Harrow, Inc.

Good afternoon and welcome to HARO Health's second quarter 2021 earnings conference call. My name is Ilee 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 is being recorded. I would now like to turn the call over to Jamie Webb, Director of Communications and Investor Relations for HARO Health.

Thank you, Operator. Good afternoon and welcome to Herald Health's second 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 risk and uncertainties, many of which are beyond Herald Health's 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 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. Herald Health's 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 our adjusted earnings. A 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. For 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.harrowinc.com. Joining me on today's call are Harrow's Chief Executive Officer, Mark Elbaum, and Harrow's Chief Financial Officer, Andrew Bowd. With that, I would like to turn the call over to Mark to go over some prepared remarks prior to the question and answer session. Mark?

Thank you, Jamie, and thanks for joining our call today. I would encourage everyone listening to review our second quarter 2021 earnings release, corporate presentation, and letter to stockholders, all of which were 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 provide some additional color on our business since we last spoke in May. Harrow continues to be a reliable and innovative pharmaceutical supplier to hundreds of thousands of Americans and many thousands of eye care institutions across the country, including optometrists, ophthalmologists, ambulatory surgery centers, and hospitals. As a result of our commitment to our customers and the diligence of a dedicated team of Harrow affiliated employees, the second quarter of 2021 was our best financial quarter in company history, marking the fourth consecutive quarter of record results. We are pleased to report that total revenues for the second quarter were $18.1 million dollars. That's an increase of 125% compared with the $8.1 million reported in the prior year period, and up 17% from revenues of $15.4 million in the first quarter of this year, 2021. For the first half of 2021, total revenues were $33.6 million, which and that is a 69% increase compared with $19.9 million for the first half of 2020. Gross margin of 75.6% for the second quarter of 2021 matched our company record for the first quarter of 2021 and was an increase over the prior year's gross margin of 60.2%. Adjusted EBITDA of $5.7 million for the second quarter of 2021 was another record metric, a significant increase compared with a loss of $1.7 million in the prior year quarter and an increase over adjusted EBITDA of $4.3 million recorded in the first quarter of 2021. In the second quarter of 2021, Segment contribution from Imprimis RX was $7.2 million, including non-cash expenses related to depreciation, amortization, and stock-based compensation of $521,000, compared to a negative segment contribution of $239,000 in the prior year period, and segment contribution of $5.7 million in in the first quarter of 2021. This important metric demonstrates the earnings power of the Imprimis Rx business separately from other Harrow businesses, assets, and liabilities. In addition to recording record operating results in our ophthalmic pharmaceuticals business, we are delivering on our promise to execute our strategic vision aimed at becoming a leading US eye care company. In alignment with that objective, we are focused on growing revenues from FDA-approved products to the point where, in the next few years, they exceed our revenues from compounded products. Our partnership with iPoint Pharmaceuticals to market Dexacu was the first step towards the achievement of our goal. Our new partnership with Novabay for its product, Prescription-Based Avanova, was another step, and our recently announced acquisition of AMP 100 is yet another step, and a potentially big step indeed. We hope there are more steps, if you will, to announce soon. During the second quarter, we raised $75 million in unsecured capital to fund our growth strategy and to lower our cost of capital. all, I might add, without any common stock dilution. As I mentioned, we recently announced the acquisition of rights in the U.S. and Canada to market and sell AMP-100, a patented ophthalmic topical anesthetic drug candidate with a total addressable market, or TAM, estimated at over 10 million annual procedures in the United States. including cataract surgeries and intravitreal injections. We expect a new drug application to be submitted to the FDA in the next few months. And if approved, we plan to launch AMP 100 in late 2022. Another component of our strategic goal, serving eye care customers directly through visionology, has also made excellent progress. our regional soft launch continues as we fine-tune our marketing strategy and operational processes before expanding to additional regions and eventually becoming a nationwide enterprise. Based on our early results to date, we believe Visionology has the right marketing approach, functionality, and ease of use to be the national leader in the burgeoning direct-to-consumer eye care industry. We believe we have developed a sound strategy for our company's future, raised the capital needed to execute that strategy, responsibly leveraged our assets to promote growth, both organically and through a robust pipeline of new product opportunities, and have a strong management team and partner employees who have the expertise, talent, and dedication needed to achieve our very clear and shared objectives. We couldn't be more optimistic and excited about the remainder of 2021. Now, let's take your questions. I will pause to have our operator poll for questions. Operator?