MedAvail Holdings, Inc.

Good afternoon and welcome to Medivale's 2021 fourth quarter earnings conference call. My name is Sam and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star one on your cell phone keypad. At this time, I'd now like to turn the call over to our host, Caroline Paul, Investor Relations. Caroline, please proceed.

Thank you, and thank you all for participating in today's call. Joining me are Mark Doerr, Chief Executive Officer, and Ramona Sebas, Chief Financial Officer. Earlier today, Medivale Holdings Inc., referred to as Medivale or the company, released financial results for the fourth quarter and full year ended December 31, 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, including statements or responses in addressing your questions 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 or in response to your questions that relate to expectations or predictions of future events, results, or performance or similar statements All forward-looking statements, including without limitation, those relating to our operating trends and future financial performance, the impact of COVID-19 and the military action launched by Russian forces in Ukraine 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 2022 are based upon our current estimates and various assumptions. Any forward-looking 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 periodic reports, including our annual report on Form 10-K and our quarterly report on Form 10-Q filed with the Securities and Exchange Commission. In addition, as part of this earnings call, the company's management team is providing additional financial information related to adjusted EVDAs. The company calculates adjusted EBDA, a non-GAAP financial measure, by including interest, expense, depreciation and amortization, stock-based compensation, and excluding non-recurring expenses and other income-to-net loss. The company has included adjusted EBDA in this earnings call because it is a key measure used by the company's management and board of directors to evaluate and compare the company's financial and operational performance over multiple periods identifying trends affecting the company's business, formulating business plans, and making strategic decisions. In particular, the exclusion of certain expenses and calculating adjusted EVDA facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain non-recurring variable charges. In addition, the company believes that providing each of EBDA and adjusted EBDA together with a reconciliation of net loss to each such measure helps investors make comparisons between Medavail and other companies that may have different capital structures, different tax rates, and or different forms of employee compensation. Adjusted EBDA should be viewed as measures of operating performance that are supplements to and not substitutes for operating loss, net loss, and other U.S. GAAP measures of income and loss. Non-GAAP financial measures used by the company may be calculated differently from and therefore may not be comparable to similarly titled measures used by other companies. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 24, 2022. Medivale disclaims any intention or obligation, except those 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 Mark.

Thank you, Carolyn. Good afternoon, everyone, and thank you for joining us. I'm very pleased to be participating in my first earning call as CEO of Medivale. It is a privilege to be leading this company and I thank the board for this opportunity. By way of background, I've spent my entire career in pharmacy, starting as a pharmacist and working across this industry in various other capacities, including leading national and regional retail pharmacy chains. Most recently, I was CEO of ERX Network until its acquisition by Change Healthcare in 2020. Under my three-year tenure, the company's revenue and EBITDA increased in each year before the acquisition. I believe that pharmacy is a big business with a significant opportunity for novel models to improve efficiency and patient outcomes while achieving discipline with respect to cost and quality. And I strongly believe that our new team at Medavail is uniquely poised to address this opportunity. I was attracted to Medavail for two reasons. First, I was impressed by Medavail's differentiated technology platform. Our med center and its supporting systems that enables our on-site pharmacy at the point of care in a cost-effective way. Second, I believe in the opportunities that our solutions provide given how strongly positioned we are to solve a multifaceted problem that challenges pharmacy services today. There's a clear need for solutions to address the gaps faced by both retail pharmacies and at-risk value-based medical providers. Retail pharmacies struggle with labor shortages and higher costs, resulting in reduced operating hours and compromised service levels, which effectively limit patient access to their medications. These factors contribute to reduced patient satisfaction and lower medication adherence. Poor medication adherence tends to result in suboptimal patient outcomes and impacts the star ratings for at-risk providers. which in turn affects the reimbursement levels provided by CMS. Moreover, many medical providers don't have adequate connectivity to the many pharmacists that their patients utilize, constraining their ability to gain insights on medication adherence for their patients, which limits their ability to impact patient outcomes. To address these challenges head on, we deliver flexible and comprehensive solutions to our partners with a model that I believe is increasingly essential for value-based care delivery. At the core of our offerings is our proprietary MedCenter platform, through which we deliver cost-effective pharmacy prescription dispensing and advice at the point of care to provide better and more convenient patient access and drive improved outcomes and provider satisfaction and reimbursement. Since joining Medavail, my confidence in our business and the opportunities for it has grown. There is a tremendous market opportunity to be realized with our solutions, and we have a definitive roadmap intended to meet this rising demand. I also believe that we have a clear pathway to deliver profitable growth in the business. To that end, as some of you already know, our business model has two segments, pharmacy technology, and retail pharmacy services and i would like to walk you through what we are doing with each segment starting with the pharmacy technology this area of our business represents the most significant opportunity for medivale and is a large part of our path towards profitability we sell our hardware and importantly license our software and systems to support it and provide maintenance for the platform which is intended to create a highly profitable recurring revenue stream. Our med centers are currently being operated by large, scalable partners such as Sam's Club, HCA, and Texas Health Resources, a mix of retail and health system pharmacies, which we believe are both very viable channels for our expansion. We are also pleased to have recently partnered with the University of Florida, We will provide an initial three med centers to be deployed in their various campus facilities and have the opportunity to expand this relationship to include a variety of additional sites. A critical component to pharmacy technology segment is the med center interface with the pharmacy management system. As part of our focus to drive growth in this business, we have received approval for our app to be in the Epic App Orchard which will allow us to integrate into the Epic platform through Epic Willow, its outpatient pharmacy management system. This capability is intended to allow us to expedite deployments with the many health system customers who use Epic and will significantly reduce the time from signing a deal with Medavail to deployment of our platform. Importantly, we anticipate that this integration work will open the market of installed Epic users to Medavail as prospects for our pharmacy technology. Currently, there are approximately 350 integrated delivery networks using the Epic Pharmacy software in the United States, representing thousands of potential sites for our med center. We expect this integration through Epic Willow to be completed in the second quarter of 2022. To support the growth opportunity that we see with the pharmacy technology, we are making investments and strengthening our team. We recently added new sales leadership and support in this segment and are continuing to develop our team to drive product innovation and sales. Turning to retail pharmacy services and SpotRx, our highly scalable hub and spoke pharmacy models. We deliver a unique value proposition to our clinic partners with our embedded SpotRx pharmacy, and we are focused on clinic operators that service the Medicare market with large and growing networks to maximize the potential of our land and expand strategy. Our clinic partners primarily operate in a value-based care model and are looking for a pharmacy partner that can fully complement their patient care and reimbursement We leverage data to drive patient adoption, monitor performance to adapt and optimize our offering to each clinic location, helping to identify and focus on high-value patients for our partners. Each of our SpotRx service areas operates a centralized pharmacy hub designed for easy and rapid scaling. Once we establish a hub pharmacy in a market, we have historically been able to quickly deploy additional med centers to surrounding clinic providers. To date, we have seven hub pharmacies across our key target states. Our most recent hub pharmacy opened in Orlando, Florida in June of 2021, and notably now services over 30 dispensing units across this market. A number of these SpotRx locations are associated with our partnership with IMA, and is a great example of the land and expand strategy at work. Through our partnership with IMA, we opened four initial SpotRx locations at IMA sites in late 2020. And recently, we announced the expansion of our partnership to include all IMA medical centers across Central Florida. We opened five additional SpotRx locations at IMA sites late in 2021. and have deployed or began installation for an additional 11 SpotRx locations this year. This rapid growth and expansion with the IMA network demonstrates how quickly we become an integral part of a medical center through our strong value proposition with SpotRx. We are also aiming to leverage our expansion with clinic partners and grow alongside them as they continue to build out their network. Most recently, we expanded our partnership with Oak Street Health with an additional two SpotRx installations added in Michigan in 2021 and have agreed with Oak Street Health to deploy in Arizona with three initial contracted locations. A great example of how we can expand in two of our key target markets with existing partners to drive enhanced utilization of our existing hub pharmacies. Oak Street Health operates more than 100 comprehensive primary care centers across 19 states for senior adults. We are pleased to announce that we are also expanding our partnership with Kano Health. We had initially contracted with Kano to open four spot Rx locations in Orlando area and contracted for an additional four locations in the greater Los Angeles area in the fourth quarter of 2021. I am pleased to report that we recently contracted for an additional nine sites in the Tampa, Florida area. We are looking forward to leveraging our new Tampa pharmacy hub for this opportunity. With these new deployments and expanding partnerships, we are continuing to build the foundation for scalable and sustainable revenue growth with large and growing value-based care providers. As we think about this growth, we look to deployment as a leading indicator of the strength in our momentum. We finished 2021 with 46 new deployments and momentum in the business. To provide some more context around deployments and how we are thinking about our growth, we want to introduce a new metric, dispensing med centers. Ramona will walk you through the details around our metrics, but at the end of 2021, we had 81 net cumulative deployments to date, 68 of which are dispensing med centers, representing 76% and 79% growth over the prior year, respectively. Importantly, we have also initiated internal measures intended to ramp up our deployments efficiently and effectively so that our partners can quickly realize the value proposition for SpotRx. Underlying all of this growth We are heavily focused on the profitability of our business. We have programs underway in four areas to achieve improved margin, driving prescription volumes, optimizing our prescription mix, reducing cost of goods, and improving reimbursement. We have sent forth specific initiatives with respect to each of these areas as a preview into one of these initiatives, we are deploying a comprehensive procurement strategy from sourcing products to drive utilization and the appropriate mix of medications using data and our pharmacy management system intended to ensure the highest available reimbursement for the prescription. We are also enhancing our leadership team, bringing in new talent and skills to drive these efforts, including most recently the addition of an industry leader in data utilization and analytics to optimize and accelerate data exchange with our clinic partners and enable improved efficiencies for the benefit of our patient and clinic partners. We intend to use patient appointment data and prescriber data to optimize the utilization of our med centers, which helps drive first-fill adherence and patient satisfaction with the convenience of on-site dispensing. We exited the year with strong results in the fourth quarter net revenue was $7.3 million, representing 26% sequential revenue growth from the third quarter of 2021 and 135% growth year over year. Retail pharmacy services generated $6.8 million in revenue for the fourth quarter of 2021, representing 170% growth over the same period in 2020. While pharmacy technology revenues declined 24% year over year in the fourth quarter of 2021 to approximately $434,000. Pharmacy technology revenue can be variable from quarter to quarter, due in large part to customer purchasing patterns associated with enterprise level capital sales. We are intently focused on driving revenue in this segment, as we noted earlier. Looking ahead to the first quarter, we expect approximately $8.8 million in total revenue representing 21% growth relative to the fourth quarter of 2021 and more than double our net sales compared to the same period in 2021. We also expect to see adjusted gross margin improvement in the first quarter of 2022 compared to the fourth quarter of 2021. In summary, while I'm still in the early weeks of leading our Medivale team, we are enthusiastic about the differentiated value proposition and competitive advantage of our pharmacy solutions and the strong momentum we continue to deliver with our business. As you would expect, I'm spending my time on some immediate practical needs and on ensuring that we have the people and skills in place to drive the business forward. With this well underway, as we continue to execute and deliver. I'm excited to spend time with this revitalized team to look beyond our immediate significant opportunities and update, refine, and validate our strategy and plan for the future. We are also working to secure additional financing to move our various initiatives forward. I look forward to talking more about this in the month ahead. In the more immediate term, as we work to refine our operational initiatives, I am confident that we are strongly positioned with our expansion plans underway and more opportunities presenting themselves in our existing business areas while we focus on delivering profitable and sustainable growth in the future. With that, I'll now turn the call over to Ramona to provide a review of our fourth quarter financial results.