Harrow, Inc.

Good afternoon and welcome to the HARO Health first quarter 2021 earnings conference call. My name is Cole and I'll 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. And as a reminder, this conference is being recorded. I would now like to turn the conference over to Jamie Webb, Director of Communications and Investor Relations for HARO Health. Please go ahead.

Thank you, Operator. Good afternoon and welcome to Harrell Health's first quarter 2021 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 laws. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond Harrell Health's control, including risks and uncertainties described from time to time in its SEC filings, such as the risks 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 risks 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 Health's results may differ materially from those projected. Harrell 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, Harrell referred 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 stockholders 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.heraldinc.com. Joining me on today's call are Harold's Chief Executive Officer, Mark Elbaum, and Harris Chief Financial Officer, Andrew Vaughn. With that, I'd like to turn the call over to Mark to go over some prepared remarks prior to the question and answer session. Mark?

Thanks for joining our call today. I would encourage everyone listening to review our first quarter 2021 earnings release and to read our 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 March. The first quarter of 2021 was our best financial quarter in company history. On both a year-over-year and a sequential quarter basis, key financial metrics reached record levels. We also continued our recent trend of progress in terms of major milestones, customer growth, product development, and the expansion of our revenue sources. In addition, since we last spoke in March, we were able to accumulate a war chest of over $75 million in new cash to fund our growth strategy, and we lowered our cost of capital in doing so. And I might add that we managed to accomplish all of this without any dilution to our common stockholders. We are pleased to report that that total revenues for the first quarter were $15.4 million, and that's an increase of 31% compared with the $11.8 million reported in the prior year period, and up 6% from revenue of $14.6 million in the fourth quarter of 2020. Gross margin continued to improve, reaching a record 75.6% for the first quarter of 2021, compared with 69% and 73% in the first quarter of 2020 and fourth quarter of 2020, respectively. Adjusted EBITDA of $4.3 million was another record metric compared with the $414,000 in the prior year quarter and $4 million in the fourth quarter of 2020. In the first quarter of 2021, segment contribution from ImpromiseRx was $5.7 million. including non-cash expenses related to depreciation, amortization, and stock-based compensation of $383,000. That's compared to $1.5 million in the prior year period and $5 million in the fourth quarter of 2020. This important metric demonstrates the earnings power of the ImpromissRx business separately from other HARO businesses, assets, and liabilities. As I mentioned, our first quarter results were the best in our history. In addition, we are starting to see less week to week revenue volatility, giving us added confidence that we are headed back to consistent revenue growth. Adding to my optimism is my belief that all the pent up demand for ophthalmic procedures that have been delayed due to COVID-19 is just about to get on track again, which will not only result in increased revenues for our customers, but will also mean increased revenues for Harrow Health. We have also made great strides in our strategy to expand beyond pharmaceutical compounding by leveraging our market position and adding high value in terms of revenue per unit and gross margins, FDA-approved drugs, and late-stage drug candidates to our platform. Our iPoint Pharmaceuticals partnership to market Dexacute continues to be mutually beneficial and is confirming the prospective value and thus the validity of our expansion strategy. In addition, we are executing on our vision of serving eye care customers directly through Visionology, which will be launching regionally this week. Visionology is our direct-to-consumer eye care platform that delivers a simple and seamless user experience to help patients manage their chronic eye disease We are very excited about this revolutionary new technology that we believe will transform the way consumers access eye care products and services. I look forward to updating you as we roll out this exciting new business. Now, over the past year, we have painstakingly developed a strategy that we believe will assist us in growing the company and reaching our full potential. Now, with the positive changes to our cash position, We have adequate liquidity and the financial flexibility to pursue additional acquisitions and transactions, but to also meet future challenges. Since the close of the first quarter, we have raised more than $75 million. Once again, all without diluting common stockholders. In April, we sold approximately 1.5 million shares of our 3.5 million share position in Eaton Pharmaceuticals Common Stocks. with net proceeds to HARO of approximately $9.6 million from the sale. Also in April, we closed an underwritten registered public offering of $50 million aggregate principal amount of 8.625% unsecured senior notes that are due 2026. And then in May, closed on the underwriters over allotment option to purchase an additional $5 million aggregate principal amount in those funds. In total, the senior notes offered resulted in net proceeds to the company of approximately $52.8 million. In May, we also closed on an $11 million Series B preferred offering with net proceeds of $10.7 million. We used $15.5 million to pay off our loan agreement with SWK Funding, LLC, and the balance will be used to finance future acquisitions. investments in expanding our manufacturing and distribution capabilities, building out an analytical lab to lower our post-production quality assurance and quality control costs, and for general corporate purposes, including funding future strategic product acquisitions, related investments, and working capital. Now, let's take your questions. I will pause to have our operator pull for questions.