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spk02: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Trixaid Health's fourth quarter and annual 2021 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. The earnings press release accompanying this conference call was issued at the close of the market today. The annual report, which includes additional information regarding the company's results of operations for the year ended December 31st, 2021, was filed with the SEC earlier today. On our call today is Trixade Health's founder, chairman, and chief executive officer, Shurin Adjarapu, and Howard Doss, its chief financial officer. The replay of this call and webcast will be available for the next 30 days. on the company's website under the NASDAQ MEDS link. The company's website also includes more supporting industry information. At this time, I'd like to turn the call over to Howard Doss, the company's Chief Financial Officer. Howard, the floor is yours.
spk00: Thank you, Operator, and thank you for joining us today. I'd like to welcome you to our fourth quarter and annual 2021 Financial Results Conference Call. Our press release announcing our 2021 fourth quarter and annual financial results was issued after the close of market today and is posted on our website. We have also furnished such press release to the SEC on Form 8K. Finally, we have published a copy of the presentation that accompanies this call and webcast on our website and furnished such press release and presentation to the SEC on Form 8K. Statements made on this call and webcast include forward-looking statements. These statements include but are not limited to our outlook for the company and statements that estimate or project future results of operations or the performance of the company, including the potential continued impact of COVID-19 on the company's business and results of operations. These statements speak only as of the date hereof, and the company assumes no obligation to revise any forward-looking statements that may be made in today's press release, call, or webcast, except as required by law. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and the subsequently filed quarterly reports on Form 10-Q. for information and risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call and webcast, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of TRAX-AIDS performance. These non-GAAP measures should be considered in addition to and not a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, at the end of our earnings press release. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of fiscal 2020. During the question and answer portion of today's call, please limit yourself to no more than one question and one follow-up. At this time, I'd like to turn the call over to Surin Ajarapu, the company's Chief Executive Officer. Surin, the floor is yours.
spk04: Thank you, Howard. We saw a margin improvement as our revenue base returned to the core track-safe pharmaceutical exchange platform in the year-end 2021, seeing an expected drop-off in the one-time personal protective equipment sales recognized in 2020, which were driven by the initial onset of the COVID-19 pandemic. Our nationwide footprint continues to grow, and we have relentlessly focused on exciting new ways to expand proportional wallet share within our large, growing network of registered users while better enabling them to service their prospective customers, the end users, further growing their loyalty to their local retail pharmacies. Before we do a more detailed walkthrough of our financial and operational results for the year 2021 fourth quarter and the year end December 31, 2021, for those of you who are new to the company, I'd like to walk you through who we are, how we are digitalizing the retail pharmacy experience through the optimization of drug procurement, prescription journey, and patient engagement. Prior to the launch of TraxAid, Obtaining drug courts as an independent pharmacy was an extremely laborious and time inefficient process with no insight or transparency into a fair market price or what others are paying for the same drug. Traditional wholesalers would provide unfavorable payment terms, slow delivery, and create a difficult conundrum for the opportunities approximately 57,900 independent pharmacies and targeted medical clinics nationwide. We identified this market inefficiency as well as the incredible potential in these independent pharmacies and clinics, which together maintain an estimated approximately $67.1 billion in annual purchasing power and proceeded to launch TraxSafe. We design, own, and operate a business-to-business web-based market platform, bringing together the nation's independent pharmacies with an accredited national pharmaceutical suppliers to provide a uniquely efficient and transparent buying and selling process. Our platform lets independent pharmacies know that they are receiving a fair price from competing suppliers on a fair payment terms and often the next day delivery. We believe this radical price transparency, economy of scale, and competition among our suppliers leads up to a 10% reduction in a pharmacy's total annual drug purchase cost with a drug level savings of up to 90% on certain pharmaceutical products. Our platform saves pharmacies from having to manually compare prices across the distributors, saving hundreds of hours of unnecessary labor annually and eliminating negative reimbursement or fulfilling a prescription at a loss. Our revenue model is simple. We're a paid an administrative fee of up to 6% of the buying price on a generic pharmaceutical, and up to 1% on branded drugs that pass through our pharmaceutical platform, similar to a PayPal or Visa-like model. To date, we have seen incredible success in garnering attention from independent pharmacies and clinics nationwide, validating our business model. At the end of 2021, we had over 13,100-plus registered members on our platform, with approximately 175 new registered members added in the fourth quarter alone. In February 2022, the company announced the formation with an Exchange Health LLC of a joint venture, SauceRx LLC, a pharmaceutical platform. SauceRx will provide pharmaceutical manufacturers a single platform to optimize the sale and distribution of their inventory directly to large pharmaceutical buyers across multiple classes of trade. SauceRx opens the market to short-dated, overstocked, and slow-moving pharmaceuticals that will otherwise be subjected to destruction. Traxate anticipates growth in this joint venture in 2022 as more progressive manufacturers are expected to address the public need for enhanced medication accessibility and reliable supply of cost-effective pharmaceuticals. We have leveraged our significant success since the launch of the aforementioned marketplace platform to move into an adjacent complementary business where we can leverage our strong retail pharmacy network and core competency in technology. These include Bonham Health, our telehealth subsidiary, which for the year ended 2021 had approximately 22,000 application downloads with an approximately 10.9% patient registration rate. However, many of our relationships are still in the rollout phase and have yet to generate significant revenues. On the capital market front, we were proactive in 2021, attending four premier investor conferences, the Collier Fifth Annual Investor Conference, H.E. Wainwright 23rd Annual Global Investment Conference, and Benjagi Healthcare Conference, and finally the LD Micro Main Event. This week at the Maximum Virtual Growth Conference, I'll be presenting on the panel Technology Improving Healthcare, which will be held on March 30th at 1.30 p.m. Eastern Daylight Time. We attended conference with the goal of enhancing broader investor awareness of our company. I'd like to now turn the call over to our Chief Financial Officer, Howard Doss, to walk through some key financial highlights from the fourth quarter of 2021 and the fully year-ended December 2021. Thank you, Saran.
spk00: Let us discuss fourth quarter 2021 results. Revenues for the fourth quarter of 2021 increased 19.7% to $2.4 million, compared to revenue of $2.0 million in the same quarter last year. The increase in revenue was primarily due to revenue generated by the TraxAid platform and TraxAid Prime. Gross profit in the fourth quarter of 2021 increased 831%, to $1.24 million, or 51.9% of revenues, compared to $0.1 million, or 6.5% of revenues, in the same quarter last year. The increase in gross profit was primarily due to revenue generated by TraxAid platform, which has lower cost of sales. Operating expenses for the fourth quarter of 2021 were $2.0 million compared to $2.4 million in the same quarter last year. This decrease was due primarily to a loss of impairment of goodwill recognized in the same quarter last year, which was a one-time charge. Net loss in the fourth quarter of 2021 was $0.8 million or 10 cents per basic and diluted outstanding share. compared to $2.3 million, or $0.29 per basic and a diluted share outstanding, as a result of $726,000 loss of impairment on goodwill and a one-time $1,081,000 inventory write-down of PPE items compared to the same quarter last year. Adjusted EBITDA, a non-GAAP financial measure, decreased to negative $1. $0.8 million compared to a negative $1.4 million in the same quarter last year. Let us now discuss the fiscal 2021 results. Revenues for the 2021 year decreased 42.2% to $9.9 million compared to $17.1 million in 2020. The decrease in revenue was due to revenue generated by Integra Pharma Solutions, our wholly owned subsidiary. which revenue was from personal protective equipment sales relating to the COVID-19 pandemic in 2020. Gross profit in fiscal 2021 decreased 16.8% to $4.7 million or 48% of revenues compared to $5.7 million or 33% of revenues for the same period last year. The increase in gross profit percentage was primarily attributable to higher margins associated with TraxAid platform revenue, which has a lower cost of sales. Operating expenses in 2021 were $10.0 million compared to $8.2 million last year. This increase is primarily due to the loss on inventory investment and an increase in IT initiatives in our Bonham Health and Alliance Pharma companies. Net loss in 2021 was $5.3 million or $0.65 per basic and diluted share outstanding compared to $2.5 million or $0.33 per basic and diluted share outstanding last year. Adjusted EBITDA for the year ended 2021 was negative $3.7 million compared to a positive $0.1 million for the year ended 2020. Looking at our balance sheet, cash and cash equivalents were $3.1 million as of December 31, 2021, compared with $5.9 million as of December 31, 2020. The decrease in cash was mainly due to our IT initiatives with Bottom Health and Alliance Pharma and a loss on inventory investment. With that, I will turn the call back to Surin for closing comments.
spk04: Thank you, Howard. In summary, we're focusing on exciting strategies to drive forward our core business. I think we are building an incredible, compelling healthcare ecosystem of building an exciting value proposition for all stakeholders. I look forward to seeing what the future holds as we continue a rapid pace of operational execution, creating sustainable long-term value for my fellow shareholders. With that, I'll turn it over to the operator to begin the question and answer sessions. Operator? Thank you.
spk02: At this time, we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Alan Klee with Maxim Group. Please proceed with your question.
spk03: Good afternoon. Could you talk a little more about your new pharmaceutical joint venture in terms of how you think about what the opportunity is and how you think about the timing of rolling this out? Thank you.
spk04: Sure, Alan. Thank you. Good afternoon. SOS Rx, if you look at the total U.S. generic drug market, it reached almost like $127.8 billion in 2020 alone. The percentage of products become short-dated, overstocked, or slow-moving over time and become off-contract. SOS Rx Marketplace is an innovative platform that offers an alternative sales channel to manufacturers to sell is off-contract pharmaceuticals to national distributors and chain pharmacies or grocery chains that have pharmacies at a substantially lower price in bulk. This marketplace offers proprietary algorithms, strict state regulatory compliance, pricing transparency, and negotiation tools to improve product sales. So to answer your question, how long, we just started this in the February of 2022, this joint venture, to expand all the way through the big chains while we are still supplying the TractSafe platform focuses on our independent pharmacies.
spk03: Thank you. And then my follow-up question is, is there any commentary you can give us on how you're thinking about 2022?
spk04: Alan, as we're still in a growth phase, we're unable to give you that projected numbers because as you've seen, the new initiative for orthotics, we charge administrative fee up to 20% paid by the manufacturers for our purchase price on the pharmaceuticals that pass through our platform, whereas in the tax state, it is 6% of our buying price on a generic. So these initiatives have started most recently, so we have to see how fast and These technology platforms, both CrackSafe as well as SouthSouthX, will take place. So that's the reason why we are unable to give you the projections, but we'll continue to grow both the platforms.
spk03: Great. Thank you so much. I'll get back in queue.
spk02: Our next question comes from Howard Halpern with Taglich Brothers. Please proceed with your question.
spk01: Hi, guys. Could you give a little bit of a view on how the supply chain has maybe changed a little bit between generics and branded products? Has it returned to a more normal pattern for you?
spk04: I'll take a first stab at it. I'll let Howard give you more in-depth also. We still see some of the supply chain events changing. more rolling into this year as everybody understands the war is going on. Some of the products that come, generic pharmaceuticals primarily come from India or China or Europe. That has an impact on it. That's the reason you can see the branded sales on our platform with the generic. Of course, if we look at our numbers, we make more money on the generic sales and less percentage on the branded. That's the reason you see that Some of these fall through that, but I think it's going to pick back up as it's coming to the normalcy as we see in the coming quarters like second and third quarters. Howard, do you want to add anything?
spk00: Yeah, no, Howard, I would concur with Sarin. I think the wholesalers are telling us right now that they're starting to see a little bit better view and supply of the generics. which is where they make their money as well, just like we make it on our platform. So we think that's becoming more normalized, although it's quite not there yet.
spk01: Okay. And my follow-up would be, could you talk a little bit about the group purchasing organization and how that is progressing, and where will that revenue flow into? Will that be into the Integra segment first?
spk04: Yeah, the GPO, it's It's still coming onto the platform side, not completely onto the integral side. The reason is we increase the GPOs to bring in more and more pharmacies to come onto our platform and buy their products through our platform. So we don't distinguish from there.
spk05: Okay. Okay. Thanks. I'll have five minutes.
spk02: Our next question is a follow-up from Alan Klee with Maxim Group. Please proceed with your question.
spk03: For your telemedicine efforts, could you talk a little about how you're thinking about the pickup and kind of what your strategies will be going forward? I know it's very early to increase the adoption.
spk04: Yes, Alan, if you look at in 2021, we brought in a big wholesaler. I meant to say the wholesaler, the big grocery chains like Vindixi and Berkshire Hathaway and so on and so forth. But if you look at in 2022, we signed and launched the co-bonds, which has 163 groceries and gas and merchandise markets. And along with our independent pharmacies, approximately added in the last quarter. It's continuously picking up the momentum, but we're not there yet, as you exactly said. So if you look at it, we have around 22,000 downloads, as I mentioned, and approximately 11% of them converted into the patient registrations.
spk03: Could you tell us, this is my follow-up, the total amount of customers, theoretical customers that you could penetrate, and maybe what a reasonable penetration rate of them could be when you're finally scaled up, a range of how you would think about it. You know, that could be, you know, a couple years from now, but how would we maybe think of that? Sure.
spk04: I don't have that much clarity on the Winn-Dixie, Big Y, Brookshire, Sparta, NASC. I'll give you what we have on the visibility on our 13,100-plus members. Indirectly, I'm serving almost like 15 to 20 million patients. So even if I can convert the next four to five years, 10% of that, it's a million patients that are out there that are paying $20 per subscription per month. That's where you can have a potential and can grow on top of that.
spk03: Great. Since I'm going to try to ask another question since I think there might be, I'm not holding anybody else up. Your expenses were better this quarter and you didn't have like one-time things. How do you think about like your plans to grow expenses, operating expenses relative to revenues?
spk04: I'll take a first stop, Eddie, and then I'll ask Howard to join. As I mentioned, you've seen the gross margin increase. I think relatively we keep these expenses standardized. Now it's the market platform has to pick up more and more. That's where per wallet share per month. So with an existing platform, we try to see more and more product volume going through our member network so the more and more margin increase with the same kind of an expense. Howard, do you want to add anything?
spk00: Yeah, I think those are the key points there, Alan. I think the expenses have been stabilized, really, on a monthly basis, and now it's just kind of a decision on whether we want to keep them at those levels or change them relative to how the revenue is coming in.
spk03: Thank you, and I'm You answered a question about your GPOs. Your GPOs seem like that could be a very large opportunity when it scales up. I wasn't quite sure I understood your answer in terms of how you're thinking about the timing of getting them operating and if you could provide some color in that.
spk04: We've just launched that concept a few quarters ago. We still yet to see the full-blown results on the GPO. So we're going to continue to go through that R&D mode for another quarter, and we'll be able to give you a more elaborate answer towards the second quarter.
spk05: Okay, great.
spk03: And maybe a last question. When you talk to your independent pharmacies, what are they saying are the biggest challenges they're facing now and how they're feeling about the relative – demand outlook today maybe versus a year ago?
spk05: Sure.
spk04: As you're seeing, they also saw the pinch in the supply chain and squeeze from the big boxes and our insurance companies through the DIR fees and so on and so forth. That's the reason they allow our platform. They're trying to spend more on our platform. In addition to that, as you are aware, most of the telehealth prescriptions are walking into this box chain, and that's where we've launched our Bonham Health. We want to empower our independents through our Bonham Health so that at least we can offer to their patients for the next time the patient has any telehealth need, those prescriptions can walk into my independent stores than walking into the doors of the box chain. Through that, that's another opportunity And I know you've seen the other opportunities in the telehealth that's coming up and the televets and so on and so forth. Those are the prescriptions that these independents can see so that they can sustain in the business in the long run.
spk03: Great. Sounds like you have a lot of great opportunities.
spk05: Thank you so much.
spk02: Thanks, Alan. Our next question is a follow-up from Howard Halpern with Taglich Brothers. Please proceed with your question.
spk01: Just two quick ones for you. In terms of the specialty pharma, how many states are you able to operate in?
spk04: That number we have not segregated. We can probably give you more detail, but right now I don't have it on top of my head out of the 15,000 companies we have.
spk01: It's more than half the country, though, right?
spk04: Yeah. If you look at our total member network, where we are going with this is we have on the independent pharmacies like 21,000, and plus we have expanded into the clinics almost another 30,000 to 40,000, combined together around 57,000 members that we can go after, out of which I only have 13,100-plus members on my platform.
spk01: Okay. And the final one is, you know, the Trexade Prime. How successful or how much consumer acceptance or your customer acceptance are you seeing? And is that revenue, because you had a very good fourth quarter in Integra, is that revenue flowing through the Integra segment?
spk04: Yes, absolutely. The revenue is flowing through the Integra pharma, but we're still at a massive stage. We haven't even seen even a substantial results in that model. So if you look at it, it's only not even less than 10% of the top line revenues or to the tracks and prime revenues. So we had to see that product or at least see that model growing substantially.
spk05: Okay. Okay. Thanks.
spk02: Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Mr. Shirin Adirapu for closing remarks.
spk04: Thank you, operator. I would also like to thank you all for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If we're unable to answer any of your questions, please reach out to our IR department at email, ir.faxaid.com. the company would be more than happy to assist. For any of you who may have joined the call in progress, remember that a replay of this call and webcast will be available for the next 30 days on the company's website under the NASDAQ call and match link. And that more information regarding the financial disclosures on this call and webcast, including a reconciliation of non-GAAP financial information, can be found in our press release, which we filed after the close of the market today. Thank you everyone.
spk02: This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.
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