NextPlat Corp

welcome to the next Cloud Core 2024 earnings conference call. Certain statements made during this conference call constitute forward-looking statements. These statements include the capabilities and success of the company's business and any of its products, services, or solutions. The words believe, forecast, project, intend, expect, plan, should, would, and similar expressions in all statements, which are not historical facts, are intended to identify forward-looking statements. These forward-looking statements involve and are subject to known and unknown risks, uncertainties, and other factors, any of which could cause the company to not achieve some or all of its goals or the company's previously reported actual results, performance, finance or operating, including those expressed or implied by such forward-looking statements. More detailed information about the company and the risk factors that may affect the realization of forward-looking statements is set forth in the company's filings with the Securities and Exchange Commission, copies of which may be obtained from the SEC's website at www.sec.gov. The company assumes no and hereby disclaims any obligation To update the forward-looking statements made during this conference call. Joining us on the call today are Charles M. Fernandez, Chief Executive Officer and Executive Chairman of the Board. David Phipps, President and CEO of Global Operations. And Cecil Monick, Chief Financial Officer. I will now turn over the meeting to Charles Fernandez for his opening remarks.

Good morning and welcome to Next Class 2024 Year-End Earnings Conference Call. Thank you for joining us for our call today. I will provide a review of our 2024 operations and accomplishments. The SEAL will then provide a high-level review of our financial results as reported in our annual financial statements contained in Form 10-K that was filed earlier today. David will discuss the results and highlights of our e-commerce business segment. And then I will return to discuss activities and accomplishments in our healthcare segment. We will conclude the conference by responding to questions that were submitted by our shareholders prior to this call. 2024 has been a challenging yet rewarding year for Nexplan and its subsidiaries. We are pleased with the overall performance of the company despite some challenges in our healthcare segment with consolidated revenues exceeding previous estimates. In October, we completed our merger with Progressive Care and its operating subsidiaries after approval by our shareholders. In April, we acquired Outfitter Satellite with offices in Nashville, Tennessee in expanding our sales of satellite-related products in North America through our product sales to customers, commercial, and government. We've experienced a number of positive developments in our e-commerce segment, both for the connectivity products and the slow but steady progress in China and Asia with our Opco e-commerce development program, which was extended and ramped up activities to support the future launch of our Florida Sunshine product line. Overall, we've increased our participation in e-commerce in large domestic and international customer markets and in the U.S. healthcare. We are supporting a growing number of 340B covered entities and long-term care facilities. Our team is working hard to maximize growth, run the business efficiently, reduce our costs across the organization so we can generate positive outcomes, cash flow from our investments. We are pleased that our results for 2024, excluding non-cash expenses and costs related to the merger, reflect progress against our strategic growth initiatives. I'd like to introduce our Chief Financial Officer, Cecile Monick, who will provide you with our overall annual financial reporting.

Thank you, Charlie. I would like to provide you with a summary of our results of operations for the year. and our financial and cash position as of December 31st, 2024. We are pleased with our revenue growth, primarily from the addition of a full year of revenue from our healthcare segment and the acquisition of Outfitter Satellite. Total revenue for the year was approximately $65.5 million, which exceeded our earlier sales guidance predominantly due to our healthcare segment outperforming our projected prescription fulfillment. Gross profits from our healthcare segment decreased from 32% in 2023 to 25% in 2024 as a result of continued pressures from medication price increases along with pay reimbursement rates not keeping pace with those price increases. This is an industry-wide problem for independent pharmacies such as our PharmCo subsidiaries. Gross profits from our e-commerce segment slightly decreased to 25% when compared to prior year and was primarily due to rising inventory costs and price pressures from our competitors. Due to the pricing pressures I have just noted, we continue to implement efficiency and cost-cutting measures, which are in part responsible for decreases in some of our operating expense categories. We have introduced changes in our delivery services designed to reduce driver time and maintenance costs, and change our pharmacy software and equipment that allows for greater flexibility and automation in filling prescriptions. The year-over-year increase in operating expenses was attributable to non-recurring, non-cash expenses, such as impairment losses, which were a result of the remeasurement of the fair value of the intangible assets recognized in the Progressive Care Acquisition. We also incurred significant non-recurring professional fees and other expenses associated with the progressive care merger, as well as litigation that was settled in 2024 of approximately $750,000. We ended the year with approximately $20 million in cash. Much of the decrease in our cash position during 2024 was the result of the non-recurring costs as it relates to the progressive care merger that I have identified previously, as well as cash used in the acquisition of Outfitter Satellite. Excluding non-recurring expenses, total cash used in recurring operating activities was approximately $2 million. We are striving to attain a cash-neutral position for operating activities by 2026. Our balance sheet remains strong. as we have positive working capital and very little debt other than a mortgage on our Hollandale Beach Pharmacy building, the remaining balance on the COVID loan in the UK, and some minor equipment loans. I encourage you to review our financial statements as contained in Form 10-K that were filed with the Securities and Exchange Commission earlier today. I would like to turn over the meeting to David Phipps, our President and CEO of Global Operations, who will provide you with the highlights and accomplishments in our e-commerce business segment.

Thank you, Cecile. I'd like to give an overview of our e-commerce operations, which include our three communications businesses, our Opco line of human and animal healthcare products, and our Florida Sunshine branded products. On the communication side of the business, we made significant progress over the year, attracting customers from more than 140 countries through our various global e-commerce storefronts. In April, we completed our acquisition of Outfitter Satellite, which combined with revenue from our other two communications companies, helped us to achieve record revenue and gross margins. We were particularly pleased with our 66% increase in revenue from the sale of recurring revenue airtime contracts, which provides a solid future income stream at high margin levels. During the year, we also secured an agreement with Starlink to sell their hardware and services, and we strengthened our existing agreement with Iridium to become a distributor of additional products. Additionally, we secured several major long-term contracts with local state governments, as well as military global news media and humanitarian aid organisations. We are currently working on securing a number of significant new distribution agreements and contract awards, details of which we hope to announce shortly. Please note, in many cases, our customers did not authorise us to release their names. Therefore, when we communicate these contracts and awards, we often cannot include their names or specifics of the contracts. Turning to our Opco Healthcare products, we encountered significant challenges and delays in launching in China due to complex registration and customs requirements, as well as restrictions on import quantities. However, I'm pleased to report that we are now actively selling Opto Human Healthcare products on the Tmall platform, with the launch on JD.com, China's largest online retailer scene. We have strong support from our new trading partner in China and have already conducted several successful marketing campaigns that led to strong sales. In the coming months, we aim to secure approval to ship larger quantities, which we are confident that given the initial consumer interest we are seeing, will allow us to further grow our sales. Regarding our Florida Sunshine products, we have successfully produced our first batch, which is now bottled, labeled, and ready for sale. Like Opco, we face numerous challenges in preparing for the launch in China, but we believe we are close to securing approval to begin sales. Unlike Opco, which is currently limited to the Chinese market, We are gearing up to launch the Florida Sunshine brand across Europe, the U.S., and China. We have already set up dedicated websites and branded stores on Amazon, which we're readying for a rollout. I wish to note both Opco and Florida Sunshine products are unaffected by Chinese tariffs. I'd now like to pass the call back to Charlie, who will comment on the healthcare operations.

Thank you, David. I'd like to provide you with an overview of our healthcare operations. As I mentioned earlier, We completed a strategic acquisition of Progressive Care and its pharmacy operations in 2024. Our objective with this acquisition was to utilize our strengths in developing sales platforms for our customers' products and apply those strengths in the healthcare industry. PharmCo pharmacies represent a mature business with name recognition in the South Florida market and their reputation for quality service. We have extended the PharmCo product offerings to include nutraceuticals and other personal care products and offer them utilizing our e-commerce platforms developed by NextPlat. A continuing challenge to the plan in our healthcare segment is the earnings pressures caused by the U.S. drug reimbursement not keeping pace with increasing costs of medication, which is an industry-wide problem for independent pharmacies like PharmCo that provide traditional retail pharmacy services. As we've completed our integration of PharmCo services into Nexplat, we've realized that PharmCo's strengths lie in the offering of pharmacy services to 340B covered entities, long-term care facilities, and other healthcare providers. Contractual agreements with these entities provide a greater profit margin than PharmCo's traditional retail pharmacy services. In recognition of this, in 2024, we began to market these services to a greater number of facilities in South and Central Florida. In 2025 and beyond, we will continue to focus our sales and marketing efforts in these business lines. This includes adding more sales and marketing employees and outside service providers to assist in identifying sales leads with 340B covered entities, as well as long-term care and assisted living facilities. In the meantime, our healthcare business continues to progress despite challenges I've just outlined. Our prescription volumes have increased to a level just shy of PharmCo's pre-pandemic levels. We've added several new 340B pharmacy service contracts, which will come online with us during the second quarter of 2025. As Cecile outlined, we have reduced operating expenses and identified numerous efficiency improvements in our medication dispensing and delivery services that are providing cash savings. and we will continue to be an industry leader in providing free same-day and next-day deliveries of medications to our customers, a service that few in our area offer. We are optimistic that we will continue these improvements such that we will expect to significantly reduce operating losses in 2025 and are striving to reach break-even operating results in our healthcare segment by 2026. That concludes our formal remarks. We can now conduct the Q&A portion of today's call. As this is our first earnings call, we've asked investors and shareholders to submit their questions in advance, and we would like to thank all of you who did. Because of the number of questions were of similar subjects, we've tried to consolidate them and will address them now. Question number one. The company announced a buyback of shares. Has the company already started buying back shares? And with the shares clearly being undervalued, does the company intend to continue buying and possibly looking to increase the amount of authorized shares for buyback, whether this be from the board of directors or stockholder approval? Thanks for your question. While we would like to be active in the market today, we have not yet repurchased any shares. This is due not only to SEC rigs, but also because we are actively working on capital allocation decisions as we work to streamline and reinvest into the business in both the e-commerce and healthcare. We do expect to be active in the market now that our annual report has been filed and hope to have an update for you on our first quarter conference call, which will be held in mid-May. Question number two, are you concerned about the low stock price and what are you doing about it? Thanks for your question. Collectively, myself and other members of management and the Board of Directors have significant investment in NextLeft. Our investments were at prices significantly greater than today's share price, so we are keenly aware of the low stock price. We also believe the stock price reflects broader market trends favoring large-cap stocks over small-cap stocks due to a perceived lower risk profile, as well as company-specific issues. In our case, this includes a series of non-recurring expenses and non-cash charges, including goodwill impairment required by GAAP over the course of 2024 because of our ownership of Progressive Care and our merger in October. Combined, these developments obscured what we believe was the true value of the business and resulted in large losses and an increase in cash burns, which investors perceived negatively. That combined with a low flow due to higher insider ownership and limited exposure to Wall Street and retail investors resulted in volatility and low trading liquidity. With progressive care merger behind us and a focus on improving efficiency of the business, we believe the operational cash burn will be significantly decreased and supported by growth in e-commerce. We also believe we can improve cash flow and other key financial metrics. This, along with the efforts to increase awareness of the company through the increased engagement with our investment community, should help unlock more value in our shares. Question number three, what are you doing to increase the visibility of the company with investors? Will you be meeting with investors or participating in investor conferences? Thanks for your question. Yes, we are committed to increasing investor awareness in Next Class, and this call is just one step in support of that effort. We understand that many investors feel we haven't been proactive. However, our team and board, almost all of which are significant investors in the company, are focused on execution, something we believe that very volatile equity markets and the small cap market in particular demand. Yes, it been a long process as we focus on cleaning up the balance sheet, finding and integrating acquisitions and adjusting our operations to address issues like payer reimbursement in the retail pharmacy business. But we will communicate our progress as often as we are legally allowed. And that includes efforts to attract investors who are seeking investment opportunities in small cap growth companies. Question number four, why aren't China sales taking so long to ramp up and what impact do you see from recent tariffs put in place? I will turn this question over to David.

Thanks, Charlie. For the first part of the question, I'd say that selling in China isn't easy. That's why you only typically see the very largest companies undertake those efforts due to the extensive government regulation and logistical challenges. It's this complexity combined with product availability constraints that have primarily led to the longer-than-anticipated ramp-up, issues which are now largely being resolved. In China and elsewhere, there are multiple levels of regulations and approvals needed for international organizations to sell, and these vary by type of products being sold, such as those for human consumption or pets. But in most cases, it is a slow process dealing with the various governmental authorities. That is partly why the most successful brands in China are those that create local partnerships with organizations that can help support approvals and distribute, market, and sell their products. We are somewhat unique in our ability to tap into the large Chinese market through relationship with partners such as Alibaba, JD.com, and others we've already secured. And we're also working with our customer, Opco, to not only pursue the required approvals for their pet care products, but also with them to further tap their supply chains to obtain significantly increased levels of inventory so that we can expand our sales. We're very optimistic about the potential we see in China, as early demand for products like Opco's joint care product, Arcelene, has been strong. We believe we have addressed many of the roadblocks which have slowed our progress, and by the end of the second quarter 2025, should be in the market with a wider array of products supported with increased inventory levels. To answer the second part of the question regarding tariffs, Due to where we source our products and the nature, we are not currently seeing any significant impact from tariffs, but we're monitoring it closely. Back to you, Charlie.

Okay, question number five. What are the marketing plans for Florida Sunshine? Where and when will it be available, and will it be sold to U.S. customers and customers of your pharmacies? I will again turn this question over to David to answer.

Thanks, Charlie, and thanks for that question. We've made significant progress in creating the Florida Sunshine brand and preparing it for international launch. Complying with the unique regulations inherent in selling products in multiple international markets has been time intensive, especially in China. We've created the required infrastructure of building out the storefronts, and in the case of China, are working towards a new partnership there, which will be very beneficial in terms of marketing expertise and distribution. In terms of the U.S., the North American market for vitamins and supplements is very crowded and competitive. So right now, our focus is on international markets, where we believe the brand can quickly stand out. While we're looking at the potential for sales of Florida Sunshine in the U.S., perhaps through our pharmacies under the OTC benefits programs for Medicare Advantage. Again, our focus is really on tapping into the large market in China and in Europe. Back to you, Charlie.

All right. Question number six. Does the company intend to continue expansion by organic growth, or is the company currently looking at any other acquisitions? Currently, we're working to support organic growth across both our e-commerce and healthcare segments. This would include investment in additional inventory as well as into marketing and other sales programs. We are not currently looking at any other acquisitions. Our final question, can you comment about the lawsuits mentioned in the financial reporting? Thanks for your question. We cannot comment specifically about the lawsuits, only that we believe they are without merit and our legal counsel believe the courts will agree and move to dismiss them so we can avoid incurring significant legal costs. That was the final question that we received from investors. Thank you again for submitting them. Please remember that you can submit your questions to our investor relations email, which is investors at Nexplat, or with our IR contact listed on our press release. Michael Glitman at mike at mwgco.net. We continually strive to respond to your questions in a timely manner. That concludes our earnings call. We look forward to an exciting and rewarding year in 2025 and to talking with you again in mid-May 2025 for about our first quarter. Have a nice rest of your day.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.