarter of 2020. On both a year-over-year and sequential quarter basis, key financial metrics continued to improve Despite interim challenges we faced during the fourth quarter related to COVID-19 resurgence and unpredictable weather. We also saw significant progress in terms of major milestones, customer growth, product development, and the expansion of our revenue sources. We were pleased to report that total revenues for the fourth quarter were $14.6 million. An increase of 16% compared with the 12.6 million reported in the prior year period and slightly up from revenue of 14.4 million in the third quarter of 2020. Gross margins have remained relatively consistent at 73% for the fourth quarter of 2020 compared with 72% in the fourth quarter of 2019 and 74% in the third quarter of 2020. Adjusted EBITDA for the fourth quarter of 2020 rose to a new record level of $4 million, compared with $2.1 million reported in the prior year period, and that represented a 33.3% increase over the third quarter of 2020. In the fourth quarter of 2020, segment contribution from ImpromisRx for the quarter was $5 million, including non-cash expenses related to depreciation, amortization, and stock-based comp of $434,000. And that was compared to $2.2 million in the prior year period and $4.7 million in the third quarter of 2020. This important metric demonstrates the earnings power of the ImpromisRx business separately from other HARO businesses, assets, and liabilities. As I reflect on the full year 2020, I am proud of how our team stayed true to our mission and continued to execute our strategy, even in the face of the challenges and uncertainties brought on by the COVID-19 pandemic. Early in the pandemic, Harrow Health took steps to manage its balance sheet and expense levels. We also worked aggressively to maintain our competitive advantages by strengthening our product and service offerings. further improving the ImpromissRx prescriber and patient experience, advancing several key new product development opportunities, and beginning the process of expanding ImpromissRx beyond pharmaceutical compounding. Those measures paid off, resulting in a rapid return to pre-COVID-19 performance levels and building a pipeline of new value drivers for our customers and stockholders alike. During 2020, we began to exclusively focus on growing our eye care businesses as we seek to become eye care focused healthcare only. Since beginning our commercial operations in 2014, we have built our eye care business by selling innovative pharmaceutical compounded products only to institutional customers such as doctors, hospitals, and ambulatory surgery centers. Today we are positioned to expand beyond pharmaceutical compounding. In the future, while we continue to organically grow our pharmaceutical compounding business, the next major phase of development of Harrow Health will leverage our market position and add high value in terms of revenue per unit and gross margins, FDA approved products and late stage drug candidates ophthalmic drug candidates to our platform. Our first strategy proof point was the transaction we completed with iPoint Pharmaceuticals to market Dexacute. But we are working diligently to further expand HARO's value by acquiring additional high-value products and technologies and by deploying new eye care services, which will drive the next major phase of our growth at HARO. This year, we'll also see the launch of Visionology, our direct-to-consumer eye care subsidiary that we've been diligently developing over the past three years. To give some context, before I had ever heard of the word COVID, I had a strong conviction that with the help of new telemedicine technology, other software tools, and mobile diagnostics, the provision of eye care goods and services would move closer and closer to the consumer, the end-user. the patient. With the help of Drew Livingston, the co-founder and former CEO of Doxy.me, which is the world's largest SaaS-based telemedicine business, together we have been able to build visionology. And what we have trademarked and what we call eye care as a service, which with the help of a network of local eye care professionals, many of whom are our customers now, We will deliver a simple and seamless user experience to help patients manage their chronic eye diseases. Our goal is to drive value, transparency, and access to eye care through Visionology, which is launching regionally during the second quarter. I look forward to updating you on our progress and rolling out this exciting new business. Now, let's take your questions. I will pause to have our operator poll for questions.