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spk00: Hello, ladies and gentlemen, and welcome to today's conference call. My name is Natasha, and I'll be coordinating your call today. I will now hand you over to Caroline Poole from Investor Relations. Over to you.
spk01: Thank you, and thank you all for participating in today's call. Joining me are Ed Kilroy, Chief Executive Officer, and Ramona Sebaugh, Chief Financial Officer. Earlier today, MedEvil Holdings released financial results for the third quarter ended September 30th, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance, or similar statements are forward-looking statements. All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth in our organization and reimbursement, market opportunity and expansion, and guidance for revenue gross margin and operating expenses in 2021 are based upon our current estimates and various assumptions. Also, management may make additional forward-looking statements in response to your questions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements and do not guarantee future performance. Accordingly, you should not place undue reliance on these statements and should not rely on them in making an investment decision without considering the risks associated with such statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section in our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 8th, 2021. Medavail Holdings 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 will turn the call over to Ed.
spk03: Thank you, Caroline, and good afternoon, everyone, and thank you for joining us. We are encouraged by our strong top line performance of 15% sequential revenue growth from the second quarter of 2021. As a reminder, our business model has two segments. Retail pharmacy services consists of sales from the operation of our technology enabled high touch retail pharmacy and pharmacy technology revenues comprised of the sale or provision of these technologies to large customers to support their own pharmacy operations. Our retail pharmacy sales segment generated $5.4 million of revenue in the third quarter of 2021, representing 149% growth over this period in 2020, and a 21% increase from the second quarter of 2021. Our pharmacy technology revenues decreased 93% year-over-year in the second quarter of 2021 to approximately $350,000. Notably, 2020 included a one-time benefit of $4.7 million recognized in conjunction with the accounting for a non-recurring commercial agreement from 2018. Excluding this one-time accounting adjustment, pharmacy technology revenues increased 51%. After a challenging first half of the year, we saw momentum return and made meaningful progress during the third quarter, signing partnerships and expanding into new sites with existing clients. We remain focused on growing with clinic operators that have large numbers of sites to maximize the potential of our land and expand strategy. We deliver a unique value proposition to our partners with our SpotRx embedded pharmacy model. These care providers are focused on improving both medication adherence and patient satisfaction, and we are delivering results to them each and every day. Our real-time operationalized data identifies at-risk patients and enables tracking by patient, clinic, and disease state. By evaluating metrics such as proportion of days covered or PBC scores, we are able to place patients on auto refill, work with clinicians to prevent hospitalizations, and perform a number of other operational actions that are valuable to our partners. These are important metrics to our clients in the Medicare market. as we can help influence their star ratings and therefore their level of reimbursement from CMS. To that end, beginning with new clinic installations, we had a strong third quarter. We deployed 14 new SpotRx med centers in clinic sites. The 14 new clinic deployments in the third quarter were led by clients such as Kano Health, Access Health, and CareMore. as we continue to expand with our value-based care clients. Geographically, we installed three sites in Arizona, two in California, and nine in Florida. We also remain on track with our expectation to have 45 new in-clinic deployments by year-end 2021. We continue to execute on business development, delivering expansion within our current deployed states in the third quarter, as well as new partnerships. We continue to work with our clients planning further geographic expansion as we grow with them. In September, we signed an agreement with IMA Medical Group, a growing network provider of medical and wellness services to embed our SpotRx pharmacy model into an initial four clinics with an objective to improve medication access and adherence for IMA patients. IMA serves patients in 21 medical centers across Central Florida. As announced today, we also signed an agreement with InovaCare, a leader in transforming care delivery. to offer patients access to our SpotRx kiosks, courier home delivery, and support by our clinic account managers at initial three InovaCare locations in the Orlando area. InovaCare manages more than 500,000 lives, including more than 150,000 dual eligible beneficiaries across over 30 clinics. This continued expansion in Florida one of our key states with a large and concentrated market, demonstrates SpotRx's strong value proposition to Medicare patients and value-based care providers. Importantly, with these new deployments and new partnerships, we are building the foundation for scalable and sustainable revenue growth with large and growing value-based care providers. Our pharmacy technology segment continues to represent a significant opportunity for Medivale. Clients such as Sam's Club, Kaiser, and Texas Health Resources continue to operate our technology in their production environments and are working closely with us as they move forward. Previously, we did announce that we started development of a full integration with the Epic electronic health record software. This capability will help us to expedite deployments with the many health customers who have Epic installed and reduce the time from signing a deal with Medivale to deployment of our pharmacy technology. Today, we have multiple clients, such as Texas Health Resources and Providence Health, that have installed or are in Epic and intend to take advantage of this integration work. Most importantly, this integration work opens the market for installed Epic users to us as prospects for our pharmacy technology. Currently, there are approximately 350 integrated delivery networks using the Epic pharmacy software in the United States. We are also adding sales resources to accelerate the Epic opportunity. The integration work is currently scheduled to be completed in the second quarter of 2022. Turning to our 2021 outlook, we continue to expect net revenue to be at least $21 million. The timelines we are seeing from physical installation to first dispense remain unchanged from the last quarter. Further, excluding the one-time benefits previously mentioned, we continue to expect to deliver revenue growth in excess of 100% in 2021 and expect to maintain this top line growth rate in 2022, given the demand we see for our offerings and our ongoing expansion into new geographies. Finally, as we announced in September, we are excited to have Ramona Sebaugh join our leadership team as CFO. Ramona brings over 20 years of experience with pharmacy and healthcare services organizations leading strategic growth initiatives. Ramona's expertise will be invaluable in executing our strategy to drive strong operational and financial performance. We are pleased with our growth as we continue to build and execute against our business development strategy and we are excited about our opportunity ahead. The Medicare Advantage market continues to grow quickly and we are... to be the leading onsite 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.
spk02: Thank you, Ed. I am very excited to be joining Medivale 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 30th, 2021 was $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 non-recurring commercial agreement in the three months ended September 30, 2020, with 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, pharmacy technology sales can be variable from quarter to quarter to a large purchasing patterns associated with these enterprise-level capital sales. As Ed mentioned, during the third quarter, we deployed 14 med centers in the retail pharmacy services segment compared to 11 in the third quarter of 2020. Growth margin for the third quarter of 2021 was 3%, flat sequentially from the second quarter, and 70% as compared to the prior year period. Gross margin in the third quarter of 2020 includes the one-time non-cash benefit of $4.7 million recognized in conjunction with the accounting of a non-recurring 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 workflows 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 non-recurring expenses and other incomes to was a loss of $10.1 million in the third quarter of 2021 compared to a loss of $5.1 million 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 equivalent. We now have approximately 32.8 million shares of 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 in net revenue and 45 new in-clinic deployments this year. Regarding our growth margin outlook, we remain focused on improving our growth 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.
spk03: Thank you, Ramona. 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. And with that, we will now open it up for questions. Operator?
spk00: Absolutely. Ladies and gentlemen, if you would like to ask a question on today's call, please star 1 on your telephone keypad now. We take our first question from Charles Rhee of Cowan. Charles, your line is now open. Please go ahead.
spk04: Yeah, thanks a lot. And thanks for taking the questions. You know, 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, you know, less deployments. less deployments, you know, I assume it looks like about 18 to get to your target of 45. Any update where we're at here sort of mid-quarter?
spk03: I would just say, Charles, that we are on track to deliver the 45 for the full year as we outlined. And, you know, we have a good line of sight into those as you would fully expect. We will be deploying throughout the quarter. And so, you know, they're happening on a monthly basis. So, again, we are reconfirming the 45. Okay.
spk04: Great. Thanks. Another question here is, you know, I think last quarter you talked about changes in the Board of Pharmacies that has costs and delays to get, you know, sites really up and running. Any kind of update there? I think you had talked about eight to 12-week delays. Wondering if that has changed. some of those timelines have improved at all?
spk03: We haven't seen any changes, Charles, and I'm not anticipating any for the balance of the year. Obviously, we take that into consideration as we are moving forward and deploying right now. And just as a note, in Florida, there isn't the Board of Pharmacy inspection as there are in California and Arizona and Michigan. And so we can move a little quicker in Florida, but there's been no change to the other states that we mentioned earlier.
spk04: 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, as well as maybe some higher COVID-related expenses. Just curious what you're seeing there. And then lastly, maybe a question for you, Ramona. Um, you know, as you kind of come here and start working with the team, you know, what do you, what would you talk, what would you list in terms of your priorities? Uh, you know, as, as you think about, you know, helping Medaville here take the next step. Thanks.
spk03: So thanks Charles. So I'll just jump in with the, uh, from a clinic volume perspective and I'll say patient visits, uh, we have seen improvements quarter to quarter. Uh, I would expect to see those to continue into the fourth quarter as well. You know, 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, you know, what we are seeing is the traffic patterns improve, which is very encouraging as we come into the back half of the year, or last part of the year, I should say. Ramona?
spk02: Thanks, Ed. Hi, Charles. Yeah, coming into this role, I see some maybe key areas for us to focus on will be to clearly our continued top-line growth in both segments of our business. We'll want to continue to drive programs around our efficiency and productivity within our operating units. An example, we have an agreement with McKesson to start deploying by the end of this year. And then finally, we will continue to focus on improving our overall financials with the company and reducing our overall cash burn. So those probably are the three buckets that we will spend the majority of our time.
spk04: That's great. If I could just follow up on partnering with McKesson, would that alleviate the need for your central pharmacies 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 then?
spk02: Certainly. Go ahead. Sorry, Ed.
spk03: No, what McKesson is going to be doing for us, Charles, is packaging the medication into, say, 30-, 60-, 90-day vials. We would then process that order in our pharmacy. So what it's doing is saving us the pill counting into the breakdown by customer and then also the inventory management because they would be managing the inventory at their end.
spk04: I see. Okay. What kind of financial impact?
spk03: It's a labor reduction.
spk04: Right. So is that I would say that next year?
spk03: Yes, yes, you would. Because we're just beginning to roll it out. And we're evaluating right now the percent of our refills that would be driving through that process. Obviously, we want to maximize it, but I don't have a specific number right now, a dollar savings, but we certainly are counting on this to improve our productivity as we move into 2022.
spk04: Great. All right. Thank you.
spk00: Thank you, Charles. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. We take our next question from Brooks O'Neill of Late Street Capital Markets. Brooks, your line is now open. Please go ahead.
spk03: Hi, guys. This is Travis Spangler filling in for Brooks, and thanks for taking my question. I see that InovaCare signed open three spot RX locations in Florida. Given that InovaCare operates more than 30 clinics, can you discuss the opportunity to get into the other 27 clinics or so? I would say that we are in discussions with all of our enterprise customers with regards to continued growth. So, you know, I can't speak for InovaCare's internal plans, but 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 in your home delivery option or do patients like the opportunity to pick up their medications at the end of the clinic visit? It's a little of both when we have the patients that are in chronic medications. Some of them choose to pick it up when they're visiting the clinic. Others prefer to have it 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, the patients can choose either channel to receive their refills. Sounds good. Thanks, you guys, for answering my questions.
spk00: Thank you, Brooks. We also have a follow-up question from Charles Rhee of Cowen. Charles, your line is open. Please go ahead.
spk04: Thanks for taking the follow-up here. Ed, you know, I want to talk about sort of the commitment here, kind of seeing 100% growth in revenue for next year. When you look at that number, where do you think the, you know, puts and takes are to kind of achieving that? And clearly, it looks like we're you know, tracking, you know, at least in line, if maybe not a little better, on deployments, which means some of those sites can be generating revenues, you know, ramping sooner than, you know, maybe we had been expecting. You know, what do you think are kind of swing factors that we should think about as we kind of round out this year and into next year?
spk03: Well, I think, Charles, the – obviously, The deployment of the go-live of the 45 we have put in this year, will have put in this year, is very important. So the timing of the go-live of those will be important. And then I'll say the cadence as we get into next year of quarterly deployments. As you know, we haven't provided any guidance for next year yet on 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 there was not a lot of benefit of those. 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 and the geographies we're 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 exit this year within the ground.
spk04: And is it fair to think, obviously, this year most of the deployments were back half-weighted because of switching of the contract manufacturer. Can you just quickly update us on that? And would you expect then the cadence of deployments going forward here in 22 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?
spk03: So the contract manufacturing is going very well. So that is not an issue as we go into 2022. With regards to the seasonality, we don't see a seasonality, although I would say that early in the first quarter, people aren't usually deploying in late fourth quarter of the next year. They are slowing things down a bit. It's mainly a holiday season and hours of operation. So other than that, there's really no seasonality 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.
spk04: And then maybe if I could just ask one more here. You know, obviously a lot of efforts here in Florida sounds like a very fertile ground to be making inroads in. I know Texas has been on the radar for you guys. Any update on how you're thinking about for their state expansions?
spk03: So you're absolutely correct. Florida is a very, very significant market for us. And based on the signing we've done in Florida so far, we've got a very large footprint within that state. Just looking at the sites that our current clients have, there's a significant opportunity. Most of those clients, certainly not all, but most of the the florida clients as well as other clients we have have a presence in texas so that is a state that we are having discussions with our customers about that state but there's also a couple of others that are in play as well so you know we have to think about the growth path that we're on and how many states we want to open at one time. But we're certainly having very active discussions on a number of states, with Texas certainly being one of the key ones, as we've talked about before.
spk04: Great. And sorry, if I could just ask one more here. If we think about, you know, the rate, you know, the deployment schedule and sort of the cadence of it, you know, assuming that all your partners are you know, we're willing to deploy quickly. What is right now sort of your capacity maybe in a quarter to be able to deploy? Because, you know, clearly you did 14 this quarter. I think you did 12 basically at the end of the second quarter. You know, what do you kind of think of as sort of your max capacity in terms of resources to be able to deploy currently? And maybe your plan for expansion of that capacity.
spk03: Yeah. I'm not going to declare a specific max, Charles, because it really is driven by, as we deploy in a site, 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 the clinic we're going into. It's our hiring and training of our CAM, so our clinic account managers. And so we have ramped up our recruiting capability, our education and training capability, but it's usually the rate and pace that the client wants to move. And as we see more demand to move faster, then we'll have to ramp up our internal skills to do that, which, again, it's not a physical installation. It's more of us hiring and putting our people on the street and training and educating the staff of each of the clinics. But as you noted, I mean, we did 14, and we did more than that in the fourth quarter to get to our 45 for the year.
spk04: Is it possible to exceed 45, or is that just more of a timing issue on the roadmap you have with your partners? Because given that you seem like you did a little bit more here in the third quarter than you kind of were indicating last quarter, does that free up kind of space to – to do a few more, or is it just kind of set up here?
spk03: What I would say, Charles, is we're not changing the 45 guidance right now.
spk04: Okay, great. Thanks a lot.
spk00: Thank you very much, Charles. We have no further questions, so I will hand back to Ed for any closing remarks.
spk03: Thank you all for taking the time and joining us, and we look forward to updating you on our next call. Have a nice evening.
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